Tax Audit in Georgia: How Far Back the Revenue Service Goes
A Revenue Service letter can name a year you closed in your head long ago. Georgia puts hard limits on that letter: which years are still open, how long the audit can run, what it can charge you and what it cannot. This post sets out those limits, article by article, and what you can still fix before the audit decision lands.
- The Tax Code provides 2 kinds of tax audit and no third: a desk audit run on information the Revenue Service already holds, and a field audit at your premises.
- An audit reaches back 3 years, measured from the end of the calendar year that the audited period falls in.
- A field audit needs not less than 10 working days of notice, has to start within 30 days of that notice, and runs for at most 3 months plus a 2 month extension.
- Understating tax on a return costs 50% of the understated amount as the general rule, and the fines from one audit cannot exceed the taxes that audit assesses.
- Filing an amended return before the decision to audit is served removes the understatement fine, but never the tax or the 0.05% a day interest on it.
- You have 30 days from service to appeal the audit act, the decision on it and the tax demand together.
The 2 kinds of tax audit in Georgia
Tax control has 2 forms, current control and a tax audit, and only the tax authority may carry it out. Other supervisory bodies and law enforcement bodies are prohibited from tax control of a person's activity.
The audit half splits into 2 kinds. A desk audit runs on the order of an authorised person of the tax authority, on the specific issue that order names, without anyone coming to your place of business. It works from the taxation information the tax authority already holds, plus the explanations and accounting documents it obtains from you, and where the errors it finds change the tax amount the officer draws up a tax audit act.
A field audit is the one that comes to you, and it is the one the Code subdivides: the Georgian text of Article 264(4) gives a full audit or a thematic audit of your activity. The English translation of the same publication prints "fully or partially" and loses the word thematic. Where the 2 texts of the Code disagree, the Georgian is the one that applies.
A field audit may also include the current control procedures, and you have to give the auditors the working conditions that normally exist on your premises. The auditor may demand duly certified copies of accounting documents, and on refusal may seize the original, which is returned as soon as the field audit ends.
| Desk audit | Field audit | |
|---|---|---|
| Where it runs | No visit to your place of business | At your premises |
| What it works from | Taxation information the tax authority holds, plus your explanations and accounting documents | The same, and it may include the current control procedures |
| What it covers | The specific issue the order names | The whole activity, or a theme within it |
| Advance notice | None set in the Code | Not less than 10 working days |
| What closes it | A tax audit act, where the errors change the tax amount | A tax audit act |
How much notice you get, and how long an audit can run
A field audit is announced first. You are sent written or electronic notice not less than 10 working days before it starts, and the audit has to begin no later than 30 days after that notice is served. If it does not begin in that time the notice is deemed to have lost force. No notice period is set anywhere in the Code for a desk audit.
Once it starts, Article 264(6) gives a field audit not more than 3 months, and where necessary the period may be extended by not more than 2 further months in agreement with the head of the Revenue Service. That makes 5 months the outside limit, and the Georgian and English texts agree on it.
Where force majeure or another circumstance stops a started audit continuing, the authorised person decides to suspend it, and the running of the audit period resumes from the day the audit continues. A suspension therefore stops the clock rather than adding to it.
When no notice arrives
An urgent field audit is conducted with no written notice, on court permission, and the Code lists 6 grounds for one: material breaches found at the last audit; reliable information casting doubt on the origin of the person's financial and material means; reliable information about an undocumented increase in property or another taxable object; returns and documents that do not confirm the reality of the taxable objects and computed taxes; no return or no documents needed to compute or pay tax; and information that the person plans to evade by leaving Georgia, transferring assets or destroying documents.
The tax authority must apply to the court and obtain permission within 48 hours of starting an urgent field audit, and may not start before permission is given. Until then, representatives may seal only the documents and stock the audit needs, and must unseal them if permission is refused in the fixed period.
Re-auditing an issue already audited for the same period is prohibited without a judge's order, and the one exception is an issue on which you have filed an amended return covering that already audited period.
How far back a Georgian tax audit can go
Article 4 of the Tax Code sets 3 limitation periods, all of them 3 years, and each starts somewhere different. For a tax audit the count begins at the end of the calendar year being audited. For assessing tax and serving a tax demand it begins at the end of the calendar year the liability arose in. For imposing a sanction other than late payment interest, 3 years again.
The counting point matters more than the number. The Georgian text of Article 4(6) runs the audit period from the end of the calendar year being audited. The English translation says "from the end of the calendar year in which the audit takes place", which moves the start point.
