The parliament will consider a package of changes to the property tax
Tata Toria
On the instructions of the President, the Ministry of Finance has prepared a package of amendments to the Tax Law.
The mentioned draft law that is now being considered in the parliament envisages inculcation of privileges in property taxation. The privilege applies to motor cars older than 6 years. Simplification of the property tax’s time constraints is also planned.
No one denies that legislative base in property taxation requires perfection. According to the Deputy Finance Minister Mr. Lasha Gotsiridze, the practice has shown some drawbacks in the legislative sphere. Administration of legal person’s taxes is taking place in a better way than that of physical persons. However, it should be also pointed out that during the period of two years, for the first time in Georgia’s history, quite a serious income was received by the state budget from physical persons’ property tax.
The new draft law, which has already been submitted for the parliament’s consideration by the Ministry of Finance, envisages perfection of the legislation and eradication of shortcomings. According to Mr. Gotsiridze, after coming into effect of the draft law, physical persons will declare their property themselves. At the same time, property tax’s time constraints have also become simpler. With the purpose of further simplification of the process, the Ministry of Finance is planning to introduce only two time constraints: enterprises will pay the property tax till June 15, while physical persons – till November 15. The land tax will be also paid by the mentioned date.
Besides, practically one model will be applied to the taxes on motor-cars, yachts, airplanes, helicopters and non-agricultural lands, i.e. if a family’s annual tax exceeds 40 000 GEL, it will be considered as a tax payer for the mentioned units.
As to motor-cars older than 6 years, the property tax is cancelled. The mentioned amendment came into effect from 1 January 2005. However, in spite of it, during the period of one and a half year motorists paid the levied tax – 5 GEL because of negligent actions of the tax authorities.
According to Mr. Gotsiridze, motorists have special cards in the Tax Department and the excess will be indicated for those ones who paid the mentioned tax till November 15 of the current year, then, at their discretion, these sums will be reckoned in other taxes or covered from the budget.
According to Mr. Gotsiridze, the parliament liked the principle of motor-cars’ privileged taxation and simplification of the tax’s time constraints. He hopes that the consensus will be reached and the draft law will be adopted.
According to the current legislation, considered as a payer of the property tax is a person that in the territory of Georgia possesses a unit liable to taxation by this tax or if he uses or factually possesses the land owned by the state (implied by factual possessing is actual possession or use of land except for land possession and legal use of the land envisaged by the Georgian legislation).
Fixed assets reckoned on the balance of a Georgian enterprise, uninstalled equipment, unfinished capital investments and intangible assets except for land are taxed by the property tax.
For a foreign enterprise the subject of taxation is represented by the property reckoned in the country’s territory, except for land.
For organizations – the property reckoned on their balance or part of the property used for economic activities (except for land).
Taxed by the property tax is also the real estate owned by physical persons (constructions, buildings and parts of them), except for the property used for economic activities.
The property used for economic activities is the subject for taxation by the mentioned tax. Also cars registered in Georgia in accordance with the established order (the commodity envisaged for foreign economic activities by the commodity nomenclature 8703), yachts (launches), airplanes, and helicopters.
Taxed by the property tax is the land being is possession of Georgian or foreign enterprises, organizations and physical persons as well as the land being in possession envisaged by the Code or factually possessed state land.
The tax rate for an enterprise’s fixed assets, uninstalled equipment, unfinished capital investment, intangible assets, a foreign enterprise’s property reckoned in the Georgian territory, the property reckoned on organizations’ balance or a part of the property makes up no more than 1% of the average annual depreciated book cost. It is calculated by the average cost of assets at the beginning and at the end of the year.
The tax rate for the property used for economic activities makes up no more than 1% of the property’s cost and is calculated taking into account the cost of the assets and the norms of the fixed assets’ amortization.
The assets’ cost includes the expenses for their purchasing, production, construction and installation as well as other expenses that increase their cost, except for the paid dues and customs tax.
The fixed assets liable to amortization are grouped in accordance with the following norms (see Chart 1):
The tax rate for real estate (buildings, constructions or their part), except for the property used for economic activities, is differentiated in accordance with the incomes received by the tax paying family during the year and is determined in the following amount:
Families having the annual income from 40 000 GEL to 60 000 GEL are taxed in the amount of no less than 0,05% and no more than 0,2% of the real estate’s market value.
Persons having the income from 60 000 GEL to 100 000 GEL – no less than 0,2% and no more than 0,8%.
Families having the income of 100 000 GEL and more pay no less than 0,4% and no more than 0,8% of the real estate’s market value.
The tax rate for passenger cars registered in Georgia pursuant to the established order is differentiated according to engine volume and a car’s age and makes up no more than (see Chart 2):
Tax rates for yachts, airplanes and helicopters are differentiated in accordance with vehicles’ kind and volume capacity (see Chart 3):
As for the land tax, the basic tax rate on agricultural land for Georgian and foreign enterprises or persons is differentiated according to administrative-territorial units and land quality. It is determined for 1 hectare a year in GEL.
Pursuant to the Code, arable lands, lands occupied with permanent plantations, meadows and pastures were singled out outside the confines of town (borough) administrative units.
The following taxes are fixed for arable lands and the lands occupied with permanent plantations located outside the confines of town administrative units (see Chart 4):
The following rates are fixed for natural meadows and pastures (see Chart 5):
Taxed at the rate determined for natural meadows and pastures is the state-owned land allocated to persons on the basis of issuance of the corresponding license.
The basic property tax rates for the mentioned lands can vary depending on the concrete land’s quality and its location, but no more than by 50%.
Basic land tax rate on non-agricultural land for Georgian or foreign enterprises, organizations or physical persons make sup 0,24 GEL per square meter of land.
