To successfully run your business, you need to be well versed in Georgian taxation and fill out the declarations correctly. The entire area of taxation is controlled by the Tax Code and regulated by legislative acts.
BASIC TAXES OF GEORGIA
At the moment, there are 8 types of basic mandatory payments in the country:
- value added tax – 18%;
- corporate income tax – 15%;
- dividends – 5%;
- income tax – 20%;
- import tax – 0% or 5% or 12%;
- tax at source – from 10 to 15%;
- on property – up to 1%;
- excise tax – not a fixed amount.
All of these types of taxes are regulated by the state, except for property tax, which is also regulated by the state, but it must be paid to the local budget of the region. This approach to payments allows residents and non-residents to form a profitable business in Georgia.
The Government Committee of Georgia made a decision to create Free Industrial and Virtual Zones – absolutely legal systems of preferential taxation, for which there are separate mechanisms for paying taxes, which you can read in more detail here.
VALUE ADDED TAX
After the formation of modern taxation, VAT in Georgia has not undergone any significant changes. The collection rate has been and remains at 18% for over 13 years. To understand how VAT is calculated in Georgia, you need to study the current code in more detail. It is especially important to know which goods and services are not subject to VAT. You can read more in this article.
CORPORATE INCOME TAX
Taxable profits of a business are taxed at a rate of 15 percent. If the profit is withdrawn to the personal account of the founder of the company, at the same time there is an obligation to pay tax on distributed dividends in the amount of 5%.
In accordance with the amendments to the Tax Code of Georgia, if the founders reinvest profits, then they are exempt from this tax, that is, if, for example, at the beginning of the journey you do not withdraw dividends, but send funds to develop your business, you do not pay any monthly taxes.
It is 5% and is calculated according to the Estonian accrual model. His company pays (ShPS, LLC, JSC). The payment is collected simultaneously with income tax when the company withdraws the profit to the personal account of the beneficiary (founder, co-founder of the company). When the profit is withdrawn, 15% of the withdrawn amount is paid first, and the dividend from the interest paid is 5%. The dividend tax is subject to a monthly declaration. A company, not an individual, acts as a tax agent.
To summarize, taking profit from the company, you are obliged to pay two taxes on its behalf at the same time – on profit and on dividends. If you leave funds in the company’s account, invest them in development – there are no mandatory payments.
CALCULATION ON EXAMPLE OF 1000 GEL
Calculation based on the example of 1000 GEL:
1000 / 0.85 = 1176.47 withdrawn profit
1176.47 / 0.95 = 1238.39 withdrew dividends
Total 238.39 payable to the budget,
1238.39 * 15% = 185.76 income tax,
238.39-185.76 = 52.63 dividend tax
INCOME TAX FOR INDIVIDUALS IN GEORGIA
Income tax in Georgia is 20% on the accrued amount. The tax is the same both for citizens of other countries who receive salaries from a Georgian company – for example, expats with the status of a tax resident of the country and for citizens of Georgia. At the same time, there are no social payments, and the pension contribution is only 4% and is paid only in case of remuneration of the citizens of Georgia.
It is important to understand that this tax is also calculated according to the Estonian accrual system, for example, paying GEL 1000 as a salary, the tax amount will be GEL 250 (according to the formula 1000 * 1.25). That is, the actual tax burden is 25%.
TAX AT SOURCE
Income received by a non-resident from a source other than a permanent establishment is subject to tax at the source of payment without tax deductions at the following rates:
• royalties – 5%;
• for services of international communication, telecommunications, and international transport – 10%;
• income from transactions with oil and gas – 4%;
• for all other payments (marketing, etc.) – 10%;
• when paying offshore – 15%.
Let’s give a simple example:
Suppose your Georgian company has a contract with a Russian company to provide services. All payments to a Russian company are subject to withholding tax at source of 10%. It is worth considering this important aspect when calculating the marginality of entrepreneurial activity.
In terms of taxes in Georgia, it is imperative to know that the country has concluded a number of agreements to avoid double taxation with more than 50 countries. That is, for a number of taxes, upon receipt of appropriate confirmation of their payment in such a country, the tax base of a Georgian company will be equal to 0.
Contact Jara Accounting specialists who not only know all the intricacies of tax legislation, but also know the requirements of the tax office for the relevant documentation, which allows you to absolutely legally reduce the tax burden of your business.
If you still have questions regarding taxes in Georgia, then fill out the form below to get a free consultation.
COST OF TAX CALCULATION SERVICE IN GEORGIA
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