We all know what the country needs schools, bridges, roads, highways. However, we do not have an exact answer to the question of how and by whom they should be built. We also know that we need the police, doctors, firefighters, but the question is still heard: who should pay their salaries?

The fact is that the services or products listed above are used by the whole society. Therefore, it is society that has to bear the costs for their functioning. Taxes are a means of mobilizing money from the public, which is used by the government. The state finances construction, schools, the police, and many other things that we need and use. At the same time, members of the government receive salaries from taxes, and most importantly, taxes are used to finance all matters that serve the interests of each citizen. That is why it is essential to know what taxes are; what type they are; when we pay them, and how much we pay.

We have already learned that taxes are a way for a country to have the products and services that every citizen needs. However, a second question arises here, namely, how taxes should be collected and who should be considered as a taxpayer. The first logical answer to this question, perhaps, is that the tax should be paid by those who have an income. We also follow this logic and start talking about income tax.

Income tax

Income tax is a general state tax, which is paid by people who receive income from a source in Georgia. The Tax Code defines the categories of income that are taxed at the standard rate of 20%, non-standard rate, or exempt from income tax. For example, teachers' income is taxed at 20%. Income from renting a house - 5%, and income received by the state (pension, scholarship) are exempt from tax.

Income tax is for those individuals who work and earn income. However, businesses, enterprises, and companies also receive income. Therefore, the Profits tax is especially imposed on them.

Profits tax

The monthly profits tax applies to an enterprise that operates in Georgia through a permanent establishment. The profits tax rate is 15%. Profits tax will be calculated on the basis of the amount of retained earnings, expenses not related to the main activity of the enterprise, items donated, or the number of representation expenses in excess of the amount specified in the Tax Code. For example, if you give 1000 GEL as a gift from the company, then the profits tax will be 1000 * 15%, which is 150 GEL.

It should be noted that in recent years, the Estonian model of profit tax has been applied in Georgia, according to which the enterprise is exempt from profits tax if the profit is reinvested in the business. It is true that this model reduces tax revenues, but reinvesting profits is a positive economic stimulus that has a positive impact on the economy in the long run.

As you see, income and profits taxes are direct taxes, namely, individuals and entrepreneurs pay the tax directly to the Government. However, taxes are not always direct. An example of this is VAT - value-added tax.

Value-added tax

Value-added tax is an indirect tax, which is a supplement to the price of goods and/or services rendered and paid by you, the customer. While you are paying this tax, the transfer to its state treasury is the responsibility of the product or service provider. The provider of the product or service is called the VAT payer. VAT is included in the price of the product paying for this tax and that is why it is called value-added tax. The VAT rate is 18%.

It should be noted that not everyone has to pay VAT. If the annual turnover of the business is less than 100,000 GEL, then it is voluntary for the business to register as a VAT payer. But if the annual turnover is more than 100,000 GEL, then VAT is required. In addition, there are products and services that are exempt from VAT. An example is the trade-in educational items.

In general, The state taxes not only products and services produced in Georgia, but also imported from abroad. That is why we have an import tax.

Import tax

As it can be seen from the name, import tax applies only to products that enter Georgia from other countries. On the other hand, the tax applies only to imports and not exports. It should also be noted that unlike the taxes listed above, the import tax does not have a standard rate. The tax depends on the categories of products imported into the country.

Like import tax, the excise tax interest rate also depends on the product category.

Excise tax

First of all, it should be mentioned that the excise tax is more diverse than other ones, in particular, it concerns the production, sale, import, and export of some products established by the legislation of Georgia. For example, excise taxpayers are cigarette and fuel manufacturers, distributors, importers, and exporters. As already mentioned, the interest rate depends on the specific product type.

The money received from all five taxes listed by us is transferred directly to the central treasury of the state, from where it is distributed to the regions as needed. However, there is a tax that does not belong to the general state, but to the local one. This is a property tax.

Property Tax

Property tax depends on the status of the individuals, namely, whether they are Individual entrepreneurs or have legal entities, As well as the amount of income they have and what type of property they own (real, movable, durable). As a rule, property tax does not exceed 1% and, as already mentioned, the income collected from property tax will be transferred to the local budget.

Thus, as we found out, there are six types of taxes in Georgia. We should be aware of them because we pay taxes, so we need to know what we pay, why we pay and how much we pay.