B. Taxes on corporate income and gains
Corporate income tax. Resident companies and permanent establishments of nonresident companies are not subject to tax on their generated but not yet distributed profits. They are subject only to tax on the following taxable objects:
• Distributed profits
• Expenses incurred and other payments not related to economic activity
• Free-of-charge supplies of goods or services and transfers of funds
• Representative expenses exceeding statutory limits prescribed by the TCG
Distributed profits. Distributed profit consists of cash or noncash dividends distributed by a legal entity to its partners or shareholders.
Activities that are not considered distributions of profits include, among others, the following:
• Distributions of dividends among Georgian legal entities
• Distributions of dividends received from foreign enterprises (other than companies registered in low-tax jurisdictions)
• Further distribution of dividends received by corporations, companies, firms and similar entities established under the legislation of a foreign country, regardless of whether they have legal entity status (other than permanent establishments of foreign enterprises), that have transferred their place of management to Georgia
Repatriations of profits attributable to permanent establishments of nonresident entities are treated as distributions of profits. Profit attributable to a permanent establishment is a profit that the permanent establishment would have made if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions.
Distributions of profits include the following:
• Transactions conducted with related resident entities that are not subject to tax on distributions of profit if the contractual price of such transactions differs from the market price
• International controlled transactions that are not at arm’s length
• Transactions conducted with persons that are exempt from corporate income tax or personal income tax under the TCG if the contractual price of such transactions differs from the market price
Incurred expenses and other payments not related to economic activity. The TCG contains a list of expenses or payments that are subject to corporate income tax. Such expenses include, among others, expenses that are not documentarily proven or that were not incurred for the purpose of deriving profit, income or compensation. In addition, certain payments to persons registered in low-tax jurisdictions are taxable.
Free-of-charge supplies of goods and services and transfers of funds. Supplies that are not aimed at gaining profit, income or compensation are considered to be free of charge. In addition, a shortage of inventory or fixed assets is considered a free-ofcharge supply and is subject to corporate income tax.
Free-of-charge supplies of goods or services are exempt from tax under the following circumstances:
• The supply was taxed at the source of payment.
• The supply represents a donation to a charitable organization and does not exceed 10% of the net profit for the preceding calendar year.
• The recipient of the goods, services or funds is a state authority, municipal body or legal entity of public law.
• The recipient of the goods, services or funds is a resident enterprise or a nonresident enterprise conducting business in Georgia through a permanent establishment that is subject to tax on distributed profits as mentioned above.
Representative expenses. Representative expenses exceeding 1% of revenues or expenses (whichever is greater) for the preceding calendar year are taxable.
Other. The tax base of banking institutions, credit unions, microfinance organizations and loan provider entities is determined as the difference between the gross taxable income and the amount of deductions stipulated under the TCG.
Foreign legal entities without a permanent establishment in Georgia are subject to withholding tax on their Georgian-source income at a rate of 4%, 5%, 10% or 15% (see Section A).
The object of corporate income taxation of a nonresident enterprise earning income from the sale of property in Georgia that is not related to the activity of its permanent establishment in Georgia is the difference between the gross income earned from a Georgian source during a calendar year and the amount of the deductions with respect to the earning of the income.
The object of corporate income taxation of a nonresident enterprise earning remuneration for the lease or rental of property from a person who is not a tax withholding agent is the difference between the gross income earned from a Georgian source during the calendar year and the amount of the deductions with respect to the earning of the income.
Tax rates. The regular corporate income tax rate is 15%. To calculate corporate income tax, the tax rate is applied to the taxable objects described above divided by 0.85.
The tax rate for banking institutions, credit unions, microfinance organizations and loan provider entities is set at 20%.
Special types of enterprises. The Georgian tax law provides for beneficial tax treatment for enterprises operating in Georgia with the following statuses:
• International Company
• Special Trade Company
• Free Industrial Zone Company
• Virtual Zone Person
• Tourist Enterprise
• Agricultural Cooperative
• Investment Fund
The Georgian Tax Authorities (GTA) grant the above statuses according to the rules defined by the Minister of Finance of
Georgia or the Government of Georgia. The statuses are described below.
International Company. An International Company is a Georgian enterprise engaged in information technologies or maritime operations that performs certain activities defined by the decree of the Government of Georgia and earns income only from those activities. An International Company pays corporate income tax at a 5% rate.
