Georgia to follow Estonia's example and only tax distributed profit

Following the Estonian example: Georgian prime minister Giorgi Kvirikašvili (Reuters/Scanpix)
5/16/2016 4:19 PM
Source: BNS
Category: News

The Georgian parliament adopted changes to the country's tax laws to introduce a new system of levying income tax on business. It will only have to be paid if corporate profit is distributed. Estonia introduced a similar model in 2000.

The Georgian parliament adopted changes to the country's tax laws to introduce a new system of levying income tax on business. It will only have to be paid if corporate profit is distributed. Estonia introduced a similar model in 2000.

The law will enter into effect on Jan. 1, 2017. The Estonian tax model served as a direct model for Georgia, Deloitte, the international consultancy, said.

The Estonian system is the only one of its kind that exempts undistributed earnings from taxation, and instead taxes distributed earnings only. Georgia will be the second country in the world to adopt such a model.

Although under the original plan the corresponding Georgian bill was supposed to be discussed after the elections in autumn, for Giorgi Kvirikashvili, who became prime minister of Georgia in the final days of 2015, tax changes increasing the economy's competitiveness are one of the key priorities. Work on the law changes thus received a fresh impetus in January, and the bills were drafted with the help of Estonian experts.

"The Georgian law is very similar to ours, with just a few exceptions – for instance, the financial sector will switch to the new system of income tax with a small delay. Banks and insurance companies will join it in 2019," said consultant with Deloitte Ivo Vanasaun, who advised the Georgian government in the process.

Vanasaun added that while many other countries had shown interest in the Estonian system by making inquiries to get background information and chart the Estonian experience, no other country was as concrete about their plans as Georgia at this point.

Editor: Dario Cavegn

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