EY Georgia Tax & Law Brief for October – December 2023

On 28 December 2023, the amendments to the Law on Activities of Microbanks entered into force. 

• To obtain a microbank license, a license seeker is no longer obliged to submit detailed information about all shareholders to the National Bank of Georgia (NBG).
• The referred obligation now applies exclusively to providing information about shareholders holding a significant share, intermediate owners, and the beneficial owner.
• A microbank that does not have any shareholder with a significant share is obliged to submit identification information on its 20 largest shareholders, including the amount and type of their shares/stock, to NBG.

The source and date of publication: Legislative Herald of Georgia. 28/12/2023

On 19 December 2023, the amendments to the Law on Entrepreneurs were published. 

• Entities/branches registered before the enforcement of the new law on entrepreneurs (until 1 January 2022) must align their registration data with the requirements of the law by 1 April 2025 instead of January 2024. 
• According to the amendments, failure to comply with the legal requirements will result in the suspension of registration of the entity/branch until 1 January 2026.
• The suspension of registration includes restrictions on the disposal of an entity’s property, participation in tax transactions, and banking and representative powers. 
• From 1 January 2026, the Public Registry will establish defect to the entity/branch and prescribe a 3-month period for its elimination. If no action is taken within the specified period, the registration of the entity/branch will be canceled.
• As an exception, shareholders of the entity have the option to apply to the Public Registry for the cancellation of registration from 1 May 2024.
• The amendments entered into force from 1 January 2024.

The source and date of publication: Legislative Herald of Georgia. 19/12/2023.

On 11 December 2023, the amendments to the Law on Competition were published

• The Competition Agency of Georgia has been renamed to – Georgian Competition and Consumer Protection Agency.
• Under the prior version of the law, only group exemptions from restrictive competition agreements that were predetermined by the state were permitted. This rule now includes individual exceptions established by the state for a certain period.
• The period for verifying the notice on concentration by the Agency has been extended from 5 to 10 working days.
• The amendments provide that the party of concentration may not be an economic agent, but a natural person. 
• Failure to submit a notice on concentration may result in a fine of GEL 10,000 for an individual.
• The amendments will be gradually implemented and will become fully effective from 1 April 2024. 

The source and date of publication: Legislative Herald of Georgia. 11/12/2023.

On 7 December 2023, the law on possession of dematerialized securities was published.

• The law regulates matters related to the possession and circulation of dematerialized securities.
• Securities are considered dematerialized only in the form of a book-entry, with ownership confirmed by the system statement.
• The law applies exclusively to dematerialized securities held in Georgia, outlining rules for their receipt, issuance, and possession.
• As part of a legislative package, the law has led to amendments in over 20 legislative acts, including the Law on the Securities Market, the Law on Entrepreneurs, and the Civil Code.
• The law will be gradually implemented and will become fully effective from 1 March 2024.

The source and date of publication: Legislative Herald of Georgia. 07/12/2023.

On 20 November 2023, the amendments to the Law on Funded Pension were published.

• According to the amendments, a Georgian citizen seeking to receive pension assets will now qualify to do so only upon forfeiting both their permanent residence permit and their Georgian citizenship.
• As per the legislative amendments, the employer will have 5 working days from the issuance of salaries to make a pension contribution.
• According to the new sanction regime, penalties imposed by the Pension Agency on the employer and the claims for the performance of obligations must be subject to mandatory enforcement.
• The amendments will be gradually implemented and will become fully effective from 1 January 2025.

The source and date of publication: Legislative Herald of Georgia. 20/11/2023.

On 20 November 2023, the amendments to the Capital Regulation of Commercial Banks were published. 

• A commercial bank is obliged to deduct the foreseeable dividend from retained earnings – one of the elements of the primary initial capital.
• The mechanism for determining the amount of the dividend has also been established.
• A foreseeable dividend, issuance of which does not reduce the primary initial capital, must not be deducted from the retained earnings to be included in the primary initial capital.

The source and date of publication: Legislative Herald of Georgia. 20/11/2023.

On 23 October 2023, the amendments to the Rule on Performing Notarial Acts and the Public Registry Instruction came into effect. 

• If an agreement is subject to the registration in the Public Registry, and a party involved is presented with a power of attorney issued in a foreign country or is a partnership, the agreement must be notarized in the form of a public act. 
• Obligation for public act certification must also be applied to the ongoing registration proceedings initiated in the Public Registry before the amendments came into effect.

