Financial and tax reporting in Georgia is a convenient system for filing documents that meet modern international and European standards. Since 2000 several reforms have taken place in the country: first the government approved the standards of accounting and financial audit and afterward reduced the tax burden on citizens and companies. As a result, a clear procedure for reporting to the state authorities was introduced.
First of all, the reporting system is designed for entrepreneurs and large companies. And given the low tax rate, the country attracts more and more foreign capital. Therefore, entrepreneurs need to know what the tax and other regulatory authorities rely on. We will find out how taxes are paid in Georgia and how to report on the financial situation of the company correctly.
Specifics of financial reporting in Georgia
A State shall audit the activities of organizations to prevent money laundering, capital smuggling, or financing of terrorism.
The data of annual financial statements of the enterprises are provided in strict compliance with the legislation of Georgia and the requirements on personal data protection.
International Financial Reporting Standards (IFRS) are applied in Georgia. The submission of financial statements in Georgia is regulated by the Law on Accounting and Audit of Financial Statements.
According to the legislation, enterprises in Georgia are required to submit annual financial statements. The transfer of these data is done electronically. According to the normative documents, financial statements must be disclosed before 1 October of the year following the reporting one. The annual financial report includes:
- balance sheet;
- the profit and loss account;
- an explanation of the movement of funds in the company’s accounts;
- the results of the company’s economic activity for the year;
- current financial condition of the company;
- explanatory notes.
All enterprises in Georgia are divided into 4 categories
б) income exceeding GEL 100 million;
в) average number of employed persons for the reporting period exceeds 250;
б) income not exceeding GEL 100 million;
в) the average number of employed persons for the reporting period not exceeds 250;
б) income not exceeding GEL 20 million;
в) the average number of employed persons for the reporting period does not exceed 50;
б) income does not exceed GEL 2 million;
в) the average number of employed persons for the reporting period does not exceed 10;
Category three and four entities are granted a deferral in the submission of annual financial statements until 1 October 2021. Annual financial statements are submitted to the Accounting, Reporting and Audit Oversight Service.
Financial and tax reporting in Georgia for small and medium enterprises shall be submitted under a simplified scheme. Depending on the size of the enterprise, the volume of reporting may vary from 2 to several hundred pages.
It is convenient that the report can be submitted electronically. At the same time, all information is publicly available and is absolutely transparent to the citizens of Georgia. For the document to be accepted for consideration it is necessary to specify the following information about the company:
- legal organizational form of the company;
- legal and physical addresses;
- name of the organization;
- registration authority;
- registration number.
Financial and tax reporting in Georgia allows obtaining detailed information on the financial condition of the enterprise and its creditworthiness, as well as on the financial results of its activity.
Also, the obligatory procedure is a financial audit, which checks the company’s performance from the annual financial report. Starting from January 2019 all companies, except for companies of the third and fourth categories, must be audited. In this case, the audit provides that part of the reporting of small and medium-sized businesses will be confidential.
Specifics of tax reporting in Georgia
Georgian jurisdiction cannot be called tax-free, but its level is rather low, and the tax regime itself is one of the most transparent, liberal, reliable, and simple among other countries in the world. This can be supported by the fact that Georgia was ranked 9th in the list of low taxation countries according to the Global Competitiveness Report.
Tax reporting in Georgia, to reduce the tax burden on legal entities and to simplify collection procedures, as a result of recent reforms, taxes are reported as follows:
- all amounts in the report are stated in the GEL;
- submission of a declaration for the reporting month, monthly, by the 15th day of the next month; declarations are filled in on the basis of primary documents, which in most cases are in electronic form, on the portal of the tax service.
Taxes in Georgia are collected at the local and state (national) levels. There are 6 main taxes in total:
- Income tax (on dividends (5%)) – 15%.
- Personal Income Tax – 20%.
- Value added tax (except for medical care, education and export) – 18%.
- Import tax (customs duties) – 0%, 5% or 12%.
- Excise tax.
- Property tax – up to 1%.
January 1, 2019 introduced a mandatory universal pension fee from individuals and businesses (self-employed people have the right to refuse to pay the fee). The pension fee rate is 2% of the salary of an individual and the same amount is paid for an employee by an enterprise. The pension fee is mandatory for persons under the age of 40 as of August 6, 2018, and persons older may refuse to pay the fee.
All taxes in Georgia, except property tax, are national. According to the Law on Economic Freedom, the government has no right to raise national tax rates (exception – excise taxes) or introduce new taxes at all without the approval of the population by referendum.
In order to attract more foreign entrepreneurs and expand the sphere of business, taxes in Georgia are paid according to a convenient scheme. All documentation can be submitted electronically to avoid bureaucracy and to speed up the process of controlling the activities of a legal entity.
How to report
The more accurate and detailed are the declarations on financial and tax reporting, the less chances to violate the law and get a serious fine. Therefore, two normative provisions should be carefully studied before independent formation of documents: the Tax Code of Georgia and articles of the law “On Accounting, Reporting and Audit”. The best thing to do is to contact us and we will help you understand all the nuances of taxation in Georgia.