Gov’t abolishes profit tax for trading companies in FIZs

Gov’t abolishes profit tax for trading companies in FIZs

access_time2021-04-05 15:00:51

The Revenue Service under the Ministry of Finance is changing the practice of taxing companies operating in free industrial zones - in particular, it cancels income tax incentives for the companies operating in FIZ.


According to the executive director of the Hualing Free Industrial Zone Soso Nibladze, the preferential tax regime has been in effect for 10 years, including for the companies engaged in import-export.


“However, the Revenue  Service has changed its approach. Now tax officials call representatives of companies operating  in the FIZ and recommend that to start paying income tax. When asked what are the legal grounds for these recommendations, they do not receive a full answer. No changes to the legislation have been adopted yet, ”he explains.


According to Nibladze, among the arguments in favor of this approach is that “trade” is not mentioned  among activities the companies in the FIZ are engaged although it is not directly banned.


 “The  approach that everything which is not forbidden is allowedis  quite logical and legal. If the law on free industrial zones does not prohibit operating  trading companies, then they should enjoy tax incentives as well, ” CEO at  Hualing FIZ says.


In Soso Nibladze’s words, the Revenue Service also says that  the law on free industrial zones is outdated and should be revised.


“We are holding consultations with the Ministry of Finance in order to improve the current laws on Industrial Free Zones. In recent years, all free industrial zones in Georgia have tried to attract trading companies and have spent considerable resources for this purpose. A new infrastructure has been built, warehouses are being built as well as customs procedures are being developed. Now all this is complicated due to uncertainty, "- Soso Nibladze notes.


CEO at Poti Free Industrial Zone David Ebralidze believes that the Revenue Service cannot demand the payment of income tax from manufacturing companies, as this is clearly spelled out in the current legislation. But recently, the Revenue Service is considering the restoration of  taxation for trading companies.


“Everyone agrees that the law on free industrial zones should be revised and amended, we are ready to consider this issue with all interested departments, including the Ministry of Finance. We hope that in the end a mutually acceptable decision will be reached, ” CEO at  Poti FIZ concludes.


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