Author: Nino Metreveli, Accountant of LTA
Importance of article writing: to introduce the main objectives of an accountant, while providing accounting services in Georgia to any interested party, to make Georgia's taxes, their rates, tax planning service, and payment rules informative to external users, both Georgian and non-resident clients, and to provide information on the publicity and preparation of financial statements in Georgia.
Importance of Accounting Service in Georgia
Accounting is one of the main foundations of any organization's financial success. It records, summarizes and systematically analyzes the financial operations of the company. There are always two parties interested in receiving accounting services in Georgia - the company itself and external users (auditors, individuals, investors, etc.), and without external users, the financial success of the company is impossible. Thus, accounting service provides them with clear and established decisions, where it is also important to make information public and attract investments. In this article, we delve into the key aspects of accounting and bookkeeping in Georgia, exploring the tax rates and tax obligations, and reviewing the importance of financial statements for businesses. At the same time, we emphasize the role of accountant in Georgia (Tbilisi / Batumi, wherever you need accounting services to be received).
Regulatory Framework if Accounting in Georgia
The overall methodological management of accounting and reporting in Georgia is carried out by the Ministry of Finance of Georgia. Accountant is obviously the main person in the company who conducts respective actions on behalf of it. Ministry of Finance of Georgia develops and approves normative acts and methodological instructions on accounting and reporting, which are mandatory for all enterprises and organizations. Additionally, in Georgia accounting standards are relevant with the International Financial Reporting Standards (IFRS), and every company is obliged to proceed the accounting along with global accounting practices.
The main components of accounting
Accounting includes conducting/recording daily transactions, managing the balances of property owned by the enterprise/organization, managing employee payroll and accounts, controlling the purposefulness of economic operations within the enterprise's core activities, as well as planning and budgeting, managing taxes and presenting financial statements. Accounting summarizes the collected and processed information in financial statements and provides it to users for making economic decisions.
The recording of daily transactions is related to the control of operations within the organization, the accuracy of documentation, and the accuracy of accounting. Without these records, information cannot be processed and collected, which is then needed to make financial decisions and provide information to interested parties.
For the organization, the property is the most important asset in the enterprise, because it determines the most basic and largest indicator of the balance of the enterprise, and its assessment is also important and inevitable for the enterprise, since it is crucial for investors, and the owner of the property itself. The value of the enterprise is mainly determined by the value of the property it owns. This is the basic selling price of the enterprise, and the value by which the organization is valued by external customers. It creates culture within the enterprise, goodwill outside the enterprise, and stability of financial performance.
Regarding payroll management in Georgia, it is noted the share of employees in the organization who create an asset of the organization. That is, it is a part of the cost that is financed from the property or services coming into the enterprise, which creates the main cost of the enterprise. Accordingly, the control of these accounts and the effective establishment of wage rates, and the precise formulation of labor contracts lead to the principle of document compliance with accounting reports. Often there is a separate department in the company to control this, in organizations that have many assets and many employees.
Whether you’re a local entrepreneur or a multinational corporation, understanding the nuances of accounting, bookkeeping and taxation in Georgia is essential for maintaining compliance and making informed financial decisions.
Tax Preparation / Declaration in Georgia
Personal Income Tax in Georgia
Individuals are subject to a personal income tax in Georgia, with a tax rate of 20%. According to the current practice in Georgia, the income tax on the income received in the form of salary is mainly paid by the employer. The tax code defines the categories of income that are taxed at the standard rate of 20%, non-standard rate, or exempt from income tax. For example, standard salary income is taxed at 20%, commercial rental income is also taxed at 20%, and residential rental income at 5%.
Tax Declaration Date: Salary income is declared and paid once a month up to and including the 15th of each month, and income from the rental of commercial and residential premises is declared annually, up to and including April 1 of each year.
Corporate Income Tax in Georgia
The profit tax rate is 15%. Expenditure exceeding the amount of undistributed profit, expenditure not related to economic activity, undocumented expenditure, value of items given free of charge, amount given as a gift or representative expenditure defined by the Tax Code is subject to income tax.
Tax Declaration Date: The tax is submitted and paid up to and including the 15th of every month.
Value Added Tax (VAT) in Georgia
The standard VAT rate in Georgia is 18%. VAT is paid on the supply of goods and services, as well as on imports. Certain goods and services may qualify for reduced VAT rates or exemptions.
Businesses are required to register for VAT purposes if the annual turnover of the business is more than 100,000 GEL, and comply with reporting obligations,
Tax Declaration Date: Filling VAT returns and remitting VAT payments to the tax authorities once a month for and including the 15th of each month.
Property Tax in Georgia
Property tax in Georgia applies to both land and buildings. The property tax rate is no more than 1% of the property value. The tax rate varies depending on the type of property and its location, and the individual’s income.
Tax Declaration Date: The deadline for submitting property tax on land is November 1, and the deadline for payment is November 15. The declaration is made annually. The deadline for submission and payment of enterprise property tax is April 1 of the calendar year.
Excise Tax:
Excise taxes are imposed on specific goods, An excise tax payer is a person who:
- a) produces excise goods in Georgia;
- b) imports excise goods into Georgia;
- c) exports excise goods;
Tax Declaration Date: The rates of excise taxes vary depending on the type and quantity of the taxed goods.
The tax is declared once a month, including the 15th of each month.
If the declarations to be submitted are marked on the electronic website of the Revenue Service of the enterprise, and it is not submitted within the relevant time frame, the Revenue Service is obliged to sanction the person for non-submission in the amount of 100 GEL, as well as the amount of the mandatory tax, and the amount of sanctions (0.05%) charged on the payable tax for each overdue day until the person pays tax.
Preparation and submission of financial statements
The preparation of financial statements can be separated for the purposes of internal business processes, and for external customers, the submission of which is considered mandatory in accordance with the existing standards in Georgia.
Financial reporting services are crucial for submission of financial statements, which is very important for determining the company's financial results and for planning future results, as well as for budgeting and attracting investments. In addition, any business manager also has a personal interest in the financial results of the strategy implemented by him.
As for the mandatory submission of reports to third parties, the submission of financial reports in accordance with internationally recognized standards is established by the Accounting, Reporting and Audit Supervision Service. This serves the transparency of financial information. The report is submitted once a year, on October 1 of each calendar year.
The obligation to submit the report is determined depending on the categories of the enterprise. There are four categories of enterprises, which are divided according to the total value of assets, income and average number of employees during the reporting period. In accordance with these criteria, the audit requirements for the enterprise are also determined. In most cases, large and medium-sized businesses require a financial audit.
If the company wants to edit the already submitted report, which is also made public, the audit service investigates the error, and then gives the organization 10 working days to correct the error.
In case of violation of the reporting deadline, the first step is to send a written notification to the enterprise for the purpose of warning. If the enterprise does not take into account the warning, then a monetary fine is already submitted by the audit service. The types of monetary fines differ according to the categories of the enterprise.
To summarize, the processes discussed and described are essential for the successful operation of the company. Most importantly, this process is better done when they are performed with great precision, accuracy and expertise. Therefore, your choice of whom you entrust to carry out your processes effectively is crucial. Experience, practice, knowledge, corporate culture in the relationship between the two parties, and high professionalism are the core and decisive factors that guide our team. The family of professionals is attuned to all the decisions you make and offer, and what your personal or corporate business needs to succeed. Our 10+ years of experience and qualified expert accountants will provide you with the valuable accounting services, as well as other related issues that your business may encounter.
