A Georgian company is not taxed like its individual owner
Articles 22 and 27–28 connect enterprise status to place of business and/or management. The effective-management provisions expressly address a company actually managed by another enterprise or individual, including without a formal appointment. A foreign incorporation certificate does not settle what happens when its owner makes the decisions from Georgia.
An ordinary Georgian company uses the profit-distribution system under Articles 97–98. The individual exemption for foreign-source income in Article 82 cannot be copied to the company. Establish the actual management, functions and asset ownership before modeling profit tax or comparing a company with an individual entrepreneur.
The 15% charge and its gross-up
For the ordinary model, Article 97 includes distributed profit, expenditure unrelated to economic activity, specified gratuitous transfers and excess representation expenses. The taxable outflow is divided by 0.85 before the 15% rate is applied. Describing the system merely as no tax until a dividend can overlook transactions that trigger a charge without a formal dividend.
For a simple hypothetical company with GEL 100, 000 available before distribution tax, GEL 15, 000 corporate tax leaves GEL 85, 000 for a dividend. If the ordinary 5% dividend withholding applies with no relief, another GEL 4, 250 is withheld and the owner receives GEL 80, 750. This 19.25% combined illustration assumes no adjustments, special status or foreign owner tax; it is not a forecast for a particular structure.
Retaining profit and paying expenses are different events
Ordinary retained commercial earnings can defer profit tax under the distribution model, but owner spending, undocumented costs, nonbusiness transfers and connected-party transactions need classification. A bank balance retained inside the company is not a personal spending account. Make the contractual purpose and evidence of each material outflow clear.
Article 98² addresses expenses unrelated to economic activity and other specified payments; Article 98³ addresses gratuitous supplies. Representation expenses have a statutory limit under Article 98⁴. Keep invoices, business purpose, recipient details and any loan or capital records so the accountant can identify the correct trigger and any subsequent adjustment.
Some sectors do not use the ordinary model
Article 97(12) and Article 98 specify annual taxable-profit treatment and a 20% rate for banks, credit unions, microfinance organisations and loan providers. Other regulated activities, including gambling and historic oil/gas arrangements, have their own provisions. An industry label can therefore change both the tax base and rate.
Approved international-company, virtual-zone and free-industrial-zone treatments also require their actual activity, status and conditions to be established. This first guide does not publish a ready-to-use incentive quote for those schemes. A registered company with overseas customers is not automatically entitled to one of those approvals.
Foreign activities: residence, permanent establishment and relief
Article 29 describes a fixed place through which a foreign business operates and includes specific management and agency situations. A foreign business using personnel or an office in Georgia should review those facts even where it has no Georgian subsidiary. The relevant treaty, if any, can change the domestic result; treaty eligibility must be established.
For Georgian companies with foreign taxed profit, Article 124 allows credit within the applicable Georgian limitation, including the distribution-based model. Preserve which year and income generated the foreign tax and how it relates to a later dividend. A foreign tax payment is not automatically creditable without tracing the relevant profit.
Cross-border payment withholding
The ordinary nonresident baselines are 5% for dividends, 5% for covered interest and 5% for royalties. Articles 130–134 contain recipient, PE and exemption distinctions. The interest exemption for a licensed financial institution, for example, is different from paying interest to the overseas owner of a company.
Covered interest, royalty and certain other payments to preferential-tax-jurisdiction persons can instead attract 15%. Treaty relief requires its own analysis and evidence. Keep legal/beneficial recipient, residence, payment character, relationship and documentation in the payment file before funds are released. Do not substitute the 20% resident-individual royalty rule for the 5% nonresident baseline.
Transfer pricing and unverified anti-deferral fields
The international controlled-transaction rules in Articles 126–129 require arm’s-length analysis for their covered transactions. Identify who performs the functions, uses the assets and bears the relevant risks; retain the method and evidence supporting the consideration. Invoicing a connected foreign company does not by itself demonstrate market pricing.
A comprehensive CFC or corporate exit-tax classification has not been conclusively established here. The comparison data therefore marks those fields unresolved, rather than showing no rule. Actual management, PE, anti-avoidance and the rules of the shareholder’s other country remain relevant regardless of that unresolved classification.
VAT and the real supply chain
The standard rate is 18%. Ordinary compulsory registration is triggered when the relevant VAT-taxable supplies exceed GEL 100, 000 in any consecutive 12-calendar-month period, with a two-business-day application period. Exceptions and the correct transaction count matter. VAT on imports or reverse-charged services should not be ignored simply because domestic turnover is small.
Article 162¹ generally uses the taxable customer’s establishment for B 2 B services and the supplier’s establishment for B 2 C services, then lists exceptions such as property-related and electronically supplied services. Registered taxpayers generally file and pay monthly VAT by the following month’s 15 th under Articles 167–168. Maintain customer-status and location evidence along with the invoices.
Employee costs: who participates and where the cap applies
For employees participating in the funded-pension scheme, the employer contributes 2% of taxable salary in addition to the employee’s 2%. The statute’s personal scope includes Georgian citizens and foreign/stateless permanent residents; participation/age rules must also be assessed. Do not add this employer charge to every temporary foreign worker solely because the person has become tax resident.
The state-matching contribution stops above GEL 60, 000 annual income, but that is not a maximum employee/employer contribution base. A participating employee with GEL 100, 000 of salary has a GEL 2, 000 employer contribution under the stated 2% rule, before other compensation and employment costs. This illustration does not calculate net pay or override the applicable payroll base.
Employment rules matter beyond tax percentages
The Labour Code ordinarily limits standard work to 40 hours a week, with a specific 48-hour category for listed continuous-operation industries. It provides at least 24 working days of annual paid leave. Contracts, working-time records, overtime, rest, termination grounds and unused-leave obligations therefore belong in the employment budget.
The Labour Migration Law adds requirements for covered foreign employment and self-employment. Its 2026 scope exceptions include certain work/services for nonresidents connected with activities outside Georgia and valid investment-residence holders. Those exceptions need precise factual matching; a tax registration is not itself a work-permission decision.
Keep the company and owner implementation files connected
The operating file should contain the ownership and management map, registry documents, contracts, accounts, VAT analysis, payroll status and distribution/withholding records. Assign responsibility for each return and notification. Preserve records supporting why a transfer is a business cost, a loan, a contribution or a distribution.
Before funding the structure, compare an individual entrepreneur, an ordinary company and any specifically approved regime using the actual business. We can coordinate that analysis with company formation, banking and local implementation; independent management services, where needed, are supplied by external providers rather than Offshore Capitalist itself.
Sources & research notes4 references
Sources supporting this guide. Research draft awaiting editorial review.
- Matsne — Tax Code, English consolidation 25 June–30 September 2026; September amendment separately reconciled
- Matsne — Funded Pension Law, current edition including 16 September 2026 amendment
- Matsne — Labour Code, current consolidated edition
- Matsne — Labour Migration Law, current consolidated edition including 2026 exceptions