Special Trade Company. An entity conducting its activities in an authorized warehouse may be granted Special Trade Company status for corporate income tax exemption purposes. A Special Trade Company may supply and re-export foreign goods from a customs warehouse, as well as purchase foreign goods from an entity without such status for further supply or re-export. A Special Trade Company may also derive income (including Georgian-source income) from other allowable activities if such income does not exceed the sum of GEL1 million and 5% of the customs value of foreign goods brought into Georgia. In addition, a Special Trade Company may derive income exempted from corporate income tax and from the sale of fixed assets used in economic activities for more than two years. A Special Trade Company is prohibited from importing or purchasing Georgian goods for further supply, rendering of services in Georgia to a Georgian entity, individual entrepreneur and/or to a permanent establishment of a foreign enterprise and operating a customs warehouse. The status of Special Trade Company is canceled for a calendar year if an authorized representative of such company submits an application to the GTA at least five business days before the beginning of the relevant calendar year. A Special Trade Company is exempt from corporate income tax on distributed profits received from allowable activities except for income received from the sale of fixed assets.
Free Industrial Zone Company. Free Industrial Zone Company status for tax purposes may be granted to a company operating in a Free Industrial Zone. Free Industrial Zone Companies primarily engage in the manufacturing and export of goods outside Georgia from a Free Industrial Zone. The status of Free Industrial Zone Company is subject to cancellation if the company engages in activities prohibited by the law. Free Industrial Zone Companies are exempt from corporate income tax on distributed proceeds from activities allowed within a Free Industrial Zone.
Virtual Zone Person. Virtual Zone Person status for tax purposes may be granted to a company engaged in information technology activities. Virtual Zone Persons are exempt from corporate income tax on distributions of profits derived from the supply of selfproduced information technology outside Georgia.
Tourist Enterprise. Tourist Enterprise status for tax purposes may be granted to a company that builds a hotel for the purpose of the sale and leaseback of the assets, or part of the assets, of the hotel and uses the building in hotel operations. Distribution of profit derived from the rendering of hotel services and the incurrence of expenses in the course of such activity by tourist enterprises are exempt from corporate income tax until 1 January 2026.
Agricultural Cooperative. Agricultural Cooperative status for tax purposes may be granted to a company in accordance with the Law of Georgia on “Agricultural Cooperative.” Agricultural Cooperatives are exempt from corporate income tax on distributed profits derived from the initial supply of agricultural products produced in Georgia before industrial processing of the products (that is, a change of commodity code occurs) until 1 January 2026.
Investment Fund. An Investment Fund is an enterprise established in the form of a joint investment fund or investment company in accordance with the Law of Georgia on Investment Funds.
Profits distributed, expenses incurred and other payments not related to economic activity, free-of-charge supplies of goods or services or transfers of funds and representative expenses exceeding set statutory limits by the joint investment fund within the framework of the activities defined by the Law of Georgia on Investment Funds are not subject to corporate income tax.
Expenses incurred and other payments not related to economic activity, free-of-charge supplies of goods or services or transfers of funds and representative expenses exceeding set statutory limits by an investment company within the framework of the activities defined by the Law of Georgia on Investment Funds are not subject to corporate income tax.
If the recipient of a dividend is a nonresident or a natural person and if the investment company invests only in bank deposits and/ or financial instruments, except in the case of distributions of profits received from resident enterprises, distributions of profits by an investment company are taxed at 5%; otherwise, the rate is 15%; that is, the 15% rate applies when the investment company distributes the profit to a nonresident or a natural person, unless the investment company invests only in bank deposits and/or financial instruments.
Distributions of profits by an investment company to a nonresident or a natural person are exempt from corporate income tax if the profits meet any of the following conditions:
• They are not paid out of Georgian-source income.
• They are paid out of income of a resident legal person from the supply of equity securities issued through a public offering in Georgia and admitted for trading on an organized market recognized by the National Bank of Georgia (NBG).
• They are paid out of income derived by a resident legal person from the sale of loan securities issued through a public offering in Georgia and admitted for trading on an organized market recognized by the NBG.
• They are paid out of surplus derived from the sale of loan securities issued by the government of Georgia or international financial institutions or are paid out of income received as interest from these securities or deposits placed in commercial banks.
Capital gains. No separate capital gains tax is imposed in Georgia. Capital gains derived by resident companies and permanent establishments of nonresident companies are not subject to corporate income tax until they are distributed.
Nature of tax
Property tax; on the average annual net book value of fixed assets 1
Property tax for leasing companies on leased assets 0.6
Georgia also imposes import and excise taxes.
