A Georgian Company With No Activity: What Still Has to Be Filed

A company registered in the country of Georgia still files when it has no activity. While it is VAT-registered it owes a VAT return every month, and at the time of writing the tax administration rules expect its monthly profit tax and payroll returns too, nil or not. It owes an annual financial report to the accounting supervisor whatever its turnover, and a property tax return if it holds taxable assets. Outside VAT, profit tax and payroll returns are filed only when something taxable happened. The tax portal lets a company mark itself as an inactive taxpayer, but the mark is not a pause: the duties run until the company is liquidated.

Inactive is a mark on the tax portal, not a pause

The Revenue Service's public taxpayer register lists a company as active, in liquidation, liquidated or cancelled; it has no entry for dormant. The Minister of Finance's order on tax administration does know two labels, active and inactive taxpayer: a company marks its own status on the portal and must update it before activity resumes. In the provisions read for this article the stated effect is narrow: an inactive taxpayer need not fill in the taxpayer information card. Nothing there suspends VAT registration, the annual report or the registry duties. SARAS, the accounting and audit supervisor, answers the question about inactive enterprises in its published answers by restating the general duty to submit the report.

Returns that are due whether or not anything happened

For a VAT-registered company the monthly return is the duty most often forgotten, because a month without sales feels like a month without VAT. The Tax Code's rule for VAT returns has no exception for an empty month. The order on tax administration, as published on the Revenue Service's legal hub at the time of writing, goes further: it takes a VAT-registered company's VAT, monthly profit tax and payroll returns out of the zero-return rule described below, so unfiled they stay unfiled. The way out is deregistration, not silence. At the time of writing a company may apply to cancel its VAT registration where its taxable turnover over the last 12 months did not exceed GEL 100,000 and a year has passed since it was last registered. Until the cancellation takes effect, the monthly returns continue.

Returns a company outside VAT files only when something taxable happened

• Profit tax. The Code makes the return monthly, due by the 15th of the following month, and the tax arises on a distribution of profit, an expense unrelated to the business or a free supply. Outside VAT, a month with none of these has nothing to declare under this head.
• Payroll. The return reports salaries paid and tax withheld in the month. Outside VAT, a company that pays nobody has nothing to report; one that keeps a director on a salary keeps its payroll cycle.
• Reverse-charge VAT. A service bought from a foreign supplier can create a VAT charge for a company that is not VAT-registered, payable by the 15th of the following month. A software subscription left running is the usual case.
• Anything the bank statement shows. Bank fees are harmless. A personal expense of the owner paid from the company account is treated as a distribution, and it brings the profit tax return back to life.

Where the rule applies, silence is treated as a statement that the month was empty, so it is safe only when the month really was empty. If it later turns out that it was not, the return you then file is late by definition, and the fine and the interest reach back to the original due date. So the routine in our compliance calendar still holds: tell the accountant every month that nothing happened, and let them file the nil return where one is due. A gap is an assumption that somebody will have to defend later, usually to a bank.

What silence costs

Less in percentage fines than founders fear, and more in everything else. At the time of writing a late return is fined at 5% of the tax it shows where the delay is not more than two months and at 10% where it is longer; where that tax is zero, no fine is imposed. Unpaid tax carries interest of 0.05% for every day. So a truly empty month does not, on the text of the Code, produce a percentage fine, even where its return had to be filed. The money goes on months that were not as empty as they looked, on the annual report nobody filed, and on notices nobody read. Documents not supplied on the tax authority's request in time carry a fixed fine, GEL 400 at the time of writing, and a document placed on the portal can still be served if nobody opens it. Our articles on tax penalties and on rs.ge set out both rules.

Keeping the address, the director, the access and the bank account alive

• Registered address. The owner's consent usually has a term. When it lapses the registry entry is wrong, and a letter handed over there can still count as delivered to the company. Diary the renewal with the tax dates.
• Director. A company needs someone on the register who can sign, answer the tax authority and, one day, resolve to liquidate. A director who has resigned on paper, or cannot be reached, leaves it unable to do any of these.
• Portal access. The Revenue Service login depends on one mobile number. If it belonged to someone who has left, restore access now, while nothing is pending, and check that the active or inactive mark on the portal is still true.
• Bank account. In practice a Georgian bank reviews accounts with no movement, may keep charging a service fee, and may ask the company to confirm its details or close the account. Answer the bank's questions, and close accounts you will not use.
• Records. Keep the accounting file complete even when it is thin: bank statements, the contracts that ended, a note of the nil position for each month.

When liquidation is cheaper than dormancy

Our article on closing a company describes the procedure; the decision rule is simpler. Dormancy is worth its cost when the company holds something slow or impossible to rebuild, such as a bank relationship, a licence, a contract, a registered brand or a tax history, and when a named person runs the routine below. Without both, each quiet month adds to the file that must be put in order before the Revenue Service lets the company go, and liquidation becomes the cheaper choice sooner than most founders expect.

1. Monthly: open the portal, confirm there is no unopened message and no balance on the taxpayer's card, check the bank statement for stray charges, and tell the accountant in writing that nothing happened.
2. By the 15th: while the company is VAT-registered, file the VAT, profit tax and payroll returns, nil or not; outside VAT, file any return that a stray charge has created.
3. Annually: submit the financial report by 1 October, file the property tax return by 1 April if the company holds taxable property, and renew the address consent.
4. Once a year, on a fixed date: decide again whether the company stays or goes, and write the reason down.

What this article does not answer

It deals with an ordinary LLC under the standard regime. A company with Virtual Zone or International Company status, a licence or employees has conditions that continue through a quiet period, and they are not covered here. Individual entrepreneurs follow different filing rules. The list of returns outside the zero-return rule is given as read on one date; an accountant should check it for your company and say what the inactive mark changes in practice. It does not cover your home country, where a foreign company you control may have to be reported whether or not it trades. We provide the registered address, read the notices and run the calendar for the companies we look after, and we carry out liquidations. Monthly accounting, including nil returns, is a separate service.