Special Enterprise

In accordance with the amendments made to the Tax Code of Georgia dated January 1, 2019, the tax legislation introduces a notion of a Special Enterprise aimed at deepening trade relations with Georgia’s occupied territories and offering some tax benefits.

The status of a special enterprise is assigned to a person by the tax authority. After that, with the special consent provided for by Article 6 (2) of the Law of Georgia on Occupied Territories, the person having a special enterprise status has the right to carry out the following activities, besides those permitted by the Georgian legislation:

To supply goods originating or manufactured in the occupied territory of Georgia from the occupied territories of Georgia to another territory of Georgia and / or to include the commodity, in accordance with the law of Georgia, into an export trade operation from the territory of Georgia (except for the occupied territory of Georgia). In these cases it is prohibited to supply excise goods (except for alcoholic beverages and tobacco products);
To supply the goods of Georgia (except for the goods originated or produced in the occupied territory of Georgia) to the occupied territories of Georgia;
To produce goods in the occupied territory of Georgia only for the purpose set forth in subparagraph “1” of this Article.

A person having a status of a special enterprise has the right to supply the goods provided under paragraphs 1-3, only in the following cases:

From the territory of the Autonomous Republic of Abkhazia to Zugdidi municipality and / or vice versa,

and

from the territory of the Tskhinvali region (formerly the Autonomous District of South Ossetia) – in the direction of Gori municipality and / or vice versa;

A subparagraph is added to the Tax Code of Georgia in the part of the value added tax, according to which supplying the goods originating or manufactured in the occupied territory of Georgia from the occupied territories of Georgia to a person having a aspecial enterprise status is freed from VAT without a right of offset and supplying the goods to the occupied territory by an enterprise with the status of a special enterprise is free from VAT with a right of offset.

As for income tax and distributed profit taxes, exemption is given in Chart No. 1.

Chart No. 1

N	Activity	Payment for which the privilege applies
		Income tax	Revenue tax
1	Distribution of the revenue/profit from supplying goods originating or manufactured in the occupied territory of Georgia from the occupied territories of Georgia to another territory of Georgia and / or from including the commodity, in accordance with the law of Georgia, into an export trade operation from the territory of Georgia (except for the occupied territory of Georgia).[In these cases it is prohibited to supply excise goods (except for alcoholic beverages and tobacco products);]	+	+
2	To supply the goods of Georgia (except for the goods originated or produced in the occupied territory of Georgia) to the occupied territories of Georgia;	+	+