E. Miscellaneous matters
Foreign-exchange controls. The Georgian currency is the lari (GEL). The lari is a non-convertible currency outside Georgia. Enterprises may buy or sell foreign currencies through authorized banks or foreign-exchange offices in Georgia.
Georgia does not impose restrictive currency-control regulations. Enterprises may open bank accounts abroad without any restriction if they declare such accounts (other than deposit accounts) with the GTA within five working days after opening such accounts. In general, all transactions performed in Georgia must be conducted in lari. Transactions with nonresident entities can be conducted in other currencies.
Transfer pricing. Under the transfer-pricing (TP) rules set by the TCG, the arm’s-length principle applies to transactions carried out by taxpayers with related parties. The TP rules generally apply to cross-border transactions between related parties. These rules may also apply to transactions between a Georgian resident entity and an unrelated foreign entity that is a resident of a low-tax jurisdiction and transactions between a Georgian company and its permanent establishment.
The generally accepted transfer-pricing methods include the following:
• Comparable uncontrolled price method
• Resale price method
• Cost-plus method
• Net profit margin method
• Profit split method
The Minister of Finance of Georgia is authorized to provide detailed descriptions of TP methods, their application rules and other procedural rules.
In 2013, the Minister of Finance of Georgia enforced the Instruction “On Pricing International Controlled Transactions,” which is in accordance with the TCG provisions. The Instruction covers the following items:
• Scope of transactions subject to Georgian transfer-pricing rules
• Acceptable transfer-pricing methods
• Comparability criteria
• Information sources
• Arm’s-length range
• Procedure for advance pricing agreements
• Transfer-pricing documentation requirements
• Other procedural issues
It also outlines required actions for companies doing business in Georgia.
Thin capitalization. The thin-capitalization rules were abolished, effective from 1 January 2017.
F. Treaty withholding tax rates
Georgia has entered into tax treaties with 58 jurisdictions. The table below lists the withholding tax rates under these treaties. In general, if the withholding tax rate provided in a treaty exceeds the rate provided by the TCG, the latter rate applies.
(a) The 5% rate applies if the actual recipient of the dividends is a company (other than a partnership) that holds directly at least a 25% share in the capital of the payer of the dividends. The 10% rate applies in all other cases.
(b) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly or indirectly at least 10% of the capital of the payer of the dividends. The 10% rate applies in all other cases.
(c) The 5% rate applies if the beneficial owner of the dividends is a company that holds at least 25% of the capital of the payer of the dividends. The 15% rate applies in all other cases.
(d) The 0% rate applies if the recipient is the beneficial owner of interest on a commercial debt-claim, including a debt-claim represented by commercial paper, resulting from deferred payments for goods, merchandise or services supplied by an enterprise or if the recipient is the beneficial owner of interest on a loan of any nature that is not represented by a bearer instrument and that is granted by a banking enterprise. The 10% rate applies in all other cases.
(e) The 5% rate applies if the beneficial owner of the royalties is a company. The 10% rate applies in all other cases.
(f) The 5% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 25% of the capital of the payer of the dividends. The 10% rate applies in all other cases.
(g) The 0% rate applies if the recipient is the beneficial owner of interest on credit sales of industrial, commercial or scientific equipment. The 8% rate applies in all other cases.
(h) The 0% rate applies if the recipient is the beneficial owner of royalties paid for the use of, or the right to use, copyrights of literary, artistic or scientific works, except for computer software and including cinematographic films, and films or tapes for television or radio broadcasting. The 5% rate applies if the recipient is the beneficial owner of royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment. The 10% rate applies if the recipient is the beneficial owner of royalties paid for the use of, or the right to use, patents, trademarks, designs or models, planes, secret formulas or processes, computer software or information concerning industrial, commercial or scientific experience.
(i) The 0% rate applies if either of the following circumstances exists:
• The actual recipient of the dividends is a company that holds directly or indirectly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than EUR2 million (or the equivalent amount in Danish krone or Georgian lari).
• The beneficial owner of the dividends is the other contracting state or the central bank of that other state, any national agency or any other agency (including a financial institution) owned or controlled by the government of the other contracting state.
The 5% rate applies if the actual recipient is a company that holds directly or indirectly at least 10% of the capital of the payer of the dividends and that has invested in the payer more than EUR100,000 (or the equivalent amount in Danish krone or Georgian lari). The 10% rate applies in all other cases.
