GILS Tax law: Georgia

TAX CONTROL AND APPEALING ITS RESULTS IN GEORGIA 

Types and/or forms of tax control, the procedure for conducting

Tax control can be performed only by tax authorities. Tax control procedures shall not reasonably disturb the ordinary course of business of a taxpayer and shall not suspend its activity. The types of tax control are current control and tax audit. 

Re-audit of an already audited matter is prohibited without a judge’s order except matters for which a person files an adjusted tax return for an already audited period. 

a. Current Control Procedures 

Current control over a taxpayer’s activity is performed during working hours or during the actual work of a taxpayer. 

The procedures of current control are implemented without any prior notice. 

The Tax Code of Georgia considers the following current control procedures: 

• Time study: to determine the level of a taxpayer’s revenue, the volume of supplied goods/delivered services and the number of hired individuals, the tax authority may survey the taxpayer’s economic activity and conduct a time study of the taxpayer’s activity. 

• Tax monitoring: by assigning the authorized person for a term of up to 6 months to the place of economic activity of a taxpayer, the tax authority may conduct tax monitoring and use the information obtained to determine the taxpayer’s tax obligation at the moment of a tax audit. The period of tax monitoring may be prolonged in agreement with the Head of the Revenue Service.

• Controlling purchase: the purpose of controlling purchase of goods/services shall be to determine the actual volume of revenue earned from the supply of goods or services of services or reveal a violation of the Laws of Georgia.

• Control over observance of rules for using cash registers: an authorized official of the tax inspection may, without a court decision, in accordance with procedures established by the Minister of Finance, exercise control over the observance of rules for using cash registers. 

• Visual inspection: To exercise tax control, an authorized official of the tax authority may visually inspect the premises, buildings, fixed assets and inventory holdings of a person. 

• Taking inventory: The head of the tax authority may, without a court decision, issue an order for taking stock of inventory holdings or fixed assets of a person holding excisable goods. The head of the tax authority may issue an order for taking stock of inventory holdings or fixed assets of a taxpayer holding non-excisable goods for a maximum of two times in a calendar year, and an inventory may be checked for a third time by an order of the Head/Deputy Head of the Revenue Service. To have an inventory checked within a reasonable time, the taxpayer's manager (director) shall set up an Inventory commission within 2 working days after being served with such an order. The inventory commission shall be obliged, in full and on time, to take stock of inventory holdings or fixed assets at the place of their production and storage, compare the obtained inventory with the respective accounting data, and record the results in the Inventory Report.

b. Tax Audit 

A tax audit may be a correspondence audit or a field audit: 

Correspondence tax audit: a correspondence tax audit shall be conducted by an order of an authorized person of the tax authority, for auditing specific matters defined by the order. During a correspondence tax audit, the tax authority may request that accounting documents or taxation-related information be presented.

A correspondence tax audit is conducted without visiting the taxpayer’s place of activity, based on the person’s taxation-related information available at the tax authority, as well as on clarifications and accounting documents provided by the taxpayer. 

Field tax audit: a field tax audit shall be conducted based on an order of an authorized person of the tax authority. The taxpayer shall be sent a written or electronic notice of a field tax audit at least 10 working days prior to the commencement of the audit. In case of an urgent tax audit field tax audit is conducted without prior notification. 

The audit shall commence no later than 30 days after serving the notice upon the taxpayer. If the audit cannot be started within that time, the notice shall be invalid. A field tax audit may not continue for more than 3 months. If necessary, the audit period may be prolonged for a maximum of 2 additional months, in agreement with the Head of the Revenue Service.

The findings of a tax audit shall be reflected in a report. The tax authority shall make a decision on assessing or not assessing taxes or fines, based on the tax audit report. A copy of such a decision shall be presented to the taxpayer along with the relevant tax notice.

PROCEDURE OF APPEALING THE RESULTS OF TAX CONTROL

A. Dispute within the System of the Ministry of Finance

The tax authority decision can be appealed within the system of the Ministry of Finance or directly to court.

The authorities having the competence to resolve a tax dispute within the system of the Ministry of Finance of Georgia shall be the Revenue Service and the Dispute Resolution Council under the Ministry of Finance of Georgia. 

A tax dispute within the system of the Ministry of Finance of Georgia shall include two stages, and it shall start with filing a complaint with the Revenue Service. The complaint shall be filed within a 30-day period from the moment of serving a decision on the taxpayer. 

The decision of the Revenue Service shall be appealed within 20 days either in the court or to the Dispute Resolution Council under the Ministry of Finance. 

Resolving the appeal shall take up 20 days in each instance. Though, in practice this period may last several months and even up to a year.

B. Dispute within the court system

The dispute resolution terms within the court system are as follows: 

• The first instance court - 2 months.
• The Appeal Court – 2 months.
• The Supreme Court – up to 6 months. 

In practice the period of dispute settlement may last up to 3 years and even longer depending on the complexity of the case. 

Court state fees on taxpayers’ claims are as follows: 

The first instance court – 3% of the disputed amount, not less than GEL 100 and not exceeding GEL 5 000. 

The Appeal Court – 4% of the disputed amount, not less than GEL 150 and not exceeding GEL 7 000. 

The Supreme Court – 5% of the disputed amount, not less than GEL 300 and not exceeding GEL 8 000

TAX AGREEMENT

The Tax Code of Georgia provides possibility for a taxpayer to enter a tax agreement with the Revenue Service for purposes of reducing: 

• Tax arrears.
• Sum of a duty or the related penalty and surcharge which is administered by a tax authority. 

The taxpayer submits an application for a tax agreement to the Revenue Service. The decision of the Revenue service might be one option from two: either it may refuse to sign a tax agreement with the taxpayer or submit the application, along with appended documents, to the Minister of Finance of Georgia for consideration at the Government of Georgia meeting. 

The Government of Georgia shall make a decision on signing a tax agreement, defining the amount payable and the time limit of payment under the tax agreement. The taxpayer shall be obliged to discharge the liabilities under the tax. 

 

Author: Sofia Roinishvili, Partner