1. INTRODUCTION

The profit tax rate in Georgia is – 15%.

The following shall be subject to profit taxation:

1. Distributed profit;
2. Costs incurred or other payments not related to economic activity;
3. Free delivery of goods/services and/or transfer of funds;
4. Representation expenses paid in excess of a limited amount determined under the Tax Code of Georgia;

The amount subject to profit taxation is calculated by dividing the sum of a disbursement made/expense paid according to the object of taxation determined by 0.85.

2. DISTRIBUTION OF PROFIT

The following shall be deemed as a distribution of profit:

1. Any operation performed by an enterprise with a related party (who is not subject to the new Estonian model profit tax) if the price of a transaction concluded between them is different from its market price and their relationship affects the outcome of the transaction;

2. Conduct a controlled transaction if the established conditions for the transaction fail to satisfy the market principle;

3. Any operation performed by an enterprise with a person exempt from income tax/profit tax if the price of a transaction concluded between them is different from its market price.

3. NON-ECONOMIC COSTS / PAYMENTS

Costs not related to an economic activity shall be:

1. Costs that are not documented;

2. Costs the purpose of payment of which is not to gain profit, income or compensation;

3. Costs paid for goods/services purchased from a natural person having the status of a micro business, except when the income gained from the delivery of goods/services by a person having this status is taxed under the general rule, or when a consignment note/a document of a form determined by the Minister of Finance of Georgia is issued upon the supply/purchase of goods;

4. The interest paid for a credit (loan) above the annual interest rate established by the Minister of Finance of Georgia;

5. Costs paid by a person for purchasing foreign goods from a special trade company in the amount exceeding the customs value of the goods, except for the costs not related to payments to the special trade company.

4. NON-ECONOMIC COSTS / PAYMENTS

The following shall be subject to profit tax:

1. Payments made to purchase debt securities issued by a person registered in a country with preferential tax treatment, as well as by a person exempt from profit tax;

2. Contractual penalties and/or other fines paid to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax, which was incurred on the basis of contractual relations;

3. Advance payments to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax;

4. Granting of a loan to a person registered in a country with preferential tax treatment, as well as to a person exempt from profit tax and/or payments made to purchase a claim against that person;

5. Loss incurred due to the transfer of the right to claim to and/or the denial of the right to claim for a person registered in a country with preferential tax treatment, as well as a person exempt from profit tax.

6. A contribution made to the capital of a non-resident, as well as of a person exempt from profit tax, and/or a payment made to purchase a share/equity (except for a share/equity placed on a foreign recognized stock exchange.

7. Granting of a loan to a natural person or a non-resident (except for the purchase of loan securities placed on a foreign-recognized stock exchange).

5. TAX RECOVERY

1. If payment was affected (a sum was actually received) as a result of providing debt securities purchased or the right to participate in the capital (shares/interest), or satisfying a demand, a company may set off and recover a sum of the previously paid profit tax in the amount of a profit tax calculated according to the sum paid within the accounting period of the actual receipt of the sum.

2. If a loan granted/advance payment was repaid, or goods/services were received in return for the advance payment, a company may set off and recover a sum of the previously paid profit tax in the amount of a profit tax calculated according to the sum repaid within the accounting period for repayment of the loan/advance payment or actual receipt of the goods/services, or according to the amount of compensation for the goods/services received.

6. FREE TRANSFER & REPRESENTATION EXPENSES

1. Delivery of goods or services not intended to gain profit, income or compensation shall be considered free delivery;

2. Shortage in the inventory and/or assets at the moment of its identification shall be considered as free delivery of the good;

3. The amount of representation expenses to be incurred during a calendar year shall be limited to 1 % of the income gained during a previous calendar year, and to 1 % of the expenses incurred if the expenses exceed the income gained. The amount of representation expenses incurred during the calendar year of an enterprise establishment shall be limited to 1 % of the expenses incurred before the end of the current calendar year.

7. CONCLUSION

In this article, we discussed the significant main topics of the profit tax in the Tax Code Of Georgia.

You can download our brochure about this article here.

1. INTRODUCTION

1. The legal capacity of natural persons to enter into an employment agreement shall commence from the age of 16.

2. The legal capacity of minors under the age of 16 to enter into an employment agreement shall derive from the consent of their legal representative or a custody/guardianship authority.

