The Rules of Paying of Income and Property Taxes by a Natural Person

FROM THE REDACTION

Chapter XXII of the Georgian Tax Code gives a definition of the income tax, in which it is pointed out that a payer of the income tax is a resident or non-resident natural person that receives income from a source existing in Georgia.

Article 165 of this law establishes a personality of a payer of the income tax. It is envisaged that citizenship of a natural person is insignificant in establishing of his resident status. A citizen of Georgia may at the same time be a non-resident and vice versa – a foreign citizen or a stateless person may be a resident.
A non-resident natural person is a payer of the income tax from the part of the income that he received from a source existing in Georgia, while a resident – from all incomes, that is from the incomes that are received from a source existing either in Georgia or abroad. For instance, a citizen of Georgia that has been in France for 7 months pays the income tax from the income received in Georgia only, while a citizen of France that has been in Georgia for the same period of time – from all incomes received either in France or in Georgia. The income of a natural person liable to taxation is taxed in the amount of 12%.
Article 275 of the Georgian Tax Code envisages the order of payment and account of the tax, in accordance with which, as to buildings and constructions, or a part of them, being in the property (that are not used for economic activities), the tax authority sends a natural person a property tax declaration form for 2005 till May 1, 2006. A natural person fills up this declaration form and sends it to the tax inspection till July 1, 2006. If it turns out that a natural person has to pay the property tax, he is obliged to pay a half of the prescribed property tax till July 15, 2006, while the second half – till November 15. Based on the content of the declaration, the tax authority must send a declaration form to all natural persons. Sending of a declaration form takes place in accordance with a place of residence of a natural person, which is envisaged by Article 35. A natural person may receive a declaration form from several inspections, if his buildings and constructions are located on the territory of several local government subjects. In this case, according to the regulation “on calculation and the order of payment of the income tax”, a natural person should submit a declaration according to the place of tax registration or a place of residence. He should bring there all the remaining unfilled declaration forms, and payment of the property tax on all buildings and constructions liable to taxation is made in the same tax inspection.
A natural person may not have buildings and constructions liable to taxation on the territory of the local government subject where his place of residence is. However, he submits a filled up declaration to the tax inspection according to his place of residence.
As far as a passenger car is concerned, the tax authority sends an owner a tax notice concerning the property tax for 2005 not later than August 1, 2006. A natural person should pay the tax indicated in the notice not later than November 15, 2006. As to the tax for 2006, the tax authority will send a car owner a tax notice till August 1, 2007, while the payment should take place during a car’s registration, re-registration or checkup (the date of which will be closer to August1, 2007). During the following years payment of the property tax on a car similarly to the payment of the property tax for 2006.
Example
On April 2, 2006 X sold the car bought on April 3, 2005 to Y. The Ministry of Internal Affairs will send the information on this car for 2005 to the Tax Department of the Ministry of Finance till April 1, 2006. Till August 1, 2006 X will receive a tax notice from the tax authority in which the property tax to be paid by him for 2005 will be indicated. X should pay this tax till November 15, 2006. It was indicated in the information sent by the Ministry of Internal Affairs till April 1, 2007 that the car had changed its owner. Till August 1, 2007 the tax authority should send a tax notice to X concerning the corresponding property tax for 3 months, while to Y – concerning the corresponding property tax for 9 months. Y will have to pay the tax during the immediately ahead checkup or re-registration. The time of property tax payment for X is not fixed. In accordance with Part 5 of Article 175, we can suppose that if X does not pay the tax to be paid by him by the period when Y will have to pay the property tax on the car, Y will be made to pay the tax that should have been paid by X.
As far as yachts (launches), planes and helicopters that are not used for economic activities are concerned, the tax authority sends an owner a tax notice concerning the property tax for 2005 not later than August 1, 2006. A natural person should pay the tax indicated in the notice not later than November 15, 2006.
