Georgian tax legislation offers significant tax incentives to Georgian and foreign companies operating in the information technology and maritime sectors. To benefit from the preferential taxation regime, a company must have been granted the status of an international company.
In this article, you will learn about the rules and principles of preferential taxation related to granting international company status. You will also learn what specific benefits and restrictions apply to you during the period of operating as an international company.
How and to whom can the status of an international company be granted?
To obtain the status of an international company, an interested person must apply to the Revenue Service in the form established by the Minister of Finance of Georgia (in writing or electronically).
For a detailed view of the application form, see the link ; “On Tax Administration” Appendix No. VII 4 -01 to the Order No. 996 of the Minister of Finance of Georgia.
International company status may be granted to:
a) A Georgian enterprise that has at least 2 years of experience in carrying out the activities specified by the resolution of the Government of Georgia, for which it applies to the Revenue Service for the purpose of granting the status, and receives income only from these activities.
The procedure for granting and revoking the status of an international company for a Georgian enterprise, as well as permitted activities, are defined in accordance with “Appendix No. 1” and “Appendix No. 2” of Resolution No. 619 of the Government of Georgia (for detailed information, see the link ).
b) In addition to the above, the status of an international company may be granted to a Georgian enterprise that is a representative of a non-resident enterprise in Georgia, if this non-resident enterprise has at least 2 years of experience in the permitted activity that the Georgian enterprise carries out and for which it applies to the tax authority for the purpose of granting the status.
c) Also, a Georgian enterprise may benefit from the status of an international company if its partner enterprises, which hold more than 50% of the shares, independently (each partner separately) have at least 2 years of experience in the permitted activity that the Georgian enterprise carries out and to which it applies for the purpose of granting the status.
Can a Georgian enterprise benefit from the 2 years of experience of a partner individual when granting international company status?
– No, because the exemption specified by the government decree for a partner’s 2 years of experience applies only to enterprises.
Enterprises interested in obtaining international company status face the question: is it possible to earn income from activities other than permitted ones?
– Yes, it is possible, but with certain restrictions. In particular, a person with the status of an international company is also entitled to receive only income from permitted activities, if during the calendar year the total income of this type (excluding VAT) does not exceed 2% of the income received by the person with the status of an international company from such permitted activities.
For detailed information on the procedure for granting and revoking the status of an international company for a Georgian enterprise, see Link
What benefits does an international company enjoy?
- Income earned from working for an international company is taxed at 5 percent.
- Dividends issued by an international company are not taxed at source and are not included in the gross income of the person receiving the dividend.
- The object of taxation of an international company’s profit tax is determined in accordance with Part 1 of Article 97 of this Code, however, instead of 15%, the company’s profit tax rate is 5%.
- The amount subject to corporate income tax for an international company is obtained by dividing the amount of income/expenses incurred by the taxable entity by 0.95.
- An international company is exempt from property tax (except for land) if this property is intended or used for carrying out activities permitted by a resolution of the Government of Georgia.
- In the event of incurring expenses in Georgia as determined by a resolution of the Government of Georgia, an international company has the right to reduce the amount subject to corporate income tax by the amount of such expenses.
Which expenses can reduce taxable profit?
– Expenses for wages paid to a resident Georgian citizen employed by a person with the status of an international company
– Expenses for scientific research, design and testing services in the field of activity(ies) permitted for an international company.
What restrictions does a Georgian enterprise with international company status have?
– The status of an international company may be granted to a Georgian resident enterprise.
– An enterprise that wishes to be granted the status of an international company must carry out activities permitted under the status in Georgia.
– An international company cannot be established in a free industrial zone.
– Carrying out activities that are not defined by a resolution of the Government of Georgia shall result in the cancellation of the status of an international company from January 1 of the year in which such activities commence.
– If the status of an international company has been granted to a virtual zone entity defined by the Tax Code of Georgia, in such a case, the status of a virtual zone entity shall be revoked.
For consultation on issues related to the status of an international company and the benefits associated with this taxation regime, please visit the link
