Georgia

Tax residency – A company is tax resident in Georgia if it is incorporated under Georgian laws or otherwise, its place of effective management is in Georgia.

Basis – Corporate income tax is levied on worldwide income.

Tax rate – Georgia levies a 15% corporate tax on dividends distributed. Profits retained in an LLC are not subject to taxation.

Capital gains – Capital gains are treated as ordinary income and taxed when distributed to shareholders.

Dividends – Dividends received by resident entities are not subject to taxation.

Interests – Interests received that were taxed at source are entitled to a credit on tax paid. Other interest income is subject to tax when distributed in the form of dividends.

Royalties – Royalties are subject to corporate tax upon distribution in the form of dividends.

Withholding Taxes – Dividends paid to non-residents are subject to a 5% withholding tax unless a tax treaty provides a reduced rate. Withholding tax rate on dividends could be increased to 15% if are paid to a resident of a low tax jurisdiction. Interests paid abroad are subject to a 5% withholding tax, unless the rate is reduced under a tax treaty. If interest is paid to a low tax jurisdiction, the tax rate is increased to 15%. Royalties paid to non-residents are also subject to a 5% withholding tax. Those paid to resident individuals are taxed at 20%, and those paid to a company resident of a low tax jurisdiction are taxed at 15%. Technical service fees paid to non-residents are subject to a 10% withholding tax, 15% to residents of low tax jurisdictions.

Foreign-source income – Foreign-source income is generally subject to corporate income tax when it is distributed in the form of dividends. Taxes withheld abroad can be offset against the corporate income tax.

Labor taxes – There are no social security contributions in Georgia.

Losses – Losses may be carried forward 5 years, or 10 years in certain cases. Carryback of losses is not allowed.

Inventory – Companies are entitled to record the cost of inventory using the individual accounting method, the averagely weighted cost method, or first in first out (FIFO).

Anti-avoidance rules – Transfer pricing legislation is applicable to all types of transactions between related persons, whether resident or non-resident, which must be conducted at arm’s length according to the OECD’s principles and supported by relevant documentation.

There are no thin capitalization and controlled foreign company rules.

Tax credits and incentives – A corporate income tax exemption may be available for income of budgetary, international, and charitable organizations, profits received from financial services conducted by international financial companies and gains on sales of securities issued by international financial companies.

Enterprises located in free industrial zones are exempt from corporate income tax, customs duties, V.A.T., property taxes and personal income tax (employees). A Free Industrial Zone enterprise is subject to a 4% tax on the market price of the goods supplied/received to/from a Georgian resident other than other Free Industrial Zone enterprise.

Personal income tax – Tax residents in Georgia are those who reside for at least 183 days in Georgian territory.

Tax residents are only taxed on their Georgian-source income. This means that income earned abroad is not subject to Georgian taxation.

The flat tax rate is 20%, although dividend, interest income is taxed at a 5% final withholding tax on source and not included in personal tax base.

Rental income from residential properties are also subject to a reduced 5% tax rate, provided that no deductions are taken from this income.

Capital Gains are usually subject to income standard tax rate, but an exemption may apply from gains on the sale of real property, if it has been held at least two years. Gains on the sale of a residential property with an attached land plot is subject to a reduced tax rate of 5%.

Other taxes – There is a real property tax for individuals ranging from 0.8% to 1% on the property market value. However, households with annual income below GEL 40,000 are exempted and those with annual income between GEL 40,000 and GEL 100,000 are subject to a reduced tax rate ranging from 0.05% and 0.2% on the property market value.

Property tax for companies is 1% on the annual average residual value of fixed assets (except for land) and investment property.

There is an annual land tax which varies according to the administrative unit, the type of land (agricultural or non-agricultural) and its land quality. 

In Georgia, there are no net wealth, inheritance or transfer taxes. Gifts of certain value may be subject to taxation.

V.A.T. standard rate is 18%. Certain goods and services transactions are tax exempt.