UNDERSTANDING TAXES IN GEORGIA

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**October 1998**
by David Chantladze
The Georgian Government has recently turned its attention to designing and implementing importantstructural reforms to the fiscal system, including the introduction of a new tax code in September 1997. AlthoughGeorgian tax rates are in line with those of other NIS countries, the country also has the lowest ratio of tax togross domestic product of any non-oil producing country in the world, indicating an exceptionally large shadoweconomy.  The Georgian Government is working to bring the  economy into the tax net. It seeks to maintain lowstatutory tax rates while at the same time ensuring adequate revenues to maintain macroeconomic stability. Thisarticle provides an overview of key Georgian taxes important to U.S. exporters and investors. 
**Tax Administration**
The Georgian Tax Inspectorate, part of the Ministry of Finance, is the sole state agency charged with monitoringcompliance with tax legislation.  Bodies within the Inspectorate's jurisdiction have the right to examine all financialdocuments, accounting books, reports, cash flows, securities, and other documents related to the calculation andpayment of taxes.  They are also responsible for collecting taxes and penalties from organizations, as well asadministrative fines that are not paid in a timely manner.  If taxes are not paid by the due date, a fine of 0.1 percentis charged for each day taxes are overdue. 
Georgia's Tax Code is the principal piece of legislation that determines: formation and functioning of the taxationsystem in Georgia, payment of taxes, legal positions of tax payers and tax authorities, and more. Both Georgianand foreign companies are subject to budgetary and local taxes, as well as to certain social payments. Generally,the taxes collected in Georgia include:
**Import Duties and Customs Fees -** Duties on goods imported into Georgia rangefrom 5 to 12 percent. Additionally, Customs charges a 0.3 percent processing fee on goods itclears.  
**Excise Taxes -**Excise taxes in Georgia range from 5 to 100 percent.  Goods subject to excisetaxes include: still, fortified, and sparkling wines (15 - 100 percent); spirits (50 - 100 percent);  beer (15 percent);tobacco products (100 percent); jewelry (35 percent); passenger vehicles  and vehicle tires (15 percent);  petrol(15 - 50 percent); and caviar and other valuable fish and sea products (20 percent). Transit and temporary importof excisable goods into the customs territory of Georgia, as well as reexport and import of vehicles and tires forthe purpose of humanitarian aid during a natural disaster, are exempt from excise duties.
**Value-Added Tax (VAT)  -**Taxable operations (the delivery of goods and/or services by a person in Georgia) andtaxable imports are subject to a VAT equal to 20 percent of the value of goods and services. The following entities must pay VAT:importers of taxable goods into Georgia;  resident foreign nationals who are not registered as VAT payers but who provide services onthe territory of Georgia; and branches, representative offices, and other departments that are considered separate legal entities.
Operations and goods exempt from VAT include: