Despite the global pandemic, the Georgian government is trying to make the business environment in the country attractive to investors. Considering all the challenges this year, the atmosphere for business looks stable thanks to preferential tax systems, which is a clear incentive for foreign companies to move to this country. Georgia is attracting more and more attention from the international business community as it is becoming a profitable investment destination with low taxes and simple registration rules.
Georgia does offer many tax incentives for legal entities, for example, a special corporate income tax regime, according to which tax is paid only on dividend distribution. You can read more about all previously introduced business benefits in Georgia in our article.
New tax incentives in Georgia
The establishment of incentives for international companies has become an additional motivation for companies to relocate their activities to Georgia. The new tax regime for international companies encourages multinational corporations to relocate their IT service centers to Georgia. Thanks to this, they not only save on taxes but can also count on reducing labor costs. The second type of company to which the new benefits are applicable is shipping companies.
One of the main conditions for obtaining the status of an international company and, therefore, receiving tax benefits is that the applicant has at least two years of work experience. In addition, it is necessary to demonstrate the existence of the actual presence of the business in Georgia (expenses incurred in Georgia, the presence of hired personnel in the country, etc.).
A Georgian resident company, which is subject to income tax (in accordance with Part 1 of Article 97 of the Tax Code of Georgia), can calculate to receive the status of an international company. Also, the company must conduct permitted activities (the list of permitted activities is specified in government decree No. 619). Or at least two years of experience in this area must be one of the partners of the company, who owns at least 50% of the share.
Information technology services must be provided to persons whose place of registration or place of management is outside Georgia. These services may include any of the following:
- Software release;
- The publication of computer games;
- Release of other software;
- Computer programming, consulting and related activities.
The following benefits will apply to these companies:
- The income tax rate of 5% (instead of 15%);
- Payroll tax will be set at the rate of 5% instead of 20%;
- In addition, the withholding tax on dividend payments will be 0% instead of 5%.
That is, in fact, international companies will pay only 5% of the withdrawn profit (do not forget that the Estonian model of capital reinvestment operates in Georgia, there is no mandatory monthly payment) and 5% when paying salaries, which significantly reduces the tax burden on business.
In addition, international companies in Georgia will be partially exempt from property tax and will be able to reduce the corporate income tax base.
How to get the status of an international company
It is necessary to write an application in an approved form to the tax service of the Ministry of Finance, 10 working days in the service consider the application, if the application meets the requirements, it is submitted to the government (the terms of consideration are not specified).
The company, which is affected by the new regulation, must fill out an application and bring it to the tax office. The application form consists of:
Registration data (name, form of incorporation, company code);Contact information (legal address, actual address, phone number, e-mail);List of activities;Director's signatures.
The final decision on the assignment of the status of an International Company of Georgia is made by the Government of Georgia, the register of such companies is maintained by the tax service.
If your company meets all of the above requirements, then Jara Accounting specialists will help you easily get the status of an international company and the relying benefits.