Case 1 - Company “V”. A fine of more than GEL 160,000
Company "V", registered in September 2019, was granted the status of a virtual zone person by the Ministry of Finance of Georgia in October 2019. The beneficiaries of the company are Russian citizens; the director is a Georgian citizen. The company operates predominantly by the founders.
According to the results of the tax audit, in June 2021 the company was requested to pay 160,188 GEL, which included a profit tax of 94,444 GEL, a fine of 48,566 GEL, and interest of 13,804 GEL.
The Tax Inspectorate complaint filed in July 2021, was rejected. Reason - the taxpayer did not submit evidence of the creation of any product on the territory of Georgia.
Case 2 - Company "W". A fine of more than GEL 580,000
Company "W", registered in 2018, the status of a virtual zone person was granted by the Ministry of Finance of Georgia in 2018. The beneficiary of the company, the founder, and the only one - a citizen of Slovakia. Until 2020, the activities of the company were carried out individually by the founder.
According to the results of the tax audit, the company received a request to pay 586,899 GEL in the summer of 2021, which included: tax - 338,653 GEL, fine - 169,326 GEL, and interest - 78,920 GEL.
The appeal filed with the Tax Inspectorate was dismissed in July 2021. Reason - the taxpayer failed to provide evidence of the creation of any product on the territory of Georgia.
The request to cancel the illegal result of the tax audit was dismissed in November 2021. The taxpayer's claim is currently being considered in the second instance.
Case 3 - Company "T". A fine of more than GEL 140,000
Company "T", registered in July 2019, was granted the status of a virtual zone person by the Ministry of Finance of Georgia in December 2019.
Beneficiary of the company - German citizen.
The activities of the company are predominantly carried out by the founders personally.
In December 2021, according to the results of the company's tax audit, the company was required to pay 144,468 GEL in taxes, including: tax - 81,975 GEL, fine - 40,988 GEL, interest - 21,505 GEL.
The Tax Inspectorate rejected the complaint in February 2022. Reason - the taxpayer did not provide any evidence of the product on the territory of Georgia.
Case 4 - Company "T". A fine of more than GEL 100,000
Company "T", registered in February 2017, the status of a virtual zone person was granted by the Ministry of Finance of Georgia in February 2017. The beneficiary and director of the company is a Latvian citizen.
The activities of the company were predominantly carried out by the founder personally as a software developer. In 2019-2020 The activities of the company were suspended.
According to the results of the tax audit in December 2021, a request for payment of the amount of 100,000 GEL (including profit tax, penalty and interest) was submitted to the company. Reason - the taxpayer did not provide any evidence of the product on the territory of Georgia. The request to cancel the illegal result of the tax audit is currently being considered (from January 2022).
Case 5 - Company "A". A fine of more than GEL 40,000
Company "A", registered in November 2017, was granted the status of a virtual zone by the Ministry of Finance of Georgia at the end of 2017. At the time of registration, the beneficiary, and director of the company is a Russian citizen. The company's activities were mainly carried out outside Georgia as a developer and partner responsible for the sale of the product by the owner.
In 2021, according to the results of the tax audit, a request for payment of 44,000 GEL was submitted, including profit tax, fine, and interest. Reason - the taxpayer did not present any evidence of the production on the territory of Georgia. Currently, the Ministry of Economy of Georgia is considering a request to cancel the results of the illegal audit.
Case 6 - Company "G". A fine of more than GEL 134,000
Company "G", registered in October 2017, was granted the status of a virtual zone by the Ministry of Finance of Georgia in November 2017. The beneficiary and director of the company is a Latvian citizen.
The activities of the company were mainly carried out as a manager by the owner outside Georgia and also by the employee on the territory of Georgia.
In August 2021, according to the results of the tax audit, a request for payment of 134 847.96 GEL was submitted, including 75 346 GEL profit payment, fines, and interest. Reason - The taxpayer could not provide any evidence of production on the territory of Georgia.
Currently, the Ministry of Economy of Georgia is considering the request to cancel the illegal results of the tax audit.
Case 7 - Company “D”. A fine of more than GEL 350,000
Company “D”, registered in April 2019, was granted the status of the Virtual Zone Person by the Ministry of Finance of Georgia in April. The beneficiary and director of the company is a citizen of Armenia. The activities of the company were carried out mainly outside of Georgia without hiring developers in the country.
In June 2021, based on the results of a tax audit, the company was required to pay an amount of GEL 355,247.56, including: tax in the amount of GEL 201,309, a fine of 50% of the tax amount - GEL 100,655 and penalties of GEL 53,283.56. The reason - the taxpayer did not present any evidence of the creation of the product on the territory of Georgia.
Currently, a request is being considered to cancel the unlawful result of a tax audit based on a complaint from company representatives.
Case 8 - Company “Y”. A fine of more than GEL 43,000
Company “Y”, registered in December 2015, was granted the status of the Virtual Zone Person by the Ministry of Finance of Georgia in December 2015. The beneficiary and director of the company is a citizen of Georgia.
