EY Georgia Tax & Law Brief for July – September 2023

On 1 September 2023, amendments to the Law on Labour Migration came into full force. 

•  An intermediary company arranging employment abroad for nationals and residents of Georgia, is obliged to register and get a certificate in the registry of economic activities.
• The amendments prescribe a wider range of essential terms of the contract.
• An employment contract must include essential terms outlined in the Labour Code.
• Local employer is obliged to register an employee in the united database of the Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health, and Social Affairs of Georgia (the “Ministry”). 

The source and date of publication: Legislative Herald of Georgia. 02/06/2023.

On 1 September 2023, the Rule on Submission of Report on the Activities of Labour Migration by a certified intermediary company (“Company”) entered into force.

• The report must be submitted to the Ministry.
• The submission of the report by a Company is carried out digitally through the united database of the Ministry. 
• Failure to submit a report is subject to liability, in accordance with the Law of Georgia on Labour Migration.

The source and date of publication: Legislative Herald of Georgia. 09/08/2023.

On 5 July 2023, the draft law on Amendments to the Law on Trademarks was published.

• The draft law proposes simplification of trademark examination procedures and reduction of the examination period of two months by one month. 
• Under the draft law, it will no longer be mandatory to provide a graphical representation of the trademark, and the registration of trademarks consisting of a single color will be permitted.
• The objective of the draft law is to clearly define the grounds for rejection of trademark registration, including those that may infringe public order and established moral principles.
• If approved, the law will enter into full force within 6 months after publication.

The source and date of publication: Website of the Parliament of Georgia. 05/07/2023.

On 1 July 2023, the Regulation on Capital Adequacy Requirements for Microbanks entered into force.

•  A nominal amount of regulatory capital, set at GEL 10 million, was established for legal entities seeking a license for microbank activities.
• Specific capital adequacy requirements for microbanks have been defined with the aim of reducing bankruptcy risks for microbanks and enhancing the overall financial stability of the banking sector.

The source and date of publication: Legislative Herald of Georgia. 21/06/2023.
                                                              Legislative Herald of Georgia. 22/06/2023.

On 1 July 2023, the Corporate Governance Code for Microbanks (the “Code”) and the Regulation for Managing Conflict of Interests entered into force.

• The Code establishes the fundamental principles of corporate governance.
• The Code aims to ensure effective supervision and control of transactions involving related parties by microbanks. 
• Microbanks are required to carry out transactions with related parties based on the arm’s length principle. This includes monitoring transactions and implementing appropriate measures for risk control and mitigation.

The source and date of publication: Legislative Herald of Georgia. 22/06/2023.
                                                              Legislative Herald of Georgia. 22/06/2023.

On 1 July 2023, the Rule on Licensing microbanks, as well as the Rule on Determination and Imposition of Monetary Penalties on Microbanks and their Administrators entered into force.

• The rule outlines the criteria for issuing licenses for microbank activities by the National Bank of Georgia to subsidiaries of foreign trusted banks, branches of foreign commercial banks/microbanks, and subsidiary microbanks.
• Monetary penalties have been established for instances of noncompliance with the Law on the Promotion of Money Laundering and the Prevention of Terrorist Financing, its related regulatory acts, and instructions of the Financial Monitoring Service.

The source and date of publication: Legislative Herald of Georgia. 21/06/2023.
                                                              Legislative Herald of Georgia. 22/06/2023.

On 27 September 2023, the draft law on the amendments to the Tax Code were published, covering profit taxation matters for insurance organizations.

• Insurance organizations will transition to the new (Estonian) model of profit taxation from 1 January 2024.
• To avoid double taxation of profits generated in the periods from 2015 to 2024, the draft law establishes the right of insurance organizations to credit the profit tax accrued and paid according to these periods upon the distribution of the same profits, based on the formula set by the amendments. 
• If approved, amendments will come into force gradually and will be fully enforceable from 1 January 2024. 

The source and date of publication: Website of the Parliament of Georgia. 27/09/2023.

On 30 August 2023, the draft amendments to the Tax Code were published. 

• If approved, the draft law will significantly change property tax rates for natural persons and the requirements related to their total income.
• According to the current legislation, taxable property (except for the land) of a natural person whose family income did not exceed 40,000 GEL during the previous year is exempt from property tax. The draft law proposes to raise this threshold to 60,000 GEL.
• The draft law will establish the ranges of annual property tax rates and the requirements pertaining to the taxpayer's family income earned during the tax year as follows:

• If approved, the draft law will become effective from 1 January 2024.

The source and date of publication: Website of the Parliament of Georgia. 30/08/2023. 

On 6 July 2023, the Rule on the Approval of the Mutual Agreement Procedure Defined by the International Agreement on the Avoidance of Double Taxation was published.

• If a taxpayer considers that the actions of the relevant authorities of one or both states party to the international agreement have caused or will cause inconsistent taxation, a taxpayer may address the Revenue Service and the Ministry of Finance of Georgia with the request to commence the mutual agreement procedure.
• The procedure applies to the matters including international controlled transactions, permanent establishment, dual tax residency of a taxpayer, withholding tax at the source of payment, misuse or abuse of the provisions of an international agreement.

The source and the date of publication: Legislative Herald of Georgia. 06/07/2023.