Georgia has undergone a corporate income tax (CIT) reform which resulted in the adoption of amendments to the tax code in May 2016, effectively changing the corporate profit tax regulations to the "tax on distributed profits" regime, simplifying the tax administration and introducing a number of other novelties.
In particular, the amendments abolished the taxation of corporate income at the moment of earning the profit and, instead, introduced the taxation of profit at the moment of its distribution. The amendments will become effective as of January 1 2017 and will apply to the Georgian legal entities and permanent establishments (PEs) of non-resident entities.
Income which is subject to taxation under new rules includes the distributed profit to shareholders in monetary and non-monetary form (with certain exceptions), expenses and other payments which do not relate to economic activities, representative expenses, free of charge supply of goods and services or transfer of funds. The tax code defines the lists of transactions and expenses which fall under each of the above mentioned category of objects of taxation. The corporate profit tax rate will remain unchanged at 15%, however, the amendments envisage a new methodology of determining tax base by means of dividing the amount of distributed profit by 0.85. The new CIT rules (which will not apply to banks and certain non-banking financial organisations until January 1 2019) also abolish thin capitalisation rules and tax depreciation charges for the Georgian legal entities and PEs of non – residents as of January 1 2017.
In addition, the amendments to the tax code envisage the simplification of tax accounting and administration, in particular, among others:
It is expected that the CIT reform will lead to economic growth and effectiveness, reduction of restrictions of external financing, increase of businesses' assets liquidity, ease of access to financing, creation of a good climate for startups, as well as increased attractiveness for foreign investors.
Anna Pushkaryova (email@example.com), country director, Eurofast Global Georgia
|Corporate Income Tax||15%|
|Capital Gains Tax||15%|
|Permanent representation tax rate||15%|
|Net Operating Losses (years)|
|Income from international transportation and telecoms services||10%||A|
|Income from oil and gas operations||4%||A|
|Royalties from, for example, patents, know-how||5%||A|
|Branch Remittance Tax||0%|
A These withholding tax apply to foreign companies.