Many companies in Georgia use the services of non-residents and foreign companies. In this case, when working together, obligations to pay the tax deducted at source may arise. In this article, we will analyze in which cases you will have to pay this tax in Georgia.

How do you know that you have to pay the tax deducted at source

At the moment when you pay a non-resident for services, you become a source of income paid to a non-resident, but first, you need to understand where exactly a non-resident provides services to you on the territory of Georgia or abroad. Many people think that if a non-resident does not come to Georgia and provides services on the territory of their country, then the income is not received in Georgia. But in reality, this is not the case.

If the contract with a foreign service provider says that you are provided with marketing, advertising, consulting, engineering, or a non-resident is studying the market of Georgia, placing advertisements for Georgian users, doing some projects in Georgia, it means that he is receiving income on the territory of Georgia.
As you are the source of income payment, you will have to pay tax as well. If a non-resident provides you with management, financial, accounting, legal or consulting services, then it will definitely be considered as services provided on the territory of Georgia.

What is the source tax rate

Income received by a non-resident from a source that does not belong to a permanent establishment is taxed at the source of payment without tax deductions at such rates:

  • royalties – 5%;
  • for services of international communications, telecommunications and international transport – 10%;
  • income from transactions with oil and gas – 4%;
  • for all other payments (marketing, etc.) – 10%;
  • when paid to offshore – 15%.

What to do in contentious situations

Often, when considering a situation related to tax deducted at source, companies, auditors, and tax authorities have misunderstandings. Therefore, we recommend in case of a dispute to apply for a written explanation to the tax authorities.
In this case, if your counterparty is a tax resident of the country with which Georgia has a double taxation agreement, you can officially avoid paying this tax by providing a certified certificate of tax residence of the recipient of the payment to the tax office in electronic form in Georgian.
The full list of countries that have signed these agreements is available on the website of the Ministry of Finance of Georgia.

If you still have questions about the taxation of Georgia, then you can leave a request and get a free consultation.