October 30, 2024
In July 2019, the Georgian government amended the Tax Code to provide specific tax benefits in Georgia for international companies.
On 8 October 2020, the Government of Georgia introduced Ordinance N 619 (the Ordinance) that sets out the procedure to obtain the status of an international company, determines permitted activities that the international company can carry out, and provides the list of expenses spending of which spending may reduce the payable corporate income tax.
This note sets out the main tax benefits in Georgia offered under the Tax Code to international companies, explains the general requirements relating to services that the international company has to perform, and describes the procedure that applies to the acquisition of this status by the enterprises.
Since January 2017, Georgia has exempted retained or reinvested profits from corporate income tax, following the adoption of a taxation model similar to Estonia’s. Accordingly, corporate income tax applies only to distributed profits.
Taxation Benefits for International Companies
There are several benefits that international companies enjoy in Georgia in terms of taxation:
- International companies pay only 5% income tax on employee salaries, down from the standard 20%.
- Corporate income tax on distributed profits drops from 15% to 5%.
- Dividends distributed by international companies are exempt from the 5% withholding tax and do not need to be included in the gross income of the recipient.
- Property tax exemptions apply to property (excluding land) if it is used for activities permitted under the Ordinance.
Additionally, the international company may reduce its payable corporate income tax by the amount it spends on:
- Paying salaries to Georgian citizen employees, or
- Engaging in scientific research and development projects.
These incentives reflect Georgia’s broader strategy to attract international businesses. Learn how similar tax benefits apply to the online gambling sector in Georgia here.
Permitted Activities for the International Company in Georgia
According to the Ordinance, a company that wishes to enjoy international company status must conduct only those activities explicitly listed in the regulation. These permitted activities fall into two broad categories:
- IT services such as software development, computer programming, digital product supply, software maintenance, web design, and web hosting.
- Commercial and technical services related to ship management and maritime operations, including those specifically defined in the BIMCO Ship Management Agreement 2009 (ShipMan 2009), such as ship operation, crewing, maintenance, and related support services.
A company may receive income from non-permitted activities only if that income accounts for no more than 2% of its total annual income. Exceeding this threshold may result in the revocation of international company status.
Requirements and Procedure for Obtaining International Company Status
A Georgian enterprise qualifies as an international company only when it engages exclusively in the activities listed in the Ordinance and earns income solely from them.
The enterprise qualifies when it incorporates in Georgia and either itself or any shareholder holding over 50% of its shares has at least two years of experience in the relevant field. This also applies to a representative office of a foreign company.
The enterprise must conduct its business activities within Georgia, have appropriately qualified human resources, and make the necessary operational expenditures to support those activities.
Application Process for International Company Status
To apply, the company must submit a formal request to the LEPL Revenue Service of the Ministry of Finance of Georgia. You can find the official application page here.
Applicants can apply electronically and must include the following information:
- Company registration details
- Legal and factual address
- List of permitted activities being carried out
- Location where services are rendered
- Date and applicant’s signature
The applicant should also provide supporting documentation proving experience in the specified activities. While the Ordinance does not specify which documents are required, these will be evaluated on a case-by-case basis.
Review and Decision-Making Process
According to the law, once submitted, the Revenue Service reviews the application within 10 days. If the submission is complete and compliant, the Revenue Service forwards the documents to the Ministry of Finance, which then refers them to the Government of Georgia for a final decision. However, in practice, the review of the application takes longer, as it usually involves a few rounds of questions from the Revenue Service and possibly a meeting with the representatives of the Georgian tax authorities. This shows that the Revenue Service investigates the activities of the applicants rather thoroughly.
Let’s Talk Business in Georgia
Thinking about relocating your business or launching an IT or maritime service operation in Georgia? We’d love to hear from you! Whether you have questions about eligibility, need help navigating the application process, or just want to explore your options, contact us at info@ge.andersen.com