Tax-Exempt Status — Five Directions of Benefit
A tax-benefits page gathers five directions of the Georgian Tax Code: beneficiary-side personal-income-tax exemptions (Article 82), donor-side deduction (Article 117), non-taxation of gratuitous supplies (Article 98³), VAT refund on grant-financed purchases (Article 181) and humanitarian-grant import exemption (Article 199). The principal caveat must be said at the outset: a non-commercial legal entity in Georgia has no general, unconditional exemption from profit tax — there is no American-style blanket entity exemption; the benefits are enumerated by transaction type, and the economic activity of a non-commercial entity remains taxable. Precisely this exactness is this page's value.
In planning terms, all five directions reduce to a single questionnaire: before a transaction is entered into, it must be determined which norm attaches — the recipient's exemption, the donor's deduction, non-taxation of a gratuitous supply, VAT refund or import exemption — and what documentary conditions accompany that norm. An incorrectly claimed benefit later surfaces as additional tax, and a missed one as a lost advantage; both risks are removed by advance analysis.
Article 82 — Beneficiary-Side Exemptions
The first part of Article 82 lists the types of income of a natural person not taxed with personal income tax: a received grant, the state pension, state compensation, the state academic and state scholarships; a benefit received from a non-commercial legal entity founded by the state within the framework of charitable activity; and a benefit received from a charitable organization for financing the costs of treatment or medical services. So the benefit is tied not to the recipient's status but to the source and purpose of the income — and exactly these two elements must be established documentarily.
From the recipient's standpoint this means a simple rule: for every income stream the payer's status and the payment's purpose are fixed in advance, and this fixation runs alongside the five directions described. Such an approach excludes the common error where income is treated as exempt although its source does not fit the statutory list.
Article 117 — the Donor-Side Deduction
On the donor's side works Article 117: from the gross income of an enterprise or entrepreneurial natural person is deducted the amount given to a charitable organization, and likewise the market value of goods supplied gratuitously (other than immovable property) or services rendered as reflected in gross income — but no more than 10 percent of the amount remaining from gross income after the other deductions provided by the Code. This is a two-sided instrument: for a charitable organization it strengthens donors' motivation; for the donor it reduces the tax base on a bounded condition.
Article 98³ — Non-Taxation of Gratuitous Supplies
On the profit-tax side, Article 98³ defines: the supply of goods or services whose purpose is not the receipt of profit, income or compensation is treated as gratuitous, and the cases provided by this article — including a gratuitous supply given to a charitable organization — are not taxed with profit tax. In tax-consulting practice this norm is often misread as a general 'non-commercial' blanket; in fact it extends only to the enumerated cases.
Articles 181 and 199 — VAT and Import
For grant-financed purchases, Article 181 regulates the VAT-refund mechanism: a recipient of a grant who, within the framework of the grant agreement, acquired goods or services has the right to offset or refund the VAT paid, on the basis of a tax invoice or a document confirming payment into the budget on reverse charge — provided the document is submitted to the tax authority within 3 months of the end of the month of the taxable operation. On the import side, Article 199 exempts the import of goods for the elimination of natural disasters and catastrophes and for humanitarian assistance; goods provided for by a grant agreement, under the procedure defined by government decree; and goods financed by grants or a concessional credit containing a grant element of no less than 25 percent.
Frequently Asked Questions
Below we answer the most frequent questions about tax benefits.
Is a non-commercial entity exempt from profit tax?
As a general rule — no; only the gratuitous-supply cases listed in Article 98³ are exempt, and remaining economic activity is taxable.
Up to what amount is a donation deducted?
Up to 10 percent of the amount remaining from gross income after other deductions — as a cash donation or the market value of gratuitously supplied goods or services.
How does a grant recipient recover VAT?
By submitting a tax invoice or payment-confirmation document, within 3 months of the end of the month of the operation.
Which imports are exempt?
Humanitarian-purpose goods, those provided by a grant agreement, and those financed by a concessional credit with a grant element of no less than 25 percent.
How We Help on Legal.ge
On Legal.ge you can contact an experienced tax-law lawyer who analyses every transaction through the filter of these five directions: determines the basis of exemption, checks the documentary conditions and fixes the deadlines. Fill in the request form on the site and get a qualified consultation on Legal.ge.