Special Trading Company

taxconsulting — Tue, 09 Feb 2021 18:51:47 +0000

1. Introduction

In order to further improve the business environment in the country, strengthen Georgia’s potential as a regional hub, and increase the interest of multinational international companies, the Government of Georgia allows companies to obtain “Special Trading Company” status and benefit from corporate profit tax. This status refers to the specific activity, which means the import, and storage in Georgia. Also, it implies subsequent re-export of goods after that.

2. Benefits of Special Trading Company

Special Trading Company is exempt only from corporate profit tax - 15%
It is also exempt from VAT due to its limited and main activities - 18%

3. The terms and conditions of granting the status

The status of a Special Trading Company of the enterprise is granted by the tax authority
The status of a Special Trading Company may be granted only to an enterprise established for the purpose of exemption from profit tax, with registration, for the current and future calendar years
An enterprise must apply for the status of an enterprise to the tax authority within 1 month after registration, but not later than the day of starting of the activity
When granting the status of a Special Trading Company, a certificate confirming this status is issued

Note that it is better to apply and get Special Trading Company status at the start of the new year. Because the status is given for the current and future calendar years.

It is possible for a foreign enterprise that carries out economic activities in Georgia through a permanent establishment to additionally register a separate permanent establishment in order to be granted the status of a Special Trading Company and carry out the activities permitted for such an enterprise.

Special Trading Company has the right to:

Re-export foreign goods from the customs warehouse
To sell foreign goods in to the customs warehouse, both to enterprises with the status of a Special Trading Company and for enterprises without this status
To purchase foreign goods from an enterprise without the status of a Special Trading Company for the purpose of further re-export and / or selling in to the customs warehouse

In addition to the income received from the above activities, Special Trading Company has the right to receive other income. It includes:

Income that is exempt from profit tax under the Tax Code of Georgia
Income from the supply of fixed assets used by him in economic activity for more than 2 years
Revenue, except for the above two points, which from a source in Georgia according to the tax period (year) should not exceed 1 million GEL and 5 percent of the customs value of foreign goods imported to Georgia

Special Trading Company is prohibited:

To import goods to Georgia, except for imports intended for the fixed assets of this enterprise
To purchase Georgian goods on the territory of Georgia for further sale
To provide services to a Georgian enterprise / individual entrepreneur and / or a permanent establishment of a foreign enterprise in Georgia
To have a customs warehouse

If buying goods from a Special Trading Company, the cost deductible cannot exceed the customs value of the goods. This restriction does not apply to all expenses incurred by the buyer, which are attributed to the value of the asset under the Tax Code of Georgia and are not related to payments to a Special Trading Company.

Violation of the rules of operation by a Special Trading Company shall result in penalties provided by law:

Exceeding the maximum amount of income provided by law - will result in a fine of 10 percent of the amount exceeded
Purchase of Georgian goods for further delivery causes a fine in the amount of 50 percent of the market value of the purchased goods
Providing services to a Georgian enterprise and / or a permanent establishment of a foreign enterprise in Georgia causes a fine in the amount of 50 percent of the amount of compensation received and / or acceptable from such services
Supply of fixed assets used in economic activity for a period of up to 2 years shall result in a fine of 50 percent of the amount of compensation received and / or receivable from such goods

4. Revocation of Special Trading Company status

The status of a Special Trading Company shall be revoked for the calendar year indicated by the authorized representative of the enterprise in the application for revocation of the status. In addition, the application must be submitted no later than 5 working days before the start of the relevant year.

Within 10 working days after submitting the application for revocation of the status, the tax authority shall issue an individual administrative-legal act on the revocation of the status.

5. Conclusion

Special Trading Company has significant tax benefits. It creates a very attractive business environment for international companies trading in different countries. Georgia has a good location and is at the crossroads of Europe and Asia. Also, it has a free trade agreement with both the EU and China. For companies that intend to export their goods in the region, this status allows them to import, store and distribute their goods in the region.

For more information or to get help with obtaining the Special Trading Company status contact us.

The post Special Trading Company appeared first on Tax Consulting Georgia.

special trading company certificate in Georgia Archives - Tax Consulting Georgia

Special Trading Company

1. Introduction

2. Benefits of Special Trading Company

Special Trading Company is exempt only from corporate profit tax - 15%

It is also exempt from VAT due to its limited and main activities - 18%

3. The terms and conditions of granting the status

The status of a Special Trading Company of the enterprise is granted by the tax authority

The status of a Special Trading Company may be granted only to an enterprise established for the purpose of exemption from profit tax, with registration, for the current and future calendar years

An enterprise must apply for the status of an enterprise to the tax authority within 1 month after registration, but not later than the day of starting of the activity

When granting the status of a Special Trading Company, a certificate confirming this status is issued

Re-export foreign goods from the customs warehouse

To sell foreign goods in to the customs warehouse, both to enterprises with the status of a Special Trading Company and for enterprises without this status

To purchase foreign goods from an enterprise without the status of a Special Trading Company for the purpose of further re-export and / or selling in to the customs warehouse

Income that is exempt from profit tax under the Tax Code of Georgia

Income from the supply of fixed assets used by him in economic activity for more than 2 years

Revenue, except for the above two points, which from a source in Georgia according to the tax period (year) should not exceed 1 million GEL and 5 percent of the customs value of foreign goods imported to Georgia

To import goods to Georgia, except for imports intended for the fixed assets of this enterprise

To purchase Georgian goods on the territory of Georgia for further sale

To provide services to a Georgian enterprise / individual entrepreneur and / or a permanent establishment of a foreign enterprise in Georgia

To have a customs warehouse

Exceeding the maximum amount of income provided by law - will result in a fine of 10 percent of the amount exceeded

Purchase of Georgian goods for further delivery causes a fine in the amount of 50 percent of the market value of the purchased goods

Providing services to a Georgian enterprise and / or a permanent establishment of a foreign enterprise in Georgia causes a fine in the amount of 50 percent of the amount of compensation received and / or acceptable from such services

Supply of fixed assets used in economic activity for a period of up to 2 years shall result in a fine of 50 percent of the amount of compensation received and / or receivable from such goods

4. Revocation of Special Trading Company status

5. Conclusion