Who Can Receive Gifts in Georgia and How
What constitutes a gift according to Georgia's laws? Can everyone accept gifts? Could the joy of receiving a gift be overshadowed by the obligation to pay taxes
December 29, 2023
Could the joy of receiving a gift be overshadowed by the obligation to pay taxes? We asked JUST tovlis babua about this, and here are the answers:
A gift is any property not prohibited in commercial circulation. Money is also considered property and can be a subject of gifting. The Civil Code of Georgia emphasizes that property can be considered a gift if it’s transferred from one person to another gratuitously and with the consent of the recipient.
Is the gift subject to income tax? Does it matter if the gift is from a company or an individual?
If the value of gifts received from one individual during the calendar year exceeds 1000 lari, you’ll have to pay a 20% income tax on the excess amount. This rule doesn’t apply to gifts received from immediate family members (parents, children, siblings, grandparents, aunts/uncles). If you receive a gift from a company or an individual entrepreneur, they act as your tax agents, and the responsibility to pay taxes lies with them.
Is the gift subject to income tax? Does it matter if the gift is from a company or an individual?
If the value of gifts received from one individual during the calendar year exceeds 1000 lari, you’ll have to pay a 20% income tax on the excess amount. This rule doesn’t apply to gifts received from immediate family members (parents, children, siblings, grandparents, aunts/uncles). If you receive a gift from a company or an individual entrepreneur, they act as your tax agents, and the responsibility to pay taxes lies with them.
Gifts for government officials
For civil servants and their family members, there are stricter rules regarding gifts. According to Georgia’s law "On Fighting Corruption," additional requirements are set:
- A gift for a government official is any property or services gratuitously or on preferential terms provided to a public servant or their family member, relieving them from property obligations, which is an exception to the general rule.
- The total value of gifts received by a public servant during the reporting year should not exceed 15% of their annual salary, and for gifts received at one time, it should not exceed 5% of their annual salary, provided these gifts are not from one source.
- The total value of gifts received by each family member of a public servant during the reporting year should not exceed 1,000 lari, and for gifts received at one time, it should not exceed 500 lari per family member, provided these gifts are not from one source.
Corporate gifts
Do taxes need to be paid on gifts given by the company to employees and/or their children?
Yes, in this case, the employee is considered to receive a financial benefit. The income tax on the value of the gift (regardless of its form) is 20%.
Gifts can be categorized as representative expenses and NOT be subject to taxes if the following criteria are simultaneously met:
Yes, in this case, the employee is considered to receive a financial benefit. The income tax on the value of the gift (regardless of its form) is 20%.
Gifts can be categorized as representative expenses and NOT be subject to taxes if the following criteria are simultaneously met:
- The company gives branded gifts to its clients and partners, thereby spreading information about itself and its services (ideally, if the gift has the company’s logo) AND
- the total value of these gifts (along with other representative expenses for 2023) does not exceed 1% of the profit for 2022 or the income for 2023 (for companies registered in 2023) AND
- the company can prove the gift delivery (photos, thank you letters or messages, a contract with a courier service listing client addresses) to the client.
What to do if one of the criteria is not met?
- If the company gives a gift to an individual, and the gift’s value does not exceed 1000 lari, such a gift is considered an economically unjustified expense and is taxed at a 15% profit tax rate for the giver.
- If the gift’s value exceeds 1000 lari, it is considered a benefit to the recipient and is taxed at a 20% income tax rate for the giver."
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MARIA GUSEINOVA
Leading Manager of Commercial Department
Leading Manager of Commercial Department