The following taxes are fixed for the physical and legal persons that carry out entrepreneurial activities by means of casinos, gambling and other types gaming business:
a) For each casino table – 300 GEL a month.
b) For each playing machine – 50 GEL a month.
c) For each cash desk in totalizator, Bingo, lotto – 300 GEL a month.
d) For each prize drawing – 10% of the prize fund.
e) For games in a system-electronic form – 2000 GEL a month.
The taxes are calculated in accordance with the following order:
The tax on real estate being in possession of a physical person, except for the property used for economic activities, is calculated in accordance with the property’s location and is paid in two equal parts no later than July 15 and November 15. Till May 1 of the reporting year the tax authority sends the property tax declaration to a physical person for filling up. A physical person fills it up and submits to the corresponding tax authority till June 1 of the reporting year.
The tax on agricultural land is calculated by multiplication of the tax rate by the area (hectare) of the plot and is paid till November 15 of the reporting year.
The tax on non-agricultural land is calculated by multiplication of the basic tax rate by the territorial coefficient and the land area. The mentioned coefficient is differentiated depending on the land’s location and the zone. Determination of a zone’s boundaries and differentiation of the land tax’s territorial coefficient takes place on the basis of the data of the expert social-economic appraisal of the territory, the inhabited locality’s land-use plan or other town-planning documents that are adopted by the representative bodies of the local government by submission of the corresponding services of Georgia’s executive power.
The property tax on non-agricultural land is paid in two equal parts, till August 15 and November 15.
Tax on the fixed assets reckoned on the balance of a Georgian enterprise, uninstalled equipment, unfinished capital investments and intangible assets, on the property of a foreign enterprise reckoned in Georgia’s territory, property and a part of property reckoned on organizations’ balance that is used for economic activities, property used by physical persons for economic activities is paid in the form of current taxes in accordance with location and quarterly entered to the budget in equal parts no later than the 15 date of the quarter’s subsequent month. Taking into account the previous year’s data, a tax payer should present the calculation of the tax on the mentioned units to the tax authority till April 1 of the reporting year.
Tax authorities will submit to tax payers the tax notification concerning the calculated tax sum on motor cars till August 1 of the reporting year, while paying of the tax takes place till November 15 of the reporting year. The same time constraints are applied in paying of the tax on yachts, airplanes and helicopters.
As for the amount of the fine in case of a delay in the tax’s payment, it makes up 0,07% of the sum liable to paying for each overdue day.
Exempt from the property tax are:
A physical person whose family’s annual income does not exceed 40 000 GEL; the property existing till 1 January 2007 on the balance of persons engaged in publishing of newspapers and magazines and directly used in these activities; lands that are directly related to the basic activities of the railway transport, except for the lands occupied by medical, cultural-domestic, trade, sports and other units that are not directly related to the railway’s functioning. Also exempt from the land tax is the land under the railway stations’ buildings; property used for environmental protection and fire safety, except for land; access roads, communication and power lines; reference and stand devices of the territorial branches of the State Department for Standardization, Metrology and Certification of Georgia; an organization’s property except for land and the property used for economic activities; the property used for implementation of oil and gas operations; the part of the state-owned land that is handed over to a budget organization, except for the lands used for entrepreneurial activities; lands of the organizations for protection of natural and historical monuments, on which constructions considered as historical, cultural and architectural monuments are located in the event that they are not used for entrepreneurial activities; lands occupied by natural parks, botanical and arboretum gardens, municipal parks of culture and rest or cemeteries, zoological gardens and parks, oceanariums, public gardens, alleys, secured territories, forest organizations, as well as open departmental parks, gardens and forest parks, except for the plots allocated in these territories for economic activities; the lands occupied by the towns’ reservoirs and their water areas that are used for transport and underground communications and are not used for production of agricultural output and economic activities; lands allocated for functioning of hydrometeorological centers, environmental pollution control stations and installations; lands occupied by reservoirs intended for the population’s supplying with drinking water, power stations, melioration systems and their functioning and sanitary-protection and technical zones of these units; ships registered in Georgia’s Ships Register and sailing under the Georgian flag; plots of agricultural purpose whose fertile layer is damaged by half or more as a result of a natural disaster; Kurta, Eredvi and Tighvi communities, Avnevi and Nuli villages – temporarily, till settlement of the conflict and normalization of the economic situation; the lands that are used for aerodromes, airports, helipads, aeronavigation safety zones and underground communications as well as plots of land intended for prospective development of ports in the event that they are not used for economic activities; physical and legal persons that received agricultural lands for development – during 5 years from receiving; a plot of agricultural land having the area of up to 5 hectares being in possession of a physical person for 1 March 2004; disabled veterans of the World War II and the persons equated with them – for plots of land received by privatization; the residents of regions located on the southern mountainside of the Caucasus mountain ridge and the mountainous villages, communities and boroughs of Ajara-Guria region – on plots of land existing on the given territories; for the residents of the mountainous regions of southern Georgia the land tax on plots existing in this territory is reduced by 50%; property of medical establishments used for medical activities, except for land; medical-research, training, experimental-lecture and test plots that are used for scientific and educational purposes and the works on which are financed from the budget; plots of land used by asylums for blind, deaf-and-dumb, mentally retarded and physically backward children, war veterans’ societies, old people’s and children’s homes, centers for adolescents’ social adaptation and labor rehabilitation financed from the budget; plots of land serving the purpose of upbringing and education of children if they are not used for economic activities; lands occupied by hunting farms.
The mentioned tax privileges are not applied to the cases when a physical or a legal person having privileges leases a plot of land or constructions and buildings owned by him to other physical or legal persons.