How to comply if your Georgian business is not active every month of the year?
Tax and Financial Reporting in Georgia
Active Georgian businesses (e.g., legal entities, individual entrepreneurs, “small businesses” and individual taxpayers) must submit annual and/or monthly tax declarations, as well as annual financial reports (statutory reports for certain types of businesses). In this article I will provide a brief explanation of the above and underline some important details about tax reporting compliance in Georgia.
Tax Reporting Periods in Georgia
The periods for filling in and submitting tax returns in Georgia differs per taxes; it is either monthly or annually.
In the table below you can see the reporting period for some taxes applicable in Georgia:
|Withholding tax on wages||Monthly|
|Withholding tax on dividends||Monthly|
|Withholding tax on interest||Monthly|
|Withholding tax on royalties||Monthly|
|Withholding tax on service fees||Monthly|
|Small Business (1%)||Monthly|
|Corporate Income tax||Monthly|
|Property tax of individuals||Annually|
|Property tax of legal entities||Annually|
|Ordinary personal income tax||Annually|
Usually, when the tax reporting period is monthly, the due date for submitting a tax declaration and paying taxes is the 15th of the month following the reporting month. For example, if the reporting month for VAT declaration is February 2022, the due date for submitting a tax declaration and paying VAT is 15th March 2022. If the 15th of a month coincides with a holiday or the weekend, then the due day shifts to the next working day.
The exception to the rule is the declaration of withholding tax (wage tax, dividends, interest, royalties and service fees). In such cases, tax payment should be made the same day when the wage, dividend, interest, or service fee was paid and the tax declaration should be submitted later, by the 15th of the next month.
For example, if my company pays salaries to its employees on the 25th of each month, withholding tax on the salaries should also be transferred to the budget on the same day, but I can submit my tax return before the 15th of the next month.
Regarding annual declarations, the payment due date and submission of tax declarations is usually before the 1st of April of the year following the reporting year (with an exception in the case of property tax for individuals).
For example, an annual tax declaration for personal income tax in 2021 should be submitted before1st April 2022.
Annual tax returns for property tax of legal entities in 2021 should be submitted no later than 1st April 2022.
Notably, in case of annual tax declarations (e.g. property tax of companies) system of advance payment of tax might be applicable, I will not discuss this topic in details in this article.
What happens if a Georgian business had a taxable event but did not submit the relevant tax return?
If the taxable event took place in your Georgian business during the reporting period and you did not submit the relevant tax declaration or did not fully report your taxes, you might receive penalties up to 50% of the principle amount of unpaid taxes as well as late payment interest amounting to 0.05% of the unpaid due tax per each day of overdue payment (Article 275, 272 and/or 274 of the Georgian Tax Code will apply).
The above is quite clear, what is more interesting is that your business might receive penalties for not submitting tax declarations even if the business did not have any activity (a taxable event) in a reporting month.
Statutory bookkeeping/reporting compliance for Georgian companies and individual entrepreneurs
Tax returns in Georgia are submitted electronically. Each taxpayer has their own page on the online platform of the Georgian Revenue Service (GRS) – www.rs.ge. Tax declarations should be submitted on this platform. Besides declarations, taxpayers have an obligation to fill-in general information about their business, open and read statutory notifications from the GRS, as well as send reports to the national statistics office.
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Necessary general information to be filled-in on taxpayer’s information card on www.rs.ge
Maintaining a business in Georgia is not only about submitting tax declarations. It means filling-in and updating general information, reading notifications sent by the GRS (statutory, otherwise sometimes you cannot use the online platform), answering questions from the statistics office, etc.
Necessary general information to be provided by a taxpayer online is as follows (this is a non-exhaustive list):
- A contact person’s mobile number (the website requests a confirmation code before allowing access and this is sent via SMS to the contact person’s (or second user’s) provided mobile number);
- Marking your business as ‘Active’ or ‘Inactive’;
- Bank account;
- Place of management (exact address);
- Inputting a business activity code;
- Marking the tax declarations that need to be submitted by the business (you should mark each tax declaration that is applicable to your business).