3. An employment agreement may be oral or written, fixed-term, or open-ended.

4. An employment agreement shall be concluded in writing if labour relations last longer than 1 month.

5. Except when the duration of an employment agreement is 1 year or longer, an employment agreement shall only be concluded for a fixed term if one of the following circumstances are present:

a. a specific amount of work is to be performed;
b. seasonal work is to be performed;
c. the amount of work has temporarily increased;
d. an employee being temporarily suspended from work is being replaced;
e. other objective circumstances.

6. If the duration of an employment agreement is more than 30 months an open-ended labour agreement shall be deemed to have been concluded.

7. A provision in an individual employment agreement concluded with an employee that contravenes Labour Code of Georgia a collective agreement with the same employee shall be void, except where the individual labour agreement improves the conditions of the employee.

2. WORKING TIME

1. Standard working time shall not exceed 40 hours a week.

2. The duration of uninterrupted rest between working days (or shifts) shall not be less than 12 hours.

3. Where the working day is longer than 6 hours, an employee shall be entitled to a break. The duration of a break shall be determined by agreement between the parties. Where the working day is no longer than 6 hours, the duration of a break shall be at least 60 minutes.

4. Employees who are breastfeeding infants under the age of 12 months may request an additional break of at least 1 hour a day. A break for breastfeeding shall be included in working time and shall be paid.

5. In addition to the 12 hours daily rest period, employers shall ensure that, per each seven-day period, every employee is entitled to a minimum uninterrupted rest period of 24 hours. By agreement between the parties, the employee may enjoy a rest period of 24 hours twice in a row within not more than 14 days.

6. The duration of working time for minors from the age of 16 to 18 shall not exceed 36 hours per week, nor 6 hours per working day.

7. The duration of working time for minors from the age of 14 to 16 shall not exceed 24 hours per week, nor 4 hours per working day.

8. A legal representative or supporter of a person with a disability may, in addition, to rest days, enjoy another paid rest day once a month, or agree on working time other than that provided for by the internal labour regulations.

9. Employers shall, in writing and/or electronically, keep a record of the hours worked by employees in the working day and shall make available to the employee the monthly records of the working time (hours worked). Employers shall store the records of working time (hours worked) for 1 year.

3. TRIAL PERIOD & INTERNSHIP

1. An employment agreement with a person may be concluded only once for a trial period of no more than 6 months. An agreement for a trial period shall be concluded only in writing.

2. The work performed during a trial period shall be paid for.

3. An employer may, at any time during the trial period the employment agreement with the employee, or terminate the employment agreement for a trial period.

4. An intern is a natural person who performs for an employer’s particular work, whether paid or not, in order to upgrade his/her qualifications and to gain professional knowledge, skills, or practical experience.

5. An employer shall not use an intern’s labour in order to avoid entering into an employment agreement. An intern shall not replace an employee. An employer shall not have the right to hire an intern to replace an employee with whom labour relations were suspended and/or terminated.

6. The duration of an unpaid internship shall not exceed 6 months, and the duration of paid internship shall not exceed 1 year. A person may do an unpaid internship with the same employer only once.

7. An internship agreement shall be concluded only in writing. Such agreement shall describe in detail the work to be performed by an intern.

4. VACATION LEAVE

1. An employee has the right to take a paid vacation for at least 24 working days a year, and unpaid vacation of at least 15 calendar days per year.

2. The employee has the right to request vacation after 11 months from the start of work. However, with the consent of the employer, vacation may be granted for up to 11 months.

3. From the second year of work, the employee can be given vacation at any time during the working year.

4. The employee can use the vacation in part or in whole (depending on the agreement between the employer and the employee).

5. The employer can determine the order of granting paid vacation to the employee during the year.

6. Not considered as a vacation: a) period of temporary incapacity for work; B) leave due to pregnancy, childbirth, and childcare; C) Additional leave for child care.

7. In case of temporary incapacity for work during paid vacation, compensation for temporary incapacity for work is issued for the entire period of temporary incapacity for work. In this case, the vacation days will be transferred to the number of days indicated in the hospital sheet (bulletin).

8. When taking an unpaid vacation, the employee is obliged to notify the employer 2 weeks in advance about it.

9. If the payment of paid leave vacation has a negative impact on the normal conduct of work, with the consent of the employee it is possible to postpone the vacation for the next year.

10. It is forbidden to transfer paid vacation to the next 2 consecutive years.

11. In case of termination of the employment contract at the initiative of the employer, the employer is obliged to compensate the employee for unused vacation in proportion to the employment relationship.

