Business Taxes in Georgia

Corporate income tax (CIT) in Georgia, Tbilisi

Profit tax payer is:

• Resident enterprise;
• Non-resident enterprise carrying out the business in Georgia through permanent institution and/or receiving income from the source of Georgia.

Object of profit taxation

The object of profit taxation of a resident enterprise and of a non-resident enterprise conducting business in Georgia through a permanent establishment (on the basis of the activity of its permanent establishment, disbursements made/expenses paid by the non-resident enterprise, or the permanent establishment) shall be:

1. Distributed profit;
2. Costs incurred or other payments not related to economic activity;
3. Free delivery of goods/services and/or transfer of funds;
4. Representation expenses paid in excess of a limited amount determined under the tax code of Georgia.

Tax rate

The profit tax rate is 15%, but the amount subject to profit taxation shall be calculated by dividing the sum of a disbursement made/expense paid according to the object of taxation by 0.85.

VAT in Georgia

A value-added tax (VAT) known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. VAT is a consumption tax placed on a product/service whenever value is added at each stage of the supply chain, from production to the point of sale. VAT is an indirect tax, thus by and large end-users of good and services bear costs on it.

A payer of value-added tax shall be:

• A person registered as a VAT payer;
• A person required to be registered as a VAT payer;
• A person carrying out import or temporary admission of goods into Georgia, only with respect to such import or temporary admission, without the registration requirement;
• A qualifying Georgian tax agent may have to calculate and pay reverse-charge VAT when it purchases a service whose place of supply is Georgia from a foreign taxable supplier without a participating Georgian establishment. Import VAT and reverse-charge VAT can arise without ordinary VAT registration; the supplier’s nationality alone is not the test.
• A person who is engaged in economic activity and whose aggregate amount of VAT-taxable transactions carried out during any continuous 12 calendar months exceeds GEL 100 000) shall
• Apply to a tax authority for VAT registration within not later than two business days from the day when the aggregate amount of a taxable transaction exceeds GEL 100 000;
• Be regarded as a VAT payer from the moment of executing the taxable transaction (including this transaction), according to which the aggregate amount of the taxable transaction exceeds GEL 100 000.
• VAT taxable transactions are:
• Supply of goods by a taxable person in the territory of Georgia in exchange for remuneration within the framework of economic activity;
• To provide services by a taxable person in exchange for remuneration within the framework of economic activity on the territory of Georgia;
• Import of goods.
• Property tax in Georgia
• Property tax may be payable by Georgian and foreign enterprises on the property brought within the statutory taxable base. This is not limited to ownership of buildings: relevant fixed assets, uninstalled equipment, unfinished construction and leased property can also require review, with separate land tax rules. The tax arrangements in relation to property tax are defined in the following way:
• For the resident enterprise (a Georgian company or a branch/permanent establishment of a foreign entity) it is payable on assets, uninstalled equipment, unfinished construction registered on its balance sheet as fixed assets, and on its leased property; and for the non-resident (foreign) enterprise it is payable on property based in Georgia (including property that has been transferred under a lease, rental agreement, usufruct or any similar agreement).

The annual enterprise property tax rate is set by the municipality at up to 1% of the average annual net book value of the property recorded on the balance sheet of the company at the beginning and end of the calendar year. Enterprises (Georgian enterprises, branch offices, permanent establishments or foreign entities) also pay property tax on land. An enterprise normally files its property tax return and pays the relevant annual property tax by 1 April, reporting the previous year’s taxable property and the current year’s taxable land. Current property tax payments may also be due by 15 June, while land tax is generally payable by 15 November; exemptions and special calculation rules must be checked. The rates on land differ depending on whether the land is classified as agricultural or non-agricultural. The rates for agricultural land plots are defined by the respective local administrative territorial units. The rates for non-agricultural land depend on a specific formula; the tax must be calculated by multiplying the annual base tax rate (GEL0.24) by the territorial co-efficient and the land area. The differentiation of the land tax by territorial coefficient is made in accordance with the location and zones of the land plot.

Withholding Tax in Georgia

Withholding tax on various payables (for example, interest, royalties, dividends, and salaries/benefits of employees). The tax return must be filed by the 15th day of the month following the respective reporting month. Tax rates differ depending on the type of payable:

Income Tax rates

A natural person’s (regardless of his/her residence) taxable income shall be taxed at the rate of 20%, unless otherwise provided for by the Tax Code of Georgia.

Incomes subjecting to taxation at the source of payment are taxed:

• Salary – 20%
• Dividends – 5%
• Interest – generally 5% where the statutory withholding rule applies, subject to specific exemptions and any applicable tax treaty.
• Royalties to a resident natural person not registered for VAT – generally 20% withholding; qualifying payments to non-residents generally follow the separate 5% rule, subject to preferential-jurisdiction provisions and treaty relief.
• As a result of renting out the residential space to an organization, legal or a natural person for residential purposes – 5%
• Taxable gain from a natural person’s sale of a residential apartment or house with its attached land, or a vehicle – generally 5%, after reviewing any applicable ownership-period exemption and the correct filing deadline.

Dividends received in Georgia

Dividend exemptions depend on the payer, recipient, profit period and statutory conditions. Dividends from a Free Industrial Zone enterprise can be exempt under the specific Tax Code rule. Dividends received by a Georgian enterprise generally follow the enterprise dividend rules. Do not treat every financial institution or publicly traded company as an automatically exempt payer: current special provisions address, among other cases, qualifying distributions by financial institutions from profits earned in 2023 and later. The transaction and any applicable tax treaty should be checked before applying withholding relief.

Interest paid in Georgia

Interest paid to foreign corporate shareholders is withheld at source at a rate of 5%. This is if no relief is granted under a respective tax treaty. If payment is made to an offshore resident, the rate is 15%. Under the general interest withholding rule, a Georgian resident or a non-resident’s permanent establishment withholds 5% on qualifying interest paid to a natural person or a non-resident without a Georgian permanent establishment. Specific exemptions include qualifying interest from licensed financial institutions. The recipient categories below must be read with those rules:

• Individuals.
• Non-commercial legal entities only where a relevant interest tax rule actually applies; this is not a separate universal 5% category.
• Non-residents with no permanent establishment in Georgia.

Excise Tax in Georgia

This is payable by business vehicles producing excisable goods in Georgia, or importing excisable goods. For the excisable goods produced or manufactured in Georgia from raw materials supplied by customers, the producer of the goods is subject to excise tax. Excise tax is an indirect tax, and therefore any excise tax paid in connection with exported goods produced in Georgia can be refunded to the exporter. Excise tax is imposed on alcoholic products, cigarettes and other tobacco products, cars, natural gas, oils, oil distillates, and other products produced from oil and bituminous minerals. Alcoholic beverages and tobacco products are also subject to the mandatory attachment of excise stamps. Excise tax rates are fixed per physical unit of the excisable goods and vary from product to product. Taxpayers are required to file an excise tax return and pay the tax liability within 15 days after the end of the reporting period.

Georgian transfer pricing rules generally follow OECD transfer pricing principles and apply to cross-border transactions between a:

• Georgian company and related foreign company.
• Georgian resident company and an unrelated foreign company registered in a tax haven jurisdiction or offshore country.