EY Georgia Tax & Law Brief for July – September 2022

EY Georgia Tax & Law Brief for July – September 2022

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Tato Chantladze
13 Oct 2022
Subject Tax & Law Alerts
Categories Tax & Law
Jurisdictions Georgia

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  • EY Georgia Tax & Law Brief for July – September 2022 (pdf)

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  • Decision of the Competition Agency on the Use of Similar Trademarks

    On 20 September 2022, Georgian National Competition Agency (the “Agency”) rendered an important decision on unfair competition.

    • The Agency considered the company’s use of trademarks and design identical to its competitor to be an unfair action.
    • In making the decision, the Agency took into account the parties’ operation in the same market and that they offered similar services to the same target group of customers.
    • The Agency ruled that the respondent’s action was also harmful to customers’ interests as they did not have the opportunity to control their own decisions and differentiate companies.
    • The Agency imposed a fine on the respondent, based on its annual turnover and refusal to cooperate with the Agency during the investigation.

    Source and date of publication: Website of Georgian National Competition Agency, 26/09/2022.

     

  • Legal Framework Governing Virtual Assets

    On 23 September 2022, amendments to the Organic Law on the National Bank of Georgia (the “NBG”) were published.

    • Virtual asset is defined as digital representation, which can be replaced, digitally traded, or transferred and is used for investment and/or payment purposes. 
    • The amendments authorize the NBG to supervise, inter alia, registration as a virtual asset service provider, deregistration, and determination of administrators’ eligibility criteria.
    • Virtual asset service includes, among other things, the exchange of convertible virtual assets into national or foreign currency, another virtual asset, or financial instrument. The virtual asset service provider is a person who carries out the abovementioned activities for another person’s benefit.
    • Virtual assets that cannot be transferred or exchanged and are not used for payment and/or investment purposes are not subject to regulation.
    • Transactions with virtual assets for personal benefit and the so-called “mining” are excluded from the virtual asset services.
    • According to the amendments, making payments with virtual assets is prohibited. The NBG is authorized, however, to determine certain exceptions.
    • The amendments will enter into force from 1 January 2023.

    Source and date of publication: Legislative Herald of Georgia, 23/09/2022.

     

  • Virtual Assets-related Amendments to the Regulatory Framework of Money Laundering and Terrorism Financing

    As part of the legislative changes on virtual assets, on 23 September 2022, amendments to the Law on Facilitating the Prevention of Money Laundering and the Financing of Terrorism were published.

    • Virtual asset service provider is now determined as an accountable person subject to the obligations on prevention of money laundering and terrorism financing envisaged by the law.
    • The accountable person will be obliged to implement preventive measures set out in the law while concluding a single transaction related to virtual asset services exceeding USD 1,000, EUR 1,000, or GEL 3,000.
    • The accountable person is obliged to take reasonable measures to determine the origin of the client’s property, financial resources, and convertible virtual assets.
    • The amendments require a virtual asset service provider to implement the preventive measures set out in the law with regards to the clients existing before registration no later than 1 July 2024.
    • The amendments will come into force from 1 January 2023.

    Source and date of publication: Legislative Herald of Georgia, 23/09/2022.

     

  • Virtual Assets-related Amendments to the Regulatory Framework of Commercial Banks, Microfinance Organizations, and Brokerage Companies

    As part of the legislative package relating to virtual assets, on 23 September 2022, amendments to the Laws on the Commercial Bank activities, Microfinance Organizations, and Securities Market were published.

    • With the amendments, commercial banks, microfinance organizations, and brokerage companies are allowed to provide virtual asset services for the benefit of another person.
    • The amendments also provide for the permitted types of virtual asset services. In particular, exchange, transfer, and/or storage of convertible virtual assets and the auxiliary activity necessary for the provision of the abovementioned service.
    • The amendments will become effective from 1 January 2023.

    Source and date of publication: Legislative Herald of Georgia, 23/09/2022;

                                                           Legislative Herald of Georgia, 23/09/2022;

                                                           Legislative Herald of Georgia, 23/09/2022.

     

  • Amendments to the Law on Commercial Bank Activities

    On 9 September 2022, amendments to the Law of Georgia on Commercial Bank Activities were introduced.

    • The amendments provide additional criteria and qualification requirements for administrators and significant shareholders of commercial banks.
    • The procedure for obtaining a commercial bank license was amended. In particular, the period for the review of the license application was increased from 3 to 6 months and the maximum consideration period of 12 months was established.
    • The procedure for providing consent by the National Bank on the purchase of significant shares was altered and the consideration period was increased from 1 month to 60 working days.
    • A future shareholder of a commercial bank is now obliged to submit to the National Bank the requested information/documentation if it gains significant influence or control over the bank, regardless of the amount of its share in the capital and/or voting shares.
    • Provisions relevant to the obligations of the supervisory board and board of directors were specified and the consequences of the failure to fulfil those obligations were set out.
    • The amendments will be fully effective from 1 November 2022.

    Source and date of publication: Legislative Herald of Georgia, 23/09/2022.

     

  • Instruction Determining the Interrelated Group of Borrowers

    On 28 September 2022, amendments to the statute on the concentration of exposures and large exposures in commercial banks entered into force. 

    • The amendments determine the principles to be considered by commercial banks in recording interrelated borrowers in one group.
    • The amendments approved a relevant instruction that will assist commercial banks to identify interrelations between different borrowers that have a material negative impact.

    Source and date of publication: Legislative Herald of Georgia, 28/09/2022.

     

  • Amendment to the Rules on Issuing Loans by Commercial Banks

    On 1 September 2022, an amendment to the rules on issuing loans/credits up to GEL 200,000 by commercial banks entered into force.

