What Should Businesses Know?
From 1 January 2027, the fee for the issuance of an advance tax ruling will double, amounting to GEL 20,000 for businesses and GEL 10,000 for resident natural persons. The change is significant because the advance ruling is regarded as one of the most effective instruments of tax risk management, giving businesses the opportunity to determine in advance the tax consequences of a specific transaction.
What Is an Advance Tax Ruling?
An advance tax ruling is an individual administrative legal act issued by the Revenue Service with respect to a transaction that has already been carried out or is to be carried out. An interested person may apply to the Revenue Service on matters relating to tax and customs obligations, reporting rules, or issues connected with the administration of those duties which are administered by the tax authority. An advance ruling applies only to the person with respect to whom it has been issued and is based solely on the factual circumstances presented by that person. Moreover, the information contained in the request constitutes a tax secret.
Why Is It Important for Business?
An advance ruling enables a business, before carrying out a significant or complex transaction, to obtain the official position of the tax authority and to reduce uncertainty regarding the tax consequences. One of its principal advantages is the assurance of legal certainty. Specifically, where a taxpayer acts in accordance with an advance ruling, it is impermissible for a supervisory or law enforcement authority to adopt a decision contrary to it or to assess tax and/or a sanction on the relevant issue. It is also noteworthy that the issuance of differing advance rulings in respect of identical transactions carried out by different persons is not permitted, which promotes the consistency and predictability of tax practice.
What Changes from 2027?
Under the rates currently in force, the fee for the issuance of an advance tax ruling amounts to:
- GEL 10,000 for businesses;
- GEL 5,000 for resident natural persons.
From 1 January 2027, the fee will increase and will be set at:
- GEL 20,000 for businesses;
- GEL 10,000 for resident natural persons.
What Impact May the Change Have?
The relevance of this instrument is growing. An advance ruling is particularly pertinent in the case of nonstandard, high value or, from a tax perspective, complex transactions, where there is a risk of differing interpretations of the rules or of a subsequent tax dispute.
The doubling of the fee may reduce the accessibility of this instrument for small and medium sized businesses, particularly in cases where the volume of the transaction does not justify an expense of that magnitude. As a result, taxpayers may take more decisions on the basis of their own independent interpretation, which increases the risk of additional tax assessments and tax disputes in the future.
On the other hand, in the case of major investments, reorganisations, international transactions or other high risk operations, the advance ruling will most likely remain an important instrument of tax risk management. In such projects, the financial effect of potential tax risks and sanctions often considerably exceeds the service fee itself, for which reason obtaining legal certainty in advance will continue to be economically justified.
Conclusion
The advance tax ruling remains one of the most important mechanisms enabling a business to agree in advance with the tax authority on the tax consequences of a specific transaction and, in this way, to reduce its tax risks.
If you would like to learn more about advance tax rulings, or to assess how the upcoming changes may affect your business, please contact us. Our team will be glad to assist you.