The year is what the clock counts, not the filing date. A small business monthly return falls due by the 15th of the month after the reporting month and the annual income tax return by 31 March, so 12 monthly returns and one annual return for 2023 all sit inside the same audit window. A liability that arose in 2023 stays assessable to the end of 2026 whichever of those returns carried it.
How a late correction adds a year
Filing can extend the clock. Where less than 1 year is left before one of those periods expires and you file a return for that period, an amended return or a taxpayer's claim, the period is extended by 1 year. A correction filed in the last of those 3 years therefore gives the Revenue Service a 4th year on that period.
Your own clock is the same length. A claim for refund of overpaid tax or sanctions runs 3 years from the end of the year the right to it arose. Where a loss is carried forward 3 years or more, the period for the loss year runs 1 year beyond the carry-forward period.
What the Revenue Service can ask you to produce
The tax authority may demand that you produce accounting documentation and taxation information, including information requested by another state's competent authority under a treaty, and a list of your property. The Code sets no fixed number of days for answering. Article 70(5) obliges you to submit the requested information "within the period indicated", correctly and in full, so the deadline is whatever the request itself states.
Failing to produce accounting documentation or taxation information when the tax authority demands it in the manner the Code establishes, or failing to produce the property list within the period indicated, is a fine of GEL 400. The same act committed repeatedly is GEL 1,000 for each subsequent repetition, and "repeatedly" has a defined meaning in the Code: the same act committed within 12 months after the previous offence was revealed. Supplying incorrect information about writing off stock is fined at the book value of the stock the information failed to confirm.
- Tax source documents, kept at least 3 years after the end of the calendar year they belong to, under Article 72(3).
- For a small business status holder, the special record book and the tax documents behind it, on the same 3 years.
- For a micro business holder, tax documents for 3 years from the end of the calendar year.
- Cash register records, because a small business status holder must record cash receipts from customers with a cash register.
- Waybills, used when transporting or supplying goods in the cases the Code requires.
What an audit can cost
An audit that finds understated tax charges a share of the amount understated, and the band depends on how large that amount is against what the return declared. Article 275 sets the bands, and increasing the amount computed for reduction or the refundable amount on a return counts as understating tax and attracts the same ones.
| What the audit finds | Fine |
|---|---|
| Tax understated on a return, general rule | 50% of the understated amount |
| Understatement not more than 5% of the tax shown on that return | 10% |
| Understatement more than 5% and not more than 20% of that tax | 25% |
| Understatement caused only by the tax authority changing the moment or period the liability arose | 10% |
| Understatement above GEL 100,000 | Tax evasion under Georgian criminal law |
Interest does not wait for the audit. It is charged at 0.05% a day on the unpaid tax, starting the day after the payment deadline passed rather than on the date of the audit act, so an assessment arrives with interest already accrued on it. It stops 3 years after the day the obligation to charge it arose, and it attaches to unpaid tax only: the Code says in terms that late payment interest is not accrued on a tax sanction, so an unpaid fine carries none.
The total of the Article 275 fines imposed as a result of one audit may not exceed the total taxes that audit assesses as payable.
The cap stops at the fine. Understating tax on a return by more than GEL 100,000 is treated as tax evasion and carries liability under Georgian criminal law, which no cap on the fine reaches.
Correcting a return before the audit closes the door
Where you discover a mistake in a filed return that changes your tax liability, Article 69(1) obliges you to make the corresponding amendment or addition, and it sets no calendar deadline of its own. The audit is the deadline.
The express relief sits in Article 269(6) rather than in the fine article. A fine under Part XIII of the Code for information shown incorrectly on a return or calculation is not imposed on a person who filed the amended return or calculation before the court's or the tax authority's decision on conducting a tax audit was served, or before a tax offence report was drawn up. Because that paragraph is written for the whole of Part XIII rather than for one article, a correction made in time removes the understatement fine at every band, the 50%, the 25% and the 10%.
It removes the fine and nothing else. The tax itself and the late payment interest on it are not Part XIII fines, and Article 269(3) says that applying a tax sanction does not release the person from paying the taxes due. Filing late and understating are separate offences under Articles 274 and 275, so a return that was both late and wrong attracts both, and a more severe sanction does not absorb a less severe one.
Once the audit is announced the door shuts. You may not file a return, including an amended one, for a period or issue on which an audit is being or is to be conducted, from the moment the court's or the tax authority's decision or notice is served on you or posted on your authorised user page, or from a tax offence report being drawn up, until the tax demand is served. The one way back in is the 30 day rule: where the audit did not start within 30 days of service and the notice lost force, the bar on filing lifts with it.