The source and date of publication:
Legislative Herald of Georgia. 23/10/2023. 
Legislative Herald of Georgia. 23/10/2023.

On 10 October 2023, the amendments to the Law on Designation of Origin and Geographical Indications of Goods were published.

• The issues related to the expertise and registration procedures were newly regulated.
• A national commission has been established to review applications for the designation of place of origin and geographical indication.
• Under the amendments, protection of designation of place of origin and geographical indication will be implemented through the registration in the IPCG, an international agreement, or recognition.
• The law will be gradually implemented and will become fully effective from 1 November 2024.

The source and date of publication: Legislative Herald of Georgia. 10/10/2023.

On 10 October 2023, Society for Worldwide Interbank Financial Telecommunications (SWIFT) notice screening rules became effective.

• The categories and scopes of SWIFT notices, the procedure for screening implementation, and relevant requirements have been determined. 
• A list of sanctioned entities for which SWIFT notice screening is mandatory has been established. 
• Commercial banks are obliged to fulfill the specified requirements within 4 months from the date when the rules come into effect.

The source and date of publication: Legislative Herald of Georgia. 10/10/2023.

On 28 December 2023, the amendments to the Order on Tax Administration were published.

• According to the amendments, individuals (including non-residents), who receive capital gains from the sale of property/assets outside their entrepreneurial activity, are obliged to submit a personal income tax declaration and pay the corresponding tax no later than the 15th day of the month following the month of the property/asset sale.
• An annex to the Order has been introduced, containing the specific form for the income tax declaration related to the supply of property/assets by an individual. The declaration should include, among other details, information about the type of property/asset subject to sale, its identifying data, the purchase/sale price, generated capital gain, and the applicable personal income tax rate.
• The Order entered into force from 1 January 2024.

The source and date of publication: Legislative Herald of Georgia. 28/12/2023.

On 27 December 2023, the amendments to the Tax Code were published.

• The amendments will affect a special tax regime provided by the Tax Code – Small Business Status. Namely, the concepts of persons engaged in wine tourism activity and agrotourism activity will be added to the Tax Code.
• The statuses of the persons engaged in wine tourism activity and/or agrotourism activity will be granted based on the relevant Ordinance of the Government of Georgia. 
• Holders of the Small Business Status engaged in wine tourism activity and agro-tourism activity will lose this status if the combined income from these activities exceeds GEL 700,000 in each calendar year over a span of 2 calendar years.
• The amendments will enter into force from 1 January 2025.

The source and date of publication: Legislative Herald of Georgia. 27/12/2023.

On 25 December 2023, the amendments to the Tax Code were published. 

• The amendments entail changes regarding the taxation of income/profits from gambling business, and, among others, regulate taxation of income received from organizing slot machines saloons. 
• According to the prior regulation, both individuals and legal entities, who received income from organizing games of chance in a systemic-electronic form, were taxed for the difference between the bets accepted from players and the winnings paid out to them. The applicable tax rate was 10%.
• The amendments introduce an increased tax rate of 15%. Furthermore, persons receiving income from the organizing slot machines saloons will now be subject to the same tax rate.
• The income earned by individuals participating in these activities (players), which includes earnings obtained from game organizers and the systemic-electronic gambling accounts, will now be taxed at a rate of 5%, representing an increase from the previous effective rate of 2%.
• The amendments entered into force from 1 January 2024. 

The source and date of publication: Legislative Herald of Georgia. 25/12/2023. 

On 30 November 2023, amendments to the Order on Tax Administration entered into force.

• An import declaration now allows deduction of VAT paid/payable for goods imported, provided they are used in the following operations:
  • provision of services/supply of goods outside the territory of Georgia; 
  • transactions exempted from VAT with the right of deduction in accordance with the Tax Code; or 
  • financial transactions/operations if the customer is established outside of Georgia or if these operations are directly related to goods intended for export from Georgia. 
• The amendments apply to legal relationships arising from 1 January 2021.

The source and date of publication: Legislative Herald of Georgia. 30/11/2023.

On 20 October 2023, the amendment to the Order on Tax Administration was published.

• The amendment requires taxpayers to include in their withholding tax return any payments made for services received that are not subject to tax at the source, based on the reporting month of the actual disbursement.
• The amendment entered into force from 1 January 2024.

Source and the date of publication: Legislative Herald of Georgia. 20/10/2023.