Taxes valid in Georgia
Types of taxes
Currently, the Tax Code of Georgia outlines six primary taxes that are paid by both individuals and businesses, depending on the nature of the tax. Five of these taxes are collected in the state budget and are known as state taxes, while one tax is collected in the local government budget and is referred to as a local tax.
Taxes can be categorized into two groups: direct taxes and indirect taxes. Direct taxes are imposed directly on property or income, and individuals or businesses are responsible for paying them. On the other hand, indirect taxes are typically included in the price of goods or services, which increases the overall price, and the end user (you) pays the higher price that includes the tax when making a purchase.
The Income tax
The income tax, with a maximum rate of 20%, is the portion of income that individuals are required to pay to the government. In Georgia, for income received in the form of a salary, the calculation of income tax is typically done by the employer on behalf of the employee. The Tax Code specifies different categories of income that are subject to the standard rate of 20%, a non-standard rate, or are exempt from income tax altogether. For instance, standard salary income is taxed at 20%, rental income at 5%, and certain government contributions such as state stipends and pensions are fully exempt from income tax.
For example, if your take-home salary is 1,000 GEL (the amount received after income tax deductions), you can calculate your accrued salary (the salary before income tax deductions) and the amount transferred to the budget as income tax. To determine the accrued salary, you divide 1,000 GEL by 0.8, resulting in 1,250 GEL. The income tax transferred to the budget would then be 20% of this amount, which is 1,250 * 0.2 = 250 GEL.
If you operate as a legal entity engaging in economic activities, you will be subject to profit tax, with a maximum rate of 15%. The amount payable to the budget will be determined based on factors such as undistributed profits, expenses unrelated to economic activity, the value of items provided free of charge, gifts, or representative expenses as defined by the Tax Code. The Tax Code of Georgia outlines the specific types of business operations that are subject to profit tax.
For example, let's consider a company that trades in household goods in Facility A but incurred an expense of 100 GEL for cleaning Facility B, which is unrelated to its activities. The amount of profit tax to be paid by the company would be calculated as follows: 100 / 0.85 * 15% = 17.65 GEL.
Value Added Tax (VAT) is an indirect tax applied to the price of goods and/or services. As a consumer, you pay this tax when purchasing goods and/or services at a price that includes the VAT, although the amount is actually paid to the supplier or service provider who is registered as a VAT payer. The VAT rate in Georgia is 18%. According to the Tax Code, businesses with an annual turnover below 100,000 GEL have the option to voluntarily register as VAT payers. If the turnover exceeds this threshold, registration becomes mandatory. The Tax Code also specifies a list of goods and services that are exempt from VAT, such as educational material, books, and magazines.
For example, let's consider a company that generated income of 1,000 GEL from goods sold during the month, including VAT. The amount of VAT to be paid can be calculated as follows: 1,000 / 1.18 * 18% = 152.54 GEL.
Excise tax is a specific tax imposed on certain types of products, including tobacco products, alcoholic beverages, cars, and other goods. The tax is levied on various operations related to these products, such as production, sale, export, and import. The Tax Code of Georgia provides a specific list of products that are subject to excise tax. The tax rate applied varies depending on the type of product.
Import tax is a tax imposed on goods that are brought into Georgia from another country, crossing the customs border. This tax is specific to imported products and does not apply to exports. The Tax Code of Georgia defines the tax rates for different categories of products, which are determined based on the type of goods being imported.
Property tax is the sole local tax among the mentioned taxes, while the rest are categorized as general-state taxes. The rate of property tax is capped at 1% of the property value. However, the specific tax rate may vary depending on factors such as the owner's status (whether an individual or a legal entity), the type of property, and the income generated from it.
For more detailed information regarding taxes, you can visit the website of the Revenue Service at https://www.rs.ge/.