(j) The 0% rate applies if the actual recipient of the dividends is a company (other than a partnership) that holds directly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than EUR2 million (or the equivalent amount in Georgian lari). The 5% rate applies if the
actual recipient is a company (other than a partnership) that holds directly at least 10% of the capital of the payer of the dividends and that has invested in the payer more than EUR100,000 (or the equivalent amount in Georgian lari). The 10% rate applies in all other cases.
(k) The 0% rate applies if the actual recipient of the dividends is a company that holds directly or indirectly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than EUR3 million (or the equivalent amount in Georgian lari). The 5% rate applies if the actual recipient is a company that holds directly or indirectly at least 10% of the capital of the payer of the dividends and that has invested in the payer more than EUR100,000 (or the equivalent amount in Georgian lari). The 10% rate applies in all other cases.
(l) The 0% rate applies if the actual recipient of the dividends is a company (other than a partnership) that holds directly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than EUR3 million (or the equivalent amount in any currency). The 5% rate applies if the actual recipient is a company (other than a partnership) that holds directly at least 10% of the capital of the payer of the dividends and that has invested in the payer more than EUR100,000 (or the equivalent amount in any currency). The 10% rate applies in all other cases.
(m) The 5% rate applies if the beneficial owner of the royalties is a resident of the other contracting state and receives royalties for the use of, or the right to use, industrial, commercial or scientific equipment. The 8% rate applies in all other cases.
(n) The 5% rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends. The 10% rate applies in all other cases.
(o) The 5% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 25% of the capital of the payer of the dividends and that has invested in the payer at least EUR75,000. The 15% rate applies in all other cases.
(p) The 0% rate applies if the actual recipient of the dividends is a company that holds directly or indirectly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than EUR2 million (or the equivalent amount in Georgian lari). The 5% rate applies if the actual recipient is a company that holds directly or indirectly at least 10% of the capital of the payer of the dividends and that has invested in the payer more than EUR100,000 (or the equivalent amount in Georgian lari). The 10% rate applies in all other cases.
(q) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly or indirectly at least 50% of the capital of the payer of the dividends and that has invested in the payer more than USD2 million (or the equivalent amount in euros or Georgian lari). The 5% rate applies if the recipient is a company that holds at least 10% of the capital of the payer of the dividends. The 15% rate applies in all other cases.
(r) The 0% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends. The 10% rate applies in all other cases.
(s) In general, the 0% rate applies if the beneficial owner of the dividends is a resident of the other contracting state. However, if the beneficial owner of the dividends is a pension scheme and if dividends are paid out of income derived directly or indirectly from immovable property within the meaning of Article 6 of the treaty by an investment vehicle that distributes most of this income annually and whose income from such immovable property is exempt from tax, the 15% rate applies.
(t) The 5% rate applies if the actual recipient of the dividends is a company (other than a partnership) that holds directly at least 25% of the capital of the payer of the dividends. The 15% rate applies in all other cases.
(u) The 0% rate applies if the beneficial owner of the dividends is a company (other than a partnership that is not liable to tax) that has held directly at least 25% of the capital of the company paying the dividends for an uninterrupted period of at least 12 months before the decision to distribute the dividends. The 5% rate applies in all other cases.
(v) The 5% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends. The 10% rate applies in all other cases.
(w) The 0% rate applies if the beneficial owner of the dividends is any of the following:
• A company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends
• The other contracting state or the central bank of the other contracting state
• A pension fund or other similar institution providing pension schemes in which individuals may participate to secure retirement benefits if such pension fund or other similar institution is established and recognized for tax purposes in accordance with the laws of the other state
The 5% rate applies in all other cases.
(x) The 0% rate applies if the beneficial owner of the dividends is a company that has invested in the payer more than USD3 million (or the equivalent amount in Georgian lari). The 5% rate applies in all other cases.
(y) The 0% rate applies to pension funds and recipients of interest on corporate bonds traded on a stock exchange in the other state and issued by a company that is a resident of that state. The 5% rate applies in all other cases.
(z) The 5% rate applies if the beneficial owner of the dividends is a resident of the other contracting state. The 10% rate applies if dividends are deductible in computing the taxable income of the company paying the dividends.
(aa) The 0% rate applies if the beneficial owner of the dividends is a company (or partnership) that holds at least 10% of the capital or the voting power of the company paying the dividends. The 10% rate applies in all other cases.