Under the new CIT system, the income is recognised as per International Financial Reporting Standards (IFRS).
Under the old CIT system, taxable income is determined as the difference between the gross income of a taxpayer and the relevant deductions granted under the Georgian tax code.
A taxpayer is required to record the value of goods produced or acquired as the outlays (except for depreciation charges) or the purchase price in tax accounting. Furthermore, the taxpayer shall include the storage and transportation expenses in the value of such goods.
A taxpayer is entitled to record the cost of inventory using the individual accounting method, the average weighted cost method, or first in first out (FIFO).
The Georgian tax code does not define any separate tax for capital gains. Capital gains are taxable as normal business income at the general CIT rate.
Dividends received by local legal entities (except for sole enterprises and entrepreneur partnerships) are not subject to taxation at source and shall not be included in gross income.
Dividends received by non-resident enterprises from resident enterprises are subject to WHT at source (see the Withholding taxes section for more information).
Resident legal entities and PEs of non-residents that received interest income that was taxed at source in Georgia are entitled to a credit on tax paid to the state budget.
Interest income received from a licensed financial institution is not subject to WHT at source, and it should not be included in the gross income of a recipient unless the recipient is another licensed financial institution.
Rent and royalty income received by resident companies and/or PEs of non-resident enterprises should be subject to CIT upon its distribution in the form of dividends if the taxpayer is under the new CIT system. Under the old CIT system, such income should be included in the taxable gross income of the enterprises.
Resident legal entities are subject to CIT on their worldwide income. Under the new CIT system, foreign income is subject to CIT at 15% upon its distribution in the form of dividends. Taxes withheld abroad can be offset against CIT charged on distribution of foreign income.