    • Amendment relates to the exemption prescribed in the Civil Code of Georgia, according to which, issuing a loan in foreign currency is allowed if, as a result, the borrower’s total liabilities to the lender exceed GEL 200,000.
    • The amendment specifies that the liabilities secured by monetary funds must not be included in the total liabilities.
    • According to the amendment, issuing a loan/credit up to GEL 200,000 in foreign currency fully secured by the monetary funds in the same currency is now permitted.

    Source and date of publication: Legislative Herald of Georgia, 19/07/2022.

     

  • The Maximum Duration of the Consumer Loan was Reduced

    On 16 August 2022, the amendments to the statute on extending loans to physical persons entered into force. 

    • The maximum duration of consumer loans was reduced from 4 to 3 years. This does not apply to consumer loans secured by immovable property, the maximum duration of which is 10 years.
    • Loan issuing entity is prohibited to issue a loan and/or receive collateral if the loan-to-value ratio (LTV) on consumer mortgage loans secured by immovable property with a duration of more than 3 years exceeds the indicators set out in the order.

    Source and date of publication: Legislative Herald of Georgia, 05/08/2022.

     

  • Amendments to the Corporate Code of Conduct of Commercial Banks

    On 25 August 2022, amendments to the corporate code of conduct of commercial banks entered into force. 

    • With the amendments, the quota for the opposite sex (being in the minority) representatives in the supervisory board of commercial banks increased from 20% to 40%.
    • Commercial banks are obliged to meet the quoting requirements in two stages. In particular: the number of the opposite sex representatives must be increased to 33% by no later than 1 June 2023, and to 40% by no later than 1 June 2025.
    • The amendments also envisage recommendations according to which 33% of the board of directors of commercial banks should be of different sex.

    Source and date of publication: Legislative Herald of Georgia, 25/08/2022.

     

  • Amendments to the Rules on the Appointment of Special Manager of Commercial Banks

    On 11 July 2022, amendments to the rules on the appointment and operation of the special manager of commercial banks under the resolution regime entered into force. 

    • According to the amendments, the appointment of the National Bank’s employee as a special manager will be possible only on exceptional occasions. In particular, if the achievement of the resolution goals is at risk.
    • The amendments determined additional professional skills and qualification requirements to be met by the special manager.

    Source and date of publication: Legislative Herald of Georgia, 11/07/2022.

     

  • Amendments to the Law on the Securities Market

    On 5 July 2022, amendments to the Law of Georgia on the Securities Market entered into force.

    • With the amendments, the restriction regarding holding shares in the financial institutions by the state and/or state-owned enterprises remained in force. The restriction must not, however, apply to the holding of shares in investment funds established in accordance with the Law of Georgia on Investment Funds. 
    • According to the amendments, the state can be a limited partner of the investment fund, i.e., it will not have the right to manage its capital.

    Source and date of publication: Legislative Herald of Georgia, 05/07/2022.

     

  • Amendments in the State Participation in Investment Funds

    On 5 July 2022, along with the amendment to the Law on the Securities Market, amendments to the Law of Georgia on Investment Funds entered into force. 

    • According to the amendments, state bodies and/or state-owned enterprises can hold shares in the investment funds per the rules set out by the Government of Georgia.
    • State bodies and/or state-owned enterprises holding shares in investment funds must not be authorized to manage the portfolio and risks of the investment funds, as well as to influence investment decisions.

    Source and date of publication: Legislative Herald of Georgia, 05/07/2022.

     

  • Amendments to the Tax Code

    On 23 September 2022, the amendments to the Tax Code were published.  

    • The amendments aim to align the laws of Georgia with the directives of the European Parliament and the Council and regulate the issue of requesting confidential information by the Revenue Service from the entities subject to the supervision of the National Bank.
    • The amendments define the requirements for a payment account opened with a payment service provider.
    • During the tax audit or based on the application of the authorized body of another state, the Revenue Service will be allowed to request the entities subject to the supervision of the national bank confidential information protected under legislation applicable to those entities.
    • The abovementioned request will have to be supported by the relevant decision of the court, in accordance with the procedure established by the Administrative Procedure Code.
    • The amendments will become effective from 1 November 2022.

    Source and date of publication: Legislative Herald of Georgia, 23/09/2022.

     

  • Amendments on the Business Trip Expenses

    On 29 September 2022, amendments regarding the employees’ business trip expenses entered into force.

    • The limit for daily expenses during the employee’s business trip within the country increased from GEL 15 GEL to GEL 30.
    • The amendments determine different limits for daily expenses during long-term and short-term business trips.

    Source and date of publication: Legislative Herald of Georgia, 29/09/2022.

     

  • Micro Banks-related Amendments to the Tax Code

    On 18 July 2022, the Draft Law on the Amendments to the Tax Code (the “Draft Law”) was published on the website of the Parliament of Georgia.

    • The purpose of the Draft Law is to bring the Tax Code into compliance with the draft Law on the Activities of Micro Banks.
    • The tax regime, obligations, and responsibilities established by the Tax Code for commercial banks operating in Georgia will apply to the activities of micro banks.
    • According to the Draft Law, the definition of a “banking institution” will be added to the Tax Code.
    • Changes are introduced in the norms related to the legal relations of banking institutions/commercial banks, regulating among other things: the right to request information by the tax authority, corporate income taxation, arrangements for securing tax debt payments, etc.
    • If approved, the Draft Law will become effective 6 months after its publication.

    Source and date of publication: Website of the Parliament of Georgia, 18/07/2022.

     

EY Georgia Tax & Law Brief for July – September 2022 (Georgian)