May 20th 2023

Located in the Caucasus region, Georgia serves as a strategic crossroad connecting Europe and Asia. The country presents a range of advantageous tax incentives to businesses operating within its borders. Alongside benefits like Free Industrial Zones, Virtual Zone persons, International Finance Companies, and Tourist Enterprises, Georgia also boasts remarkably low tax rates. This article provides a concise overview of the tax rates in Georgia.

In Georgia, a flat rate tax system is in place. This means that the tax rate remains constant irrespective of the taxpayer's income level, applying uniformly to all individuals and entities subject to a particular tax.

The development The Corporate Income Tax (CIT) rate in Georgia is set at 15%. It is important to note that Georgia follows the Estonian CIT model, which means that this tax is only levied when a company distributes dividends. In other words, companies in Georgia are not required to pay corporate income tax until profits are distributed to shareholders, with a few exceptions when certain transactions are considered as profit distribution. If a company decides to reinvest its profits, no CIT is imposed on the reinvested amount.

Furthermore, it is worth mentioning that there is no specific tax on capital gains in Georgia. Instead, capital gains are subject to the general CIT regulations, and the 15% tax is applicable only after the distribution of such profits.

In Georgia, the personal income tax is only applicable to income received from sources within the country. However, Georgian resident natural persons are fully exempt from personal income tax on income earned from non-Georgian sources. The specific criteria for determining whether an income should be considered as sourced from Georgia are described in Article 104 of the Georgian tax code.

For individuals who rent out residential properties solely used for living purposes, a special tax rate of 5% applies. To qualify for this reduced tax rate, the individual must submit an application to the Georgian tax administration, requesting the right to be taxed at the lower rate. It is possible to submit this application without registering as a taxpayer if the rent payer is already a registered taxpayer. In such cases, 5% of the rental income will be withheld at the source.

Additionally, any surplus income obtained by a natural person from selling a residential property and its attached land, or from selling a car, is subject to a 5% tax.

• VAT 18%
• VAT reverse charges 18%

VAT is payable only on business activities conducted at the territory of Georgia, however please note that the destination principle differs from EU.

• Royalties - 5% (applicable for payment to both residents and non-residents)
• Interests - 5% (applicable for payment to both residents and non-residents)
• Dividends - 5% (applicable for payment to both residents and non-residents)
• Service Payments - 20% (applicable for payment to residents non-registered natural persons)
• Service Remunerations to Non-Residents - 10% (except rental by non-resident f/ non-living purpose - 20%)

Please note when a Georgian taxpayer pays for services, royalty, or interest to a tax-haven based person, a 15% withholding tax rate is applied instead!

In addition, Georgia has signed the double taxation treaty with 56 states so far and most of them exempt the Georgian taxpayers from withholding tax obligation on the above-mentioned payments.

Georgia has signed the double taxation treaty with more than 50 countries, where most exempt Georgian taxpayers from withholding tax obligation on above-mentioned payments.