The HoReCa (hotel/restaurant/café) sector is one of the major business directions, encompassing both the food production industry and the activities of establishments that offer customers food and beverage services.
Considering the growth rate of the tourism industry, the HoReCa sector holds an important role in Georgia’s economy. According to data published on the website of the National Statistics Office of Georgia (source: geostat.ge), in 2024 the turnover of enterprises engaged in accommodation and food service activities increased by 18.3% compared to 2023, amounting to 3.426 billion GEL. In the first quarter of 2025, compared to the same period of the previous year, a 17.2% growth was recorded.
It is also noteworthy that businesses operating in the HoReCa sector often face tax-related risks, which, in the absence of proper management and preventive measures, may materialize and cause both financial and reputational damage to the company.
In today’s article, we will discuss the main tax risks present in the HoReCa sector and ways to prevent them.
Problems related to accounting documentation.
- In the food and beverage production sector, accounting irregularities are common, reflected in improper, inaccurate, or incomplete documentation (e.g., incomplete inventory write-offs, inaccurate balances, etc.). In such cases, it becomes impossible to fully determine the taxable object for certain taxes. As a result, businesses face inconsistencies with tax legislation, while tax authorities gain the right to determine tax obligations using indirect methods.
According to Article 73 of the Georgian Tax Code, when tax obligations are determined indirectly, the tax authority relies on a comparison of operational revenues and expenses, information about the taxpayer across different periods, or data from other businesses engaged in similar activities, along with an analysis of other relevant information. Naturally, data calculated based on other entities or periods cannot fully reflect—and in many cases even exceed—the actual tax obligations calculated based on proper accounting documentation.
- Businesses in the HoReCa sector also frequently encounter problems related to expenses. Tax risks arise when personal expenses of employees are mistakenly treated as related to the company’s economic activity. For example, providing free or discounted meals to employees in hotels and restaurants, organizing free or discounted events/parties for staff, or allowing them to use other company products/services.
In such cases, businesses often fail to comply with legislative requirements. Specifically, they do not treat meals or other benefits provided to employees as taxable salary and do not reflect the consumption of supplies for such purposes in their accounting. This leads to shortages, which, if revealed during a tax audit, result in additional tax liabilities and sanctions.
Furthermore, the HoReCa sector has its own specific characteristics. In particular, raw materials and supplies for food preparation are often purchased at markets or from individuals who cannot/do not issue documentation upon sale. As a result, the business cannot document its expenses (cannot provide invoices, contracts, delivery notes, or purchase acts). In such cases, both entrepreneurs and companies may face additional tax liabilities (in terms of income tax or profit tax).
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Tax risks are also linked to the frequency of cash transactions. In such situations, the tax authority may scrutinize the authenticity of cash balances in the register and, according to pre-established methodological guidelines, classify part of the cash surplus as unreasonable (cash that the business does not need to hold in the register based on the nature of its activities or business plan). This is most often treated by the tax authority as salary paid to the director and taxed as income.
Additionally, there is a practice where, during non-cash settlements, companies offer customers the option to transfer money to personal bank accounts of third parties, which is strictly prohibited (see the statement from the Revenue Service). If such practices are detected by the Tax Monitoring Department during control procedures, it creates risks of tax evasion and may trigger a full tax audit of the business.
To avoid the above-mentioned tax risks and minimize their impact on business, it is necessary to implement appropriate preventive measures. Below, we will review practical steps that representatives of the HoReCa sector can take to manage risks and reduce tax pressure.
Ways to reduce tax risks
If you offer food and beverage services to customers, it is important to:
- Implement modern accounting software in your company, with diverse functionality that allows automatic write-offs of raw materials and supplies using recipes/calculations, and integrates fiscal receipts from cash registers and POS terminals to eliminate manual errors and irregularities.
- Prepare recipes/calculations for the production of offered products, and fully reflect the entire process in accounting—from the purchase of raw materials and supplies to the receipt of finished products—based on the actual calculations used.
- Conduct periodic inventory counts of goods and materials (monthly or quarterly) and, based on results, take legally required measures to address discrepancies between actual and accounting balances. This enables better control over inventory use and helps reduce tax risks while also improving logistics planning.
Take into account seasonality—the HoReCa sector is seasonal (workload varies by season) and staff turnover is common, often creating additional difficulties such as errors or violations. In such cases, the company must ensure effective control mechanisms (for cash registers, warehouses, etc.) are developed and properly implemented in critical areas.
Consultation with a qualified and experienced tax audit team, along with control of filed tax declarations and/or periodic tax reviews, will help you:
- Properly and promptly resolve any tax issues or problems.
- Accurately determine tax obligations related to past and future operations.
- Minimize tax risks.
- Stay consistently informed about tax updates—making adaptation to a changing environment much easier.
Therefore, it is clear that it is essential to fully and timely record all operations related to your business activities, ensuring control from initiation to completion.
For businesses in the HoReCa sector, tax compliance should be viewed not only as an obligation but also as a tool for effective management and sustainable development. This approach reduces tax risks and builds a solid foundation for future growth and stability.
If you operate in the HoReCa sector and want to ensure your business complies with tax legislation, the Loialté team is ready to provide you with comprehensive and timely support.
