The Revenue Service issued another methodological reference where industry representatives’ comments are taken into account

The issue of companies with Virtual Zone status is more actual than ever. The details about the Revenue Service’s release of a new methodological reference were discussed with the Association at the “Business Formula” program.

In this methodological reference, most of the comments from industry representatives are taken into account, but it remains unclear whether past fines will be waived under this document. In the meantime, audits and fines continue to be imposed. 

Related to this topic, companies with the status of “Virtual Zone Persons” voiced their opinions in the program, saying that they have been doing business in Georgia for many years. Due to the suddenly changed tax approach, they were all fined, despite the fact that they were actually creating technological products. It should be noted that then there was no such methodological reference; therefore, they believe that the Revenue Service should not have imposed fines retrospectively and the company should have been given some time to adjust to the new situation. For some companies, the situation has not changed. The Revenue Service extended the audit process for another three months. In general, the tax audit has been going on for a year and a half.

They also expressed the opinion that they are under the impression that the main goal of the Revenue Service Inspections is to fine the company in all cases, and it is unclear who will return the money spent over the past two years on lawyers, lost business profits, and most importantly – time and effort.

It should be noted that the affected companies and investors are real, and it is unacceptable to put everyone in the same position.

This whole situation has a negative impact not only on the situation of individual companies and investors but also on the overall investment environment in the country. Many companies have stopped operations and left the country.

Despite the release of a new methodological reference, in which the Revenue Service has taken into account the arguments of the affected companies and investors, it is clear that there is a need for a law that will specify in which cases individuals in the Virtual Zone are taxed because there is no guarantee that the Revenue Service will not further change its approach by issuing a new methodology.

The importance of clarifying and explaining the law at the legislative level is firmly emphasized by the Chairman of the Association Shorena Kopaleishvili. She noted a positive tendency in that many of the Association’s arguments have been taken into account, but clarity and a future safe environment for businesses can only be ensured through the law.

David Papiashvili, Managing Partner of Kreston Georgia, expressed the view that, based on the new methodology, there is hope for the cancellation of fines and mentioned a third group of taxpayers who were fined but did not appeal. In his opinion, there are signs of newly discovered circumstances , and these companies should also try to renew the dispute.

It is also interesting that last year the Business Ombudsman also stated his position on the mentioned issue, which can be said to have shared the position of the respective companies on the main issues.

At the moment, the dispute between the Revenue Service and companies with the status of “Virtual Zone Persons” is ongoing, both in the Disputes Council of the Ministry of Finance and in court. The Association continues to work hard to achieve relevant clarification in the law.