Understanding Construction Laws in Georgia: New Tax Regulations
If you're asking, "What are construction laws in Georgia, and how do they affect small business entrepreneurs?" recent legislative updates provide clarity. Starting February 1, 2025, entrepreneurs working in the construction sector will face significant tax changes. Services provided to companies, organizations, or other entrepreneurs will now be taxed at a 20% income tax rate, replacing the previous 1% preferential rate.
Are Construction Laws in Georgia National or Local?
Georgia's construction laws are governed by national regulations, including the Georgian Tax Code and related decrees. These laws outline eligibility for tax regimes and the responsibilities of small business entrepreneurs in the sector.
Under the current system:
- Certified small business owners engaged in approved activities benefit from a 1% income tax rate.
- These rules are defined under the Georgian Tax Code (Articles 88-95), Ministry of Finance Instruction #999, and Government Decree #415.
Key Changes in Taxation for Construction Entrepreneurs
The new regulations will classify entrepreneurial activities differently:
- Authorities will determine if the work constitutes employment (taxed at 20%) or service provision (taxed at 1%).
- Even with a service contract, tax authorities may reclassify activities, potentially causing disputes over the applicable tax rate.
What Are the Specific Updates in Construction Tax Laws?
Decree #415 introduces two critical updates:
- Prohibited Activities:
Entrepreneurs involved in prohibited activities lose eligibility for the 1% tax rate on all income. Examples include:- Medical services
- Architectural services
- Consulting services
- Construction Services Taxed at 20%:
Entrepreneurs providing services related to:- Residential or commercial building construction
- Civil engineering projects
- Specialized construction services
will be taxed at 20% if their clients are companies, organizations, or other entrepreneurs. Services offered to private individuals, however, will still qualify for the 1% rate.
For example:
- Building or renovating a house for a private individual: Taxed at 1%.
- Performing the same work for a construction company: Taxed at 20%.
Impact of the New Construction Laws on Small Entrepreneurs
The shift in tax regulations will likely lead to structural changes in how small business entrepreneurs in the construction industry operate. Many will need to reconsider their client base and service contracts to optimize their tax obligations.
Eurofast's Expertise in Navigating Georgia's Construction Laws
Are Georgia's construction laws challenging to navigate? With these new regulations, it's crucial for small entrepreneurs to understand their obligations and structure their business relationships accordingly.
At Eurofast, our experts provide tailored advice to help construction entrepreneurs:
- Understand activity classification for taxation
- Comply with the latest legal requirements
- Optimise their tax structure while maintaining operational efficiency
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
