{"id":1711,"date":"2006-05-12T16:34:36","date_gmt":"2006-05-12T12:34:36","guid":{"rendered":"http:\/\/geoeconomics.ge\/en\/?p=1711"},"modified":"2013-03-12T16:35:00","modified_gmt":"2013-03-12T12:35:00","slug":"how-the-tax-inspection-calculates-our-natural-persons-citizens-incoms-and-how-much-we-shouldpay-to-the-budget","status":"publish","type":"post","link":"http:\/\/geoeconomics.ge\/en\/?p=1711","title":{"rendered":"HOW THE TAX INSPECTION CALCULATES OUR (NATURAL PERSONS, CITIZENS) INCOMS AND HOW MUCH WE SHOULDPAY TO THE BUDGET"},"content":{"rendered":"

Professor Lali Chagelishvili <\/strong><\/p>\n

Article 173. Total Income
\n resident\u2019s total income consists
\n of incomes received by him both
\n in Georgia and outside it.<\/p>\n

A non-resident\u2019s total income consists of incomes received from sources existing in Georgia.
\n Any income received in any form or\/and out of any kind of activities pertains to total income, in particular:
\n – Incomes received in the form of salary;
\n – Incomes received out of economic activities that are not related to working for hire;
\n – Other incomes that are not related to working for hire and economic activities.
\n Article 174. Incomes received in the form of salary
\n Any remuneration or profit received by a natural person as a result of working for hire, including the incomes from his previous place of employment in the form of a pension or in some other form, or the income from his future place of employment pertain to incomes received in the form of salary.
\n A profit received by a hired person in the amount determined in this part with deduction of the paid sum is considered as the profit cost, including:
\n a) In receiving of any type of motor-car for personal use \u2013 from the beginning of the corresponding tax year, 0.1% of the car\u2019s book value for each day of its using by the hired person for personal purposes; b) In receiving of a loan at a lower rate than that of the market rate published by the National Bank of Georgia \u2013 the corresponding interest sum liable to payment according to the market rate; c) In supplying or handing over without compensation of goods\/services by the hirer to the hired person \u2013 the market price of this kind of goods\/services; d) In handing over of a dwelling by the hirer to the hired person \u2013 the annual market cost of the rent (in proportion to the corresponding period); d) In rendering assistance by the hirer to the hired person or his dependant in receiving education (except for a training program directly related to fulfillment of the hirer\u2019s obligations) \u2013 the cost of assistance rendered by the hirer with the purpose of receiving education; e) Remitting by the hirer of the hired person\u2019s debt or liability \u2013 the sum of debt or liability; f) Compensation by the hirer to the hired person of the incurred expenses \u2013 the sum of compensation; g) Paying by the hirer of the insurance premium or some other sum in case of insuring of the hired person\u2019s life and health \u2013 the volume of the insurance premium or some other sum paid by the hirer; h) In other cases \u2013 the profit\u2019s market price in accordance with Article 22 of this Code.
\n The following does not include the income received in the form of salary:
\n a) A compensation of traveling expenses paid to the hired person in accordance with the norm determined by the Ministry of Finance of Georgia; b) Compensation of representation expenses.
\n The sum determined by the second part of this article includes excise, VAT and other taxes that are to be paid by the hired person.
\n The incomes envisaged by the mentioned article have to do with working for hire only. According to the first part, a remuneration or profit received in any form pertain to the income. The amount of profit is determined by the second part of the article.
\n The sums, if there are such ones, paid for receiving of the amount of profit determined by the second part of Article 173 are deducted from it.
\n Example I – For Subparagraph a): Hirer X owns a motor car whose book value is 30 000 GEL. This car was used by Y with the purpose of going on leave to the country for 20 days, for which he paid 150 GEL to X. In this case the amount of Y\u2019s profit is 750 GEL (30 000 X 0,1% X 30 -150), which should be included in Y\u2019s income and taxed by X with income and social taxes.
\n Example II – For Subparagraph b): Hirer X lent 8 000 to hired person Y for a period of one year, at 12% annual interest. If the average market rate for the same period published by the National Bank of Georgia makes up annual 15%, then the amount of Y\u2019s profit will be 240 GEL (8 000 X 15% – 8 000 X 12%).
