How the legislation regulates Taxation of Crypto Mining and Supply of Crypto Assets (VAT, Corporate and Personal Income Taxes)?
Advance Tax Ruling #201 of the Ministry of Finance of Georgia about “Taxation of Crypto Mining and Supply of Crypto Assets” fully regulates cases when it comes to taxation of Physical Persons.
The same Advance Tax Ruling partially regulates taxation of Legal Entities involved in Crypto Activities. It covers only VAT issues and doesn’t cover taxation of profits gained from Crypto Activities (Mining/Supply).
Nowadays many companies are operating in Free Industrial Zones, whose activities cover Crypto Mining and Supply of Crypto Assets.
General rule of profit tax exemption for FIZ companies is the following: ”Profit or distribution of profit earned by a FIZ Enterprise from business permitted within the Free Industrial Zone, and expenses incurred/disbursements made within the scope of the same activity that are provided for in Article 97(1)(b-d) of this Code” (Article 99 of TCG).
According to the TCG (article 25, paragraph 7) “The Government of Georgia shall be entitled to determine the types of services to be provided to non-resident persons (except for permanent offices of non-resident persons in Georgia) by FIZ Enterprises, which, for the purposes of taxation, shall be deemed as permitted activities carried out by FIZ Enterprises in the free industrial zone”. With this statement the Tax Code of Georgia tells us that FIZ companies are restricted to provide services to non-residents for taxation purposes, except those activities that the Government of Georgia shall determine. Up to now the Government of Georgia hasn’t determined any such activity. Therefore, for taxation purposes FIZ companies are restricted to provide any service(es) to non-residents. Restriction of services for taxation purposes means that gains of FIZ companies from such activities can not be exempt from Profit Tax.
Advance Tax Ruling #201 of the Ministry of Finance of Georgia about “Taxation of Crypto Mining and Supply of Crypto Assets” defines supply of Crypto Assets as supply of services. Therefore, supply of Crypto Assets of FIZ companies to non-residents represents supply of services to non-residents for taxation purposes. The latter is restricted for FIZ companies and Profit Tax exemption can’t be applied.