Withholding tax in Georgia is a core element of the Georgian tax system and plays a central role in ensuring efficient tax collection at the source of payment. Under the Tax Code of Georgia, withholding tax arises when an obligation exists to withhold tax at the moment income is paid. This mechanism applies to a wide range of payments and is designed to secure compliance for both resident and nonresident income recipients.
Understanding withholding tax in Georgia is essential for businesses operating in Georgia, as tax rates and obligations vary depending on the nature of the payment and the tax residency status of the recipient.
Employment Income and Payments to Individuals
Salaries and other remuneration paid to individuals are subject to Georgia income tax through withholding at the source. An employer is required to withhold personal income tax at a 20% rate from payments made to an employed individual. This obligation applies regardless of the form of remuneration and represents a standard application of withholding tax in Georgia.
Although pension contributions are not considered a tax, the employer is additionally required to pay 2% of the gross salary at its own expense into the pension fund for the benefit of the employee, and also withhold another 2% from the employee’s salary.
The same tax withholding obligation applies when an individual entrepreneur or a legal entity pays service fees to a non-entrepreneurial individual. Furthermore, withholding tax Georgia obligations also arise when goods with a value exceeding GEL 1,000 are granted to a non-entrepreneurial individual free of charge.
Dividend Withholding Tax in Georgia
Dividends paid from Georgian companies are subject to withholding tax in Georgia at a standard rate of 5%, applicable to both residents and nonresidents. However, dividends paid to a Georgian resident commercial legal entity are exempt from taxation and are not included in the recipient’s gross income.
Interest Income and Withholding Tax
Interest paid to an individual or to a nonresident without a permanent establishment in Georgia is subject to withholding tax in Georgia at a 5% rate. This rule represents a standard approach to taxing passive income derived from Georgian sources.
Royalty Payments and Applicable Tax Rates
Royalty payments are also subject to withholding tax in Georgia, with rates depending on the residency status of the recipient. Royalties paid to a resident individual, except for individuals registered as VAT payers, are taxed at a 20% withholding rate.
Royalties paid to nonresidents benefit from a reduced 5% withholding tax rate in Georgia, making Georgia a competitive jurisdiction for cross-border licensing and intellectual property arrangements.
Double Tax Treaties and Dividend Tax Relief
Georgia has concluded double tax treaties with 58 countries. These agreements may allow dividends, interest, and royalties to be taxed at reduced rates or exempted entirely from withholding tax in Georgia, depending on the applicable treaty provisions. Such treaties play a significant role in cross-border investments and international profit distributions.
Other Payments from Georgian Sources
Other income paid from Georgian sources that does not fall within the categories of dividends, interest, or royalties (such as services rendered in the territory of Georgia) is generally subject to withholding tax in Georgia at a 10% rate. This provision ensures broad coverage of taxable payments within the Georgian tax framework.
Payments to Preferential Tax Jurisdictions
Special rules apply when interest, royalties, or other payments are made to persons registered in a country with preferential tax treatment (a.k.a. offshore countries). In such cases, instead of the standard rates, the income is subject to withholding tax in Georgia at a 15% rate.
A country with preferential tax treatment is defined as a country or territory where a legal entity is exempt from profit tax, where no profit tax is imposed on earned or distributed profits, or where the profit tax rate does not exceed 5%.
Withholding tax in Georgia is a fundamental component of the Georgian tax system, ensuring effective taxation of income at the source. The differentiated withholding tax rates in Georgia, combined with residency-based distinctions and Georgia double tax treaties, create a structured yet flexible framework for both domestic and cross-border payments.
For businesses and individuals alike, a clear understanding of the withholding tax rules in Georgia is essential for maintaining tax compliance and managing overall tax obligations in Georgia.
Disclaimer: This article is based on Georgian legislation and public information as of February 2026 and is intended for informational purposes only. It does not constitute legal or tax advice.