Georgian enterprises, foreign enterprises, organizations and natural persons that use property for economic activities, submit a tax declaration calculated in accordance with the previous year’s data till April 1. The mentioned persons should pay the property tax calculated based on the declaration in four equal parts – on April 15, June 15, October 15 of the current year and on January 15 of the coming year. These payments will be reckoned as the sum of the current year’s tax. In accordance with Part 11 of Article 5 and Enclosure 2 of the regulation “on calculation and the order of payment of the income tax”, the difference between the property tax calculated based on the current year’s data and based on the last year’s data is liable to adding on if , according to the current year’s data, the property tax is larger, and to reducing if the property tax calculated in accordance with the last year’s results is larger. It is indicated in the regulation that the return takes place in accordance with Article 71, which means that if additional adding on of property tax takes place, there arises a payment obligation that is not envisaged by this article. Payment of such sum is envisaged by the Tax Code’s Article 67, Part I, Subparagraph A). Subparagraph G) of Part I of the same article envisages that the Tax Code may establish a different order of the tax’s payment. We can suppose that a technical mistake takes place, and we should be guided by the order envisaged by Article 67, Part I, Subparagraph A).
Example
The property tax of Ltd. Z calculated based on the data of 2004 makes up 2000 GEL. The company will pay 500 GEL (for each payment) on April 15, July 15, October 15 2005 and on January 15 2006. The property tax calculated based on the data of 2005 made up 6 000 GEL. According to the Tax Code, Z does not have to pay the difference of 4000 GEL, while, in accordance with the regulation, it has to pay 4000 GEL within the period of declaration submission. It will pay 1500 GEL (for each payment) on April 15, July 15, October 15 2006 and on January 15 2007.
Payment of the land tax does not envisage submission of a declaration by a tax payer, the tax authority should itself submit “a tax payment demand” to a tax payer. If “a tax payment demand” has not been submitted to a tax payer, the person does not know how much he has to pay in the form of the tax. Proceeding from this, he has the right not to make land payments until receiving of “a tax payment demand”.
Example
On April 5, 2005 MM leased 3 hectares of state owned arable land in Gurjani region. The local government bodies acknowledged the land as being of good quality and, besides, increased the rate by 20%. In all the rate made up 52.8 GEL per hectare. On March 1, 2006 registration of the land’s owner, user and actual proprietor will take place. Since MM leased the land after March 1, 2005 (on April 5, 2005), the land tax will be added on to it from May 1, 2005 (in accordance with Parts 10 and 15 of Article 275). MM should receive “ a tax payment demand” in the amount of 132 GEL (52.8 X 3/12 X 10) till June 1, 2006. He should pay the above-mentioned sum till November 15, 2006.
As to buildings and constructions on the plot of land being in the property of several persons, the tax should be paid separately for each construction, in proportion to the area being in joint property of each person.
Example
There are two buildings on the plot of land having the area of 5000 m2. One of them occupies the land having the area of 1000 m2 and its space is 1500 m2. The remaining area of the land is a yard. The buildings have different owners. The total area of the buildings is 3000 m3, one half of which belongs to one owner and the second – to another one. Correspondingly, these persons will pay the land tax equally.
This article also concerns paying of property tax on the plot of land occupied by an apartment house. According to Part I of Article 208, “in an apartment house there is a proprietary right for an apartment and a part of the building that is not used as an apartment”. In accordance with Part 3 of the same article, “the plot of land, a part of the building and the constructions-installations that are not an individual property represent a common property of apartment proprietors. The number of shares being in common property is determined in accordance with the number of apartments”.
Example
A 20 apartment dwelling house is located on the plot of land having the area of 2 000 m2. The total space of the house 4000 m2 out of it, the space of apartments is 2500 m2, basements – 500 m2, garage – 500 m2, and the rest of the space is occupied by stair landings and other common spaces. Citizen X has in this house an apartment having the space of 250 m2, 25 m2 is occupied by a separate basement and 30 m 2 – by a separate garage. Accordion to the Civil Code, /20 – 25 (500 / 20) m2 falls on him. In all, X owns the space of 330 m2 (250 + 25 + 30 + 25), which makes up 8.3% (330 / 4000 X 100) of the building’s total space. Correspondingly, X will have to pay 8.3% of the tax on 2000 m2 of land. Let us say that 0.36 GEL should be paid as a tax for this land. The total amount of tax for 2000 m2 will make up 720 GEL. The share of X in the property tax on land will make up 59.76 GEL.
Registration of ownership for property is made based on the certificate of the tax authority only, which verifies the fact of property tax payment or absence of tax liabilities. The tax authority’s certificate is necessary only for selling of the property which requires registration.