Amendments to the Tax Code of Georgia

In April 2024, Parliament approved an initiative to amend the Tax Code of Georgia aimed at stimulating economic development. This bill provides for a number of important measures, including the write-off of citizens' tax debts and the introduction of tax incentives to encourage the repatriation of funds from offshore zones to Georgia.

The amendments are expected to begin to apply during 2024. If you are planning to open a company in Georgia or relocate a business to Georgia, then this article may be relevant to you.

Amendments to the Tax Code of Georgia

In accordance with the enacted legislation, tax arrears accumulated by individuals prior to January 1, 2021, and remaining unpaid at the time of the introduction of the write-off, shall be annulled, including accrued penalties. These amendments in the tax legislation aim to foster a more favorable investment climate in Georgia, thereby encouraging capital influx and stimulating economic growth. The introduction of tax incentives and amnesty also constitutes a step towards engaging citizens in the country's economic activities and incentivizing the repatriation of funds for investment in the national economy.

The same document provides privileges for the import of financial resources and other assets from offshore zones. For instance, when transferring assets and businesses from an offshore jurisdiction with preferential tax treatment to Georgia, tax exemption will be applied. This entails that offshore entities can transfer their ownership rights to various assets, including stakes in foreign companies, to Georgian enterprises, without incurring profit tax. The preferential capital transfer regime will be in effect until January 1, 2028.

Registration and relocation of companies to Georgia: other tax changes

In addition to the measures outlined above, the law stipulates that income derived from assets registered in jurisdictions with preferential tax regimes and relocated to Georgia by enterprises or individuals shall acquire tax-exempt status within the territory of this country. Furthermore, an exemption from the payment of import duties on resources and assets transferred from offshore zones, including goods, machinery, and equipment, has been introduced. It is important to note that the Ministry of Finance of the Republic of Georgia will establish conditions and other procedural formalities.

Additionally, the new package of amendments to the Tax Code of Georgia includes an update stipulating that enterprises incorporated in the Republic of Georgia, into which assets from offshore territories are transferred, shall be exempted from property tax until January 1, 2030. This applies to transactions in which the ultimate beneficiaries of offshore and Georgian enterprises are the same individuals.

The authors of the bill underscored that the primary objective of their proposal is to incentivize the inflow of foreign direct investment into Georgia, fostering a conducive environment for capital movement from other nations. This is achieved through the provision of temporary tax incentives.

Conclusion

Currently, certain enterprises are encountering impediments to operate within jurisdictions offering preferential tax regimes due to heightened transparency, regulatory scrutiny, and tax augmentation. Consequently, many entities are exploring business relocation to Georgia and other jurisdictions. Numerous states are actively endeavoring to capitalize on opportunities for capital attraction. Amendments to the Tax Code of Georgia serve precisely this objective.

The information is provided for informational purposes and should not be construed as legal advice. YB Case experts can provide in-depth insights on the topic. We offer not only consultancy services but also assistance in company registration in Georgia or facilitating legal relocation to Georgia.