5. OVERTIME WORK

1. Overtime work is work performed by an employee by agreement between the parties for a period of time longer than the standard working time (40 hours per week).

2. Working on holidays is considered overtime work.

3. Holidays shall be: January 1, 2, 7, 19; March 3, 8; April 9; Easter days: Friday, Saturday, Sunday, Monday; May 9, 12, 26; August 28; October 14; November 23.

4. The total overtime work performed by minors shall not exceed 2 hours per working day and 4 hours per working week.

5. Overtime work shall be paid for at an increased hourly rate of remuneration. The amount of the said payment shall be determined by agreement between the parties. Overtime work shall be paid for together with monthly remuneration payable after the performance of overtime work.

6. The parties may agree to grant an additional proportional rest period to an employee to compensate for overtime work. An employee shall be granted an additional rest period not later than 4 weeks after the work has been completed.

7. An employer shall notify an employee of overtime work to be performed 1 week prior to such work.

6. MATERNITY & PARENTAL LEAVE

1. An employee shall, upon her request, be granted a paid maternity leave of 126 calendar days, and in the case of complications during childbirth or the birth of twins, maternity leave of 143 calendar days.

2. The employee has the right to distribute the leave days between pregnancy and postnatal periods.

3. An employee shall, upon his/her request, be granted parental leave of 604 calendar days, and in the case of complications during childbirth or the birth of twins, parental leave of 587 calendar days. 57 calendar days of the leave shall be paid.

4. Maternity leave (without complications, as a standard rule) is reimbursed for a total of 183 calendar days.

5. The father can also take leave for childcare (on the days when the mother did not use the leave).

6. When taking a period of parental leave, an employee shall notify the employer thereof 2 weeks prior to taking the leave. The employee shall use the paid part of maternity leave and parental leave in sequence, for 183 or 200 calendar days, respectively.

7. The employee can request in full or in part 2 to 12 weeks of unpaid leave per year until the child is 5 years old.

7. INCAPACITY FOR WORK

1. An employee who is unable to appear for work due to illness is obliged to immediately notify the authorized person by e-mail or other means:

a. the reason for non-appearance;
b. Estimated period of absence from work;
c. type of illness;
d. work that must be performed in his absence.

2. The employee is obliged to submit a sick sheet (bulletin) with a request for reimbursement upon arrival at work, within 5 working days after closing the sick sheet (bulletin), otherwise, the missed days will not be reimbursed and absence from work during this period will be considered unreasonably.

3. Temporary incapacity for work is remunerated if the period of incapacity for work is not more than 40 calendar days in a row and the total period of 6 months is up to 60 calendar days (after that the employer may not reimburse the period of incapacity for work or terminate the employment).

4. The employer is entitled to dismiss the employee if the period of incapacity for work exceeds 40 consecutive calendar days or during the total period of 6 months it exceeds 60 calendar days (in this case the employee must have used paid and unpaid vacation).

5. The amount of temporary incapacity for work is calculated according to the monthly salary.

8. INTERNAL REGULATIONS

1. An employment agreement may determine the internal labour regulations to be part of the employment agreement. In this case, an employer shall make the internal labour regulations (if any) available to a person for reading before concluding an employment agreement. An employer shall make changes to the internal labour regulations available to an employee for reading within 14 days of making such changes.

2. Internal labour regulations shall constitute a written document that may determine:

a) the duration of a working week, the start and end of a working day, and the duration of shifts in the case of shift work;
b) the duration of breaks;
c) the time, place, and procedure for remuneration;
d) the duration of paid leave and the procedure for granting it;
e) the duration of unpaid leave and the procedure for granting it;
f) the rules for observing employment conditions;
g) the types of incentives and liabilities and the procedure for their application;
h) the procedures for reviewing applications/complaints.

3. Based on work specificities, an employer may establish special procedures under internal labour regulations.

4. An employer shall take measures to ensure compliance with the principle of equal treatment between employees at an institution and shall include anti-discrimination provisions in the internal labour regulations and other documents of the institution, and ensure their observance.

5. A provision of internal labour regulations that contravenes Georgian Labour Law, an individual employment agreement, or a collective agreement, shall be void.

9. CONCLUSION

In this article, we discussed the significant main topics of the Labour Code Of Georgia.

You can download our brochure about this article here.