The decree of the Ministry of Finance #996Article 11 (1) Paragraph 7
“A taxpayer is obliged to – no later than the end of the relevant reporting period – update the information (i.e., make the appropriate markings) on the taxpayer information card, about the tax declarations the obligation to submit of which arises during the current reporting period.”
Submit ZERO tax declarations or unmark this declaration on the taxpayer’s information card
According to Georgian tax law, if you have marked a specific tax declaration on your taxpayer’s information card and did not submit this declaration (even a blank one) before the due date, you will receive a 100 GEL penalty for each month this is not submitted.
You will also receive the same penalty if you have not marked a specific declaration on the information card before the end of a reporting period but you have submitted such tax declaration in this reporting period.
For example, if until the end of February 2022 you have not marked withholding tax declaration on your taxpayer’s information card but you have submitted this declaration until 15th March 2022. In this case you might also receive 100 Gel penalty.
You have registered a “one-man company” in Georgia that is not a VAT payer and taxable events (e.g., payment of wages or dividends) only take place 3-4 months per year. In 2021, the only taxable events took place in March, May, July, and October when you paid salary to a director (yourself) and paid taxes accordingly.
You are an individual entrepreneur in Georgia with “Small Business” status and are paying only 1% tax on your income. In 2021, you issued invoices and received income only in the months of March, May, July, and October.
In both scenarios your business is active, and you must mark at least one or two tax declarations on your information card on www.rs.ge. For Scenario 1 – a withholding tax return. For Scenario 2 – a “Small Business” tax return.
It is clear that in March, May, July, and October you should submit tax declarations and pay taxes accordingly, but what do you do for the remaining months?
Bookkeeping/reporting obligations in Georgia related to non-active reporting months
In other (non-active) months you must either submit zero tax returns or unmark the declaration on your information card before the end of the reporting month related to which you do not plan to submit any declaration.
If you choose not to do the above, you will most likely receive penalties of 100 GEL for every month for not reporting correctly, plus the regular penalties may attract the GRS’s attention, which in turn might end up with a tax inspection.
The GRS only started to impose 100 GEL penalties from the end of last year; before they only used to send warnings to taxpayers.
Tax Reporting Obligations of VAT payers in Georgia
Businesses that have registered as VAT payers, have even more reporting obligations than the general rule explained above. Each month they are supposed to submit at least three tax declarations: A withholding tax declaration, a corporate income tax declaration and a VAT declaration.
In the near future, I will explain in a separate article the consequences of cases when a VAT payer in Georgia does not submit a ZERO VAT declaration each month (even if there was not any VAT taxable transaction applicable).
Bookkeeping and Reporting Services in Georgia
Tbilisi based Accounting & Consulting firm TPsolution offers you monthly and annual bookkeeping/reporting services combined with monthly tax consultations. We are former tax inspectors, we have a lot of experience working at the Georgian Revenue Service as well as international accounting firms and multinational companies, which helps us to always keep our service quality at the highest level.
When providing bookkeeping/reporting services we use a synergy of our tax experts and bookkeepers. Our tax experts monitor, review and control the work performed by our bookkeepers to ensure that tax declarations are filled in correctly and fully in compliance with the applicable Georgian tax law.
Summary: Tax Reporting in the country of Georgia
If you operate a company in Georgia or you are registered as an individual entrepreneur, you have an obligation to submit monthly/annual tax declarations here. Your or your company’s page on the GRS’s platform should be filled-in with all the necessary information including marking the tax declarations which you plan/are obliged to submit.
If you have marked a tax declaration on your information card on www.rs.ge, you have an obligation to submit a marked tax return, even in case of not having had any taxable transaction in a specific month. If you don’t plan to submit a zero declaration, then you must unmark the declaration form on the information card. Otherwise, you will receive a penalty from the GRS for each month you do not.
The obligation to submit tax returns is even more burdensome if your Georgian business is a VAT payer. In this case your business is supposed to send at least three monthly declarations: A corporate income tax declaration, a withholding tax declaration and a VAT declaration, even in the case of no activity during a specific reporting month.