In 2005, Georgia enacted a new Tax Code that introduced lower, flat-tax rates and significant procedural and institutional innovations. The government is now preparing legislation to reduce rates even more. Major features of the current tax regime include:
- The total number of taxes was reduced to only seven. Six of the seven are State taxes – personal income tax, corporate income tax, social tax, excise, value added tax, and customs tax. Property tax is a local tax established by local self-governing bodies within marginal rates regulated by the Tax Code of Georgia.
Tax Rates Progress
- Personal income is taxed at 12%. Dividends and interest received by individuals are taxed at 10% at the source of payment. Personal income tax is paid by resident individuals on their worldwide income and non-resident individuals on their Georgian sourced income.
- Corporate profits are taxed at 20%. Dividends received by Georgian enterprises are not subject to taxation at the source and are exempt from any further corporate income taxation. Corporate income tax is paid by Georgian enterprises on their worldwide income and foreign enterprises on their Georgian-sourced income, except as otherwise provided by double taxation treaties with various countries.
- 18% value-added tax is compulsory for taxpayers whose turnover exceeds $58,480 USD in any 12-month period and for importers. Export of goods, international transportation, tourist and certain other services are subject to zero rated VAT. Financial and insurance services, oil and gas operations and certain other transactions are exempt from VAT. VAT paid for purchases can be offset against VAT payable or other tax liabilities. VAT paid for the purposes of investments in fixed assets, construction and export is refunded to the entrepreneur within 1 month and in other cases within 6 months.
- Employers pay social tax of 20% of monthly payroll, but there is no employee social tax.
Georgia has Lowest Total Tax Rate in the Region. World Bank Indicator: Total Tax Rate (% of Profit)
Source: World Bank Doing Business in 2007