Whether a year is still correctable, still auditable or already closed turns on dates that are easy to get wrong by a full year. If a notice has arrived, or you think one is coming, you can send us the years and the taxes involved and David Sisvadze sets out what is still open and what it exposes you to, in a written opinion he signs.
One route stays open even after the fine is imposed. Under Article 269(7) the tax authority, the body considering the dispute or the court may release a conscientious taxpayer from a sanction where the offence was caused by mistake or lack of knowledge, which is a discretion rather than an entitlement.
What closes an audit, and the 30 days that follow
The document that closes an audit is the tax audit act. It has to state 3 things: every factual circumstance, item of evidence and argument that was material in determining the tax liability, with the content of any expert opinion relied on; the norm of the Tax Code or of Georgian tax legislation the auditors applied; and the exact dates on which the liabilities arose where those can be established, with the computation of tax and fine and the total payable or receivable.
On the basis of the act, an authorised person of the tax authority takes a decision to assess or not to assess taxes and sanctions, and a copy of that decision is served on you together with the tax demand. The Code fixes no deadline for serving the act itself. The dated obligation attaches to the demand, which under the Minister of Finance instruction on tax administration the tax authority sends within 5 working days from the day the head or deputy head of the tax or customs authority takes the decision to assess.
There is one discount and it is time limited. Half of the fines assessed by an audit is cancelled where, within 30 days of service of the tax demand, you have paid into the budget the taxes provided for by that demand in full plus an amount equal to 50% of the fines, and have acknowledged the amount in the demand in the same period. The English translation reads as though half the tax is what gets paid; it is the fine that is halved, not the tax.
The same 30 days is the appeal clock. The audit act and the decision on it are appealed together with the tax demand issued on them, within 30 days of service, and the complaint either starts the 2 stage route through the Ministry of Finance or goes straight to court. Appealing does not suspend the appealed decision itself, though your duty to pay the part you dispute is suspended for as long as the dispute lasts. Let the 30 days lapse instead and the assessed amount becomes acknowledged tax debt, because letting the appeal period for a tax demand run out is one of the Code's defined triggers for that. An acknowledged figure is no longer disputable: whatever part of the demand it covers, a complaint over it is not taken up.
Frequently asked questions
How far back can the Georgian Revenue Service audit?
3 years. The count starts at the end of the calendar year that the audited period belongs to. The separate period for assessing tax and serving a tax demand is also 3 years, though that one is measured from the year the liability arose in. Both sit in Article 4, and it is the Georgian text that fixes those starting points.
How much notice does the Revenue Service give before an audit?
Not less than 10 working days of written or electronic notice, for a field audit. The audit then has to start no later than 30 days after the notice is served, and if it does not, the notice is deemed to have lost force. No notice period is set anywhere in the Code for a desk audit.
How long can a tax audit last?
A field audit may run for not more than 3 months, extendable by not more than 2 further months in agreement with the head of the Revenue Service. Where force majeure stops it continuing, the audit is suspended and the period resumes from the day it continues.
How long do I have to keep tax records in Georgia?
At least 3 years after the end of the calendar year the documents belong to, under Article 72(3). A small business status holder keeps the special record book and tax documents on the same 3 years, and a micro business holder keeps tax documents for 3 years from the end of the calendar year.
What is the penalty if an audit finds I understated tax?
50% of the understated amount as the general rule. It is 10% where the understated amount does not exceed 5% of the tax shown on that return, 25% where it is more than 5% and not more than 20%, and 10% where the understatement was caused only by the tax control authority changing the moment or period at which the liability arose.
Can I still file an amended return once an audit has been announced?
No. From the moment the decision or notice on conducting the audit is served on you or posted on your authorised user page, or a tax offence report is drawn up, you may not file a return for that period or issue until the tax demand is served. The bar lifts only where the audit did not start within 30 days of service and the notice lost force.
Does correcting a return before an audit remove the fine?
Yes, the fine. A Part XIII fine for information shown incorrectly on a return is not imposed where you filed the amended return before the decision on conducting the audit was served, or before a tax offence report was drawn up. The tax and the 0.05% a day late payment interest are not Part XIII fines and stay payable.
Does interest keep running while the audit is open?
Yes. The charge is 0.05% a day on unpaid tax, with the day of payment itself counted as one of the overdue days. It stops 3 years after the day the obligation to charge it arose, and it never attaches to an unpaid fine.
How long do I have to appeal an audit decision?
30 days from service. The audit act and the decision on it are appealed together with the tax demand issued on them. Miss that period and the amount becomes acknowledged tax debt, and a complaint filed after the deadline is accepted only if you prove the delay was caused by reasons outside your control.