Foreign tax credit
Income tax or profit tax paid on income earned from outside Georgia may be credited against CIT payable in Georgia. The amount of credited taxes may not exceed the Georgian tax payable on the foreign income. The rule is also applicable under the new CIT system on CIT due from dividend distribution.
The following are exempt from CIT (the list is not exhaustive):
- Expenses incurred by the budgetary, international, and charitable organisations related to the objectives of their organisational activities.
- Distribution of profit earned by an FIZ enterprise from its permitted activities and CITable costs incurred in relation with the same activities conducted in a FIZ.
- Profit (distribution of profit) earned from the supply of information technologies outside Georgia developed by a legal entity of a virtual zone.
- Distribution of profit earned by a special trading company from conducting permitted activities (except for the profit earned by the company from the supply of a fixed asset used by the company for its economic activity for over two years).
Free Industrial Zone (FIZ)
A Free Industrial Zone Company is a registered entity located inside a FIZ that has confirmed its status with the tax authorities. The following rules apply for enterprises located in a FIZ:
- Income received by a FIZ enterprise from its permitted activities conducted in a FIZ is exempt from CIT.
- The importation of foreign goods into a FIZ is free of customs duties and VAT-exempt.
- Operations carried out in a FIZ are VAT-exempt.
- Property located in a FIZ is exempt from property tax.
- Bringing (importing) goods produced within a FIZ from the FIZ in another territory of Georgia (outside the FIZ) is exempt from import tax.
- The PIT of employees is paid by those individuals through self-reporting.
A FIZ enterprise should pay tax at a rate of 4% on the received/receivable consideration of the goods supplied to/market price of the goods received from a person registered under the Georgian law (excluding on the supplies to/from other FIZ enterprises).
Virtual zone persons
A virtual zone person is a legal person engaged in information technologies activities and holding an appropriate status. The status of the virtual zone is granted by a person designated by the government of Georgia. The following rules apply for virtual zone persons:
- Profit earned (distribution of profit) from supplying the information technologies created by virtual zone persons outside Georgia is exempt from profit tax.
- Supply of information technologies created by virtual zone persons outside Georgia is exempt from VAT.
Special Trading Company
A Special Trading Company is a company having status granted by the tax authorities. A Special Trading Company may sell and re-export foreign goods, and distribution of the profit gained as a result of