The activities of the company were carried out mainly outside of Georgia without hiring developers in the country.
In December 2021, based on the results of a tax audit, the company was required to pay an amount of GEL 43,643.64, including tax in the amount of GEL 23,772, a fine of 50% of the tax amount - GEL 11,886, and penalties of GEL 7,985.64. The reason – the taxpayer did not present any evidence of the creation of the product on the territory of Georgia.
Currently, a request is being considered to cancel the unlawful result of a tax audit based on a complaint from company representatives.
Case 9 - Company “I”. A fine of more than GEL 34,000
Company “I”, registered in September 2018, was granted the status of the Virtual Zone Person by the Ministry of Finance of Georgia in October 2018. The beneficiary and director of the company is a citizen of Russia. The activities of the company were carried out mainly outside of Georgia without hiring developers in the country.
In December 2021, based on the results of a tax audit, the company was required to pay an amount of GEL 34,709, including: tax in the amount of GEL 19,432, a fine of 50% of the tax amount - GEL 9,737 and penalties of GEL 5,540. The reason – the taxpayer did not present any evidence of the employment of persons in this field on the territory of Georgia.
In March 2022, a complaint was filed against the unlawful decision of the tax inspection at the Ministry of Finance of Georgia.
Case 10 - Company “D”. A fine of more than GEL 29,000
Company “D”, registered in February 2018, and was granted the status of the Virtual Zone Person by the Ministry of Finance of Georgia also in February 2018. The beneficiary and director of the company is a citizen of Georgia. The activities of the company were carried out mainly outside of Georgia without hiring developers in the country.
In June 2021, based on the results of a tax audit, the company was required to pay an amount of GEL 29,947.50, including: tax in the amount of GEL 19,966.00, a fine - GEL 9,982.50 and penalties of GEL 7,280.30. The reason - the distribution of dividends, not the payment of salaries.
A complaint was filed against the unlawful decision at the Ministry of Finance of Georgia.
Case 11 - Company "G". A fine of more than GEL 45,000
Company "G", registered in September 2019, was granted the status of a Virtual Zone Person by the Ministry of Finance of Georgia in October 2019. The founder of the company is a German citizen and a resident of Cyprus, the director of the company is a citizen of Georgia. The activities of the company are mainly carried out outside Georgia.
In December 2021, according to the results of the tax audit, the company was required to pay GEL 45,777, including: GEL 28,513 in taxes, a fine of 50% of the tax amount of GEL 14,257 and a interest of GEL 3,008. The reason - the taxpayer did not present any evidence of persons employed in the field and for the creation of the product.
In March 2022, a complaint against the illegal decision of the Tax Inspection was filed in the Dispute Resolution Board of the Georgian Revenue Service. The complaint was partially upheld.
Case 12 - Company "V". A fine of more than GEL 400,000
Company "V", registered in February 2019, has been granted the status of a Virtual Zone Person by the Ministry of Finance of Georgia also in February 2019. The founder of the company is a German citizen; the director of the company is a citizen of Georgia. The company's activities are mainly carried out outside Georgia.
In December 2021, according to the results of the tax audit, the company was required to pay the amount of 447,706.78 GEL, including: 252,308 GEL tax, 50% tax amount 126,254 GEL and interest 69,144.78 GEL. The reason - the taxpayer did not provide any evidence of the product on the territory of Georgia.
In March 2022, the Dispute Resolution Board of the Georgian Revenue Service filed a complaint against the illegal decision of the Tax Inspection. The complaint was partially upheld.
Case 13 - Company "Q". A fine of more than GEL 27,000
Company "Q" registered in January 2019, has been granted the status of a Virtual Zone Person by the Ministry of Finance of Georgia in January 2019. The founder of the company is a German citizen. The company's activities were mainly carried out outside Georgia.
In June 2021, according to the results of the tax audit, the company was required to pay GEL 27,200.43, including: GEL 17,546, a fine of 50% of the tax amount - GEL 8,773 and interest - GEL 881.43. The reason - the taxpayer has not provided any evidence of the product on the territory of Georgia.
Case 14 - Company "TS". The fine of more than GEL 40,000
The company "TS" registered in March 2015, has been granted the status of a Virtual Zone Person by the Ministry of Finance of Georgia in March 2015. The beneficiary and director of the company is a citizen of Georgia. The company's activities and all projects were implemented directly by the company's founder, director, and at the same time, the programmer, mostly outside of Georgia. The activities were carried out under a service contract for a company in the United States of America.
In July 2022, according to the results of the tax audit, the company was required to pay the amount of GEL 40,776, including GEL 20,675 tax, a fine of 50% of the tax amount – GEL 10,311; and interest of GEL 9,790. Dividends distributed as payment of salary to the founder-developer are requalified by a tax audit. The reason - the taxpayer did not provide any evidence of persons employed in the IT field on the territory of Georgia.