EY GEORGIA TAX & LAW BRIEF

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1 EY GEORGIA TAX & LAW BRIEF SEPTEMBER 2017 Amendments to the Constitution of Georgia On 26 September 2017, the Parliament of Georgia adopted a draft Constitutional Law of Georgia. The amendments state that agricultural land can be owned only by the country s selfgoverned units, citizens of Georgia or unions of Georgian citizens. Exceptions can be made by the organic law. According to the amendments, for 12 years after enactment of this law, any new type of the general statutory tax, apart from the excise duty, can be introduced or the ceiling of the existing tax rate can be increased only through a referendum, except for the cases described in the organic law. Based on the amendments, the law becomes effective upon publication. The source and the date of publication: the Website of the Parliament of Georgia, 26/09/2017. Expected Amendments to the Law of Georgia on Agricultural Land Ownership On 20 September 2017, the Parliament of Georgia adopted a bill on amending the Law of Georgia on Agricultural Land Ownership. Based on the bill, the moratorium on acquisition of the rights to own agricultural land plots shall not apply to the commercial banks or micro finance organizations as defined by the Law of Georgia during the transitional period.

2 The bill states that if commercial banks or micro-finance organizations have acquired or acquire the agricultural land ownership right only within the limits of their banking or micro-financing activity as defined by the Georgian law, the commercial banks must dispose of it to an eligible party within 2 years, and the micro-finance organizations must dispose of it within 1 year, after acquiring the ownership right over the agricultural land plot. According to the bill, the government of Georgia is given the discretion to make decisions on allowing exceptions from the moratorium. According to the bill, the law becomes effective upon publication. 20/09/2017. Expected Amendments to the Law of Georgia on Workplace Safety On 30 June 2017, the Parliament of Georgia adopted a bill on amending the Law of Georgia on Workplace Safety. The bill suggests a unified standard of workplace safety to be met by the entities operating in the labor market. According to the bill, the law shall apply to the occupations with hard, harmful or dangerous working conditions. The list of such occupations shall be compiled by the government of Georgia within six months after enactment of the law. According to the bill, an agency supervising employment conditions will be set up to monitor enforcement of the workplace safety law and examine causes of workplace accidents. According to the bill, the law will be enforced gradually, fully becoming effective on 1 January Expected Amendments to the Law of Georgia on Border Measures Related to Intellectual Property On 7 September 2017, a bill was introduced to the Parliament of Georgia on Border Measures Related to Intellectual Property. Based on the bill, the scope of protecting intellectual property right holders expands to include special border measures for movement of each customs transaction. According to the bill, the transaction will be suspended until registration and special border control procedures will apply. According to the bill, the law will become effective on the 7 th day of its publication. 07/09/2017.

3 Expected Amendments to the Law of Georgia on State Procurement On 13 September 2017, a bill was introduced to the Parliament of Georgia on amendment of the Law of Georgia on State Procurement. The bill states that a dispute resolution board is to be set up for efficient settlement of disputes arising from electronic tenders or competitions. The operation of the board will be technically supported by the State Procurement Agency. According to the bill, the board will follow the principles of equality, it will be independent and not influenced by any state agency and/or government official. According to the bill, the law becomes effective upon its publication. However, subparagraph H of Paragraph 6 of Article 4 that refers to the technical support to be provided by the State Procurement Agency to the Dispute Resolution Board, will be enacted on the 30 th day of the publication of the law. 13/09/2017.სააგენტოს ვ Resolution by the Board of the National Bank of Georgia on Defining Types of Collateral for Loans On 31 August 2017, Resolution N2 by the Board of the National Bank of Georgia was published in the Legislative Herald of Georgia on defining types of collateral for loans. According to the Resolution, the collateral types for the loans of the National Bank of Georgia are: Debt securities issued by the National Bank of Georgia and the government of Georgia, denominated in the Georgian lari Debt securities issued by international financial institutions, denominated in the Georgian lari Debt securities denominated in the Georgian lari, issued by resident and non-resident legal entities through private placement before 1 January 2018 and in compliance with the Law of Georgia on Securities Market, except for the debt securities issued by the commercial banks operating in Georgia and the debt securities issued by the legal entities owned by and related to commercial banks. Loan assets of a commercial bank Foreign currency deposits with the National Bank of Georgia The Resolution was enacted upon publication and Resolution N3 of 23 April 2010 by the Board of the National Bank of Georgia on Defining types of Collateral for Loans was declared invalid. The source and the date of publication: Legislative Herald of Georgia, 31/08/2017.

4 Competition Law Decision by LEPL Competition Agency on Completion of Scrutiny Triggered by Complaint of Insurance Company Unison According to order N04/248 of 5 September 2017 (further the Order ) by the Chairman of LEPL Competition Agency of Georgia (further the Agency ), the Agency decided to complete the scrutiny prompted by a complaint of JSC Insurance Company Unison. According to the Order, the Agency found the requirement of using only the bank guarantees issued by banking institutions for securing performance of the public procurement contracts to be restriction of competition. The Agency believes that by introducing such a requirement, procuring agencies give advantage to banking institutions over insurance companies. According to the Order, in relation to the tenders scrutinized, it was confirmed that LEPL Municipal Development Fund of Georgia, the Roads Department of Georgia, Batumi Municipality City Hall, Khashuri Municipality and Tbilisi Municipality City Hall had violated subparagraph C of Article 10 of the Law of Georgia on Competition. According to the Order, to improve a sound competitive environment in the market, the procuring agencies, the government of Georgia and LEPL The Insurance State Supervision Service of Georgia were provided with mandatory recommendations. The source and the date of publication: the website of LEPL Competition Agency, 13/09/2017.

5 Contact Information: Zurab Nikvashvili Partner Head of Tax & Law in Georgia and Armenia EY Georgia LLC Kote Abkhazi st. 44, 0105, Tbilisi, Georgia Office: +995 (32) Dr. George Svanadze LL.M., MLB (Bucerius/WHU) Head of Law Practice Tax & Law EY Georgia LLC Kote Abkhazi st. 44, 0105, Tbilisi, Georgia Office: +995 (32) EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EY Georgia LLC All Rights Reserved This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. The views of parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were expressed.