GBCR Assistance in Tax Force Majeure

This rule was introduced in response to the August 2008 events in Georgia, which highlighted the need for post-war regulations in tax legislation. The new chapter IX of the Tax Code and a Ministry of Finance (MOF) Order provide for tax relief to taxpayers whose property was damaged, destroyed, or remained in occupied territory during the emergency state from August 9 to September 3 of the last year. Taxpayers are now allowed to consider damaged or destroyed assets as extraordinary losses and write off their value from their gross income. This deduction reduces the taxpayers' taxable amount. To take advantage of this tax relief, eligible taxpayers must submit an application to the Dispute Resolution Council of the MOF, which determines whether to grant deducting authority to the taxpayers. Prior to these legal amendments, tax legislation did not provide for the possibility of deducting losses or damaged assets. The Ministry of Finance has received 15 claims under this new rule, with 13 still in the processing stage and 2 already satisfied. Eight companies were asked to provide additional evidence. Most of the claims are from trading companies and companies involved in services, such as construction and car repair. The amount of claims varies from 10,000 to 500,000 GEL. The new rule will assist Georgia's taxpayers in continuing to function and be compliant during the crisis period, providing a mechanism for the Minister of Finance to declare future situations "extraordinary circumstances" in which the same provisions would apply. Individual taxpayers who are unable to comply with tax deadlines for reasons beyond their control will also be able to seek relief based on their particular circumstances. The new rule is expected to have a positive impact on the business environment in Georgia, allowing companies to recover from losses incurred during the conflict and continue to operate. The Ministry of Finance's Dispute Resolution Council will continue to process claims and determine the deducting authority for eligible taxpayers. The implementation of the force majeure rule is a key component of the Business Climate Reform project in Georgia, which aims to improve the business environment and promote economic growth. The project has worked closely with the Ministry of Finance to develop and implement this new rule, which is expected to have a positive impact on the country's economy.