\n Example III – For Subparagraph c): Hirer X gave to hired person Y clothes free of charge, the market cost of which makes up 300 GEL. The whole of this sum represents Y\u2019s profit.
\n Example IV – For Subparagraph d): Hirer X leased to hired person Y an apartment being in the property of X and having the space of 50 m2 for 6 months, with 70 GEL monthly rent. The rent for a similar apartment in the same district is 80 GEL a month. The amount of Y\u2019s profit will be 180 (80 X 6 \u2013 50 X 6).
\n Example V – For Subparagraph e): X paid 800 GEL to Z for conducting a course with the purpose of raising the level of Y\u2019s skill. In this case this sum will not be considered as Y\u2019s profit.
\n Example VI – For Subparagraph e): Hirer X transferred the sum of 4 000 GEL to hired person Y with the purpose of studying abroad of Y\u2019s under age child. At the same time, Y paid back 2000 GEL to X. Thus, 2000 GEL will be considered as Y\u2019s profit.
\n Example VII – For Subparagraph f): Hirer X compensated medical treatment expenses in the amount of 500 GEL to hired person Y. This sum is Y\u2019s profit.
\n Example VIII – For Subparagraph g): If, according to Example \u201cb\u201d, X remitted Y\u2019s debt after expiration of the period, the amount of Y\u2019s profit will be 8 960 GEL (8 000 + 8 000 X 12%) and not 9 200 (8 000 + 8 000 X 15%).
\n The norms of travel expenses are determined by:
\n – The Decree !231 \u201cOn Compensation of Travel Expenses to Employees\u201d of the President of Georgia dated April 20, 2005 (concerns persons envisaged by the \u201cLaw on Public Service\u201d) and
\n – The Order !220 \u201cOn determination of norms of travel expenses paid to employees\u201d of the Finance Minister of Georgia dated April 5, 2005.
\n The amount of representation expenses is determined by Article 12.38.
\n Article 175. Incomes received from economic activity that are not related to working for fire.
\n 1. Incomes received from entrepreneurial and non-entrepreneurial economic activities pertain to incomes received from economic activity that are not related to working for fire.
\n 2. The following pertains to incomes received from entrepreneurial economic activities: a) Incomes received from goods\/services supply; b) Extra income received from selling of assets used for entrepreneurial activities; c) Incomes received as a result of reduction of entrepreneurial activities or closing down of the enterprise; d) Sums received from selling of the fixed assets that are included in incomes in accordance with Part 7 of Article 183 of this Code; e) Compensated deductions, in accordance with Article 209 of this Code; f) Other incomes received from entrepreneurial activities.
\n 3. The following pertains to incomes received from non-entrepreneurial economic activities: a) Incomes received in the form of interest; b) Dividends: c) Royalty; d) Incomes received from debts\u2019 writing off; e) Extra income received from selling of assets, except for the extra income envisaged by the second part of this article; f) Incomes received by means of property\u2019s leasing, usufruct, rent or other similar form; g) Incomes received from other economic activities, except for the income envisaged by the second part of this article and Article 174 of this Code.
\n The extra income received from selling of the 2-b) assets represents a positive difference between the received (to be received) sum and the sum spent on purchasing (creation) of this asset. This order does not apply to the fixed assets that are accounted according to groups and whose wear is calculated by means of the so called \u201cdepreciated cost\u201d method.
\n c) Example – X and Y persons are producers of a similar commodity (for instance, lemonade). With the purpose of competition reduction, X concluded an agreement with Y envisaging that the latter would suspend his production for a period of one year, for which X in advance paid 7 000 000 GEL to Y. This sum will be included in Y\u2019s total income for the year when Y started to suspend production.
\n d) Example – In 2005 a Georgian enterprise deducted a bad debt in calculation of the tax profit in the amount of 9 000 GEL in accordance with Article 180 of the Tax Code. In 2006 the bad debt was compensated to the enterprise, because of which the enterprise is obliged to reflect the sum received in compensation of the bad debt \u2013 9 000 GEL \u2013 in the total income of 2006.
\n e) Incomes received from other entrepreneurial activities \u2013 if some paragraph has been missed out, it should be concretized and included in the Code, but if there is not any, the paragraphs that are similar to this one cause more misunderstanding and contradictions, and there is no protection mechanism;
\n 3. The incomes described in this part are considered as received from non-entrepreneurial economic activities if none of the terms described in Subparagraphs a) \u2013 c), Part 4, Article 13 are fulfilled. Otherwise, they will be considered as income received from entrepreneurial activities.
\n d) Certain procedures are necessary for debts\u2019 writing off: first of all, they should be reflected in the payer\u2019s accounts. Debts can be written off in the following cases:
\n – If the term for demanding them has expired. The 3 year term is established for contact demands, though in concrete cases other terms can be established as well (Civil Code, Article 129). For instance, a term for demands related to immovable items makes up 6 years;
\n – There is no lender or his assignee \u2013 till expiration of the term;
\n – In case if the lender remitted the debt.
\n f) \u201cOther similar form\u201d \u2013 implies servitude, the right to construction, etc.
\n Article176. Other incomes that are not related to working for hire and economic activities.
\n 1. Any income or profit pertain to other incomes that are not related to working for hire and economic activities, except for:
\n a) The incomes envisaged by Articles 174-175 of this Code; b) Partners\u2019 payments that increase the net asset of the enterprise, whose partners represent persons that make payments.
\n 2. In case of receiving by a person of property or profit from another person, the cost of the property or profit liable to inclusion to the total incomes is determined by the order envisaged by Part 2 of Article 174 of this Code.
\n 1. A profit indicated in this part may be, for instance, an interest-free loan given by one friend (or relative) to another one. The amount of profit will be established in accordance with the order envisaged by Article 174.2.
\n The net asset of 1.- b) enterprise is the sum that originates from the difference between the total cost of all assets and all liabilities. The cost of the net asset is equal to the cost of the enterprise\u2019s own capital. Thus, partners\u2019 payments to the enterprise\u2019s own capital do not pertain to other incomes that are not related to working for hire and economic activities.
\n 2. Part 2 of Article 174 implies for this article that the appraisal of the profit in accordance with the market cost of the profit with deduction of the paid sum.<\/p>\n","protected":false},"excerpt":{"rendered":"

Professor Lali Chagelishvili Article 173. Total Income resident\u2019s total income consists of incomes received by him both in Georgia and<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[36,23],"tags":[],"yoast_head":"\nHOW THE TAX INSPECTION CALCULATES OUR (NATURAL PERSONS, CITIZENS) INCOMS AND HOW MUCH WE SHOULDPAY TO THE BUDGET - Geoeconomics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/geoeconomics.ge\/en\/?p=1711\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"HOW THE TAX INSPECTION CALCULATES OUR (NATURAL PERSONS, CITIZENS) INCOMS AND HOW MUCH WE SHOULDPAY TO THE BUDGET - Geoeconomics\" \/>\n<meta name=\"twitter:description\" content=\"Professor Lali Chagelishvili Article 173. Total Income resident\u2019s total income consists of incomes received by him both in Georgia and\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\">\n\t<meta name=\"twitter:data1\" content=\"7 minutes\">\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\",\"url\":\"http:\/\/geoeconomics.ge\/en\/\",\"name\":\"Geoeconomics\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":\"http:\/\/geoeconomics.ge\/en\/?s={search_term_string}\",\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/geoeconomics.ge\/en\/?p=1711#webpage\",\"url\":\"https:\/\/geoeconomics.ge\/en\/?p=1711\",\"name\":\"HOW THE TAX INSPECTION CALCULATES OUR (NATURAL PERSONS, CITIZENS) INCOMS AND HOW MUCH WE SHOULDPAY TO THE BUDGET - Geoeconomics\",\"isPartOf\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\"},\"datePublished\":\"2006-05-12T12:34:36+00:00\",\"dateModified\":\"2013-03-12T12:35:00+00:00\",\"author\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/geoeconomics.ge\/en\/?p=1711\"]}]},{\"@type\":\"Person\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\",\"name\":\"Admin\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#personlogo\",\"inLanguage\":\"en-US\",\"url\":\"http:\/\/2.gravatar.com\/avatar\/bf2d8703d729f003d8905b57fcab5078?s=96&d=mm&r=g\",\"caption\":\"Admin\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","_links":{"self":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1711"}],"collection":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1711"}],"version-history":[{"count":1,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1711\/revisions"}],"predecessor-version":[{"id":1712,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1711\/revisions\/1712"}],"wp:attachment":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1711"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}