Audit of a company in Georgia, financial statements, accounting, consulting in Georgia

Financial reporting requirements in Georgia are regulated by the Law of Georgia “On Accounting, Reporting and Audit”.

Companies incorporated in Georgia must prepare their financial statements in accordance with the international financial reporting standards (IFRS).

Financial statements of a company consist of the following documents:

• Balance sheet;
• Profit and loss statement;
• Explanatory notes on cash flows in the company’s accounts;
• Results of the company’s economic activity for the year;
• Current financial position of the company;
• Notes to financial statements.

Financial statements and tax accounts shall be made in the national currency of Georgia (lari – GEL).

Accounting records must be kept for 6 years after the end of the reporting period.

Annual financial statements in Georgia shall be filed with the Service for Accounting, Reporting and Auditing Supervision. Moreover, financial statements shall be filed with fiscal authorities.

All legal entities must report and pay taxes by filing tax returns.

If an enterprise/entity was established (underwent state registration) after the beginning of a calendar year and before 1 December of that year, its first tax period is the period from the day of its establishment (registration) to the end of that year. If an enterprise (entity) was established from 1 December to 31 December inclusive, its first tax period is the period from the day of its establishment to the end of the following year, unless otherwise provided (article 59 of the Tax Code of Georgia).

Deadlines for filing returns depend on the chosen legal form of the company and taxation system. Sole proprietorships with the status of small business and limited liability companies shall file tax reports monthly, and sole proprietorships that pay 20% tax shall file a profit tax return once a year.

Companies must prepare and file with tax authorities of Georgia the following kinds of reports:

• VAT return – by the 15th day of the month following the reporting month;
• Income tax return: sole proprietorships with the status of small business – monthly by the 15th day of the month following the reporting month; individuals and sole proprietorships without the status of small business – by 31 March of the year following the reporting year;
• Property tax return for enterprises and sole proprietorships – by 1 April of the year following the reporting year; for individuals – by 1 November of the year following the reporting year;
• Annual profit tax return – by 1 April of the year following the reporting year.

If a company fails to meet the deadline for filing financial statements in Georgia, to follow the procedure of keeping accounting records or evades audit, it may receive a written warning or be imposed with a penalty:

• For public interest legal entities and companies whose income by the end of the reporting period exceeds GEL 100 000 000, total assets exceed GEL 50 000 000 or average number of staff members is 250 or more the penalty is GEL 10 000;
• For companies whose income by the end of the reporting period does not exceed GEL 100 000 000, total assets are under GEL 50 000 000 and average number of employees is less than 250 the penalty is GEL 5 000;
• For companies whose income by the end of the reporting period does not exceed GEL 20 000 000, total assets are under GEL 10 000 000 and average number of staff members is less than 50 the penalty is GEL 1 000;
• For companies whose income by the end of the reporting period does not exceed GEL 2 000 000, total assets are under GEL 1 000 000 and average number of employees is less than 10 the penalty is GEL 500.

If a company does not fulfil its obligations within 1 month after receiving a warning or penalty, the amount of the penalty doubles.

Failure of a person to meet the deadline set by tax legislation of Georgia for provision of a tax return/calculations to the tax authority results in a penalty imposed on the person that amounts to 5 percent of the amount of tax payable based on the tax return/calculations for each full/part of month of delay (parts of month are added and considered one month). And the aggregate amount of penalty for the whole period of delay must not exceed 30 percent of the payable tax (article 274 of the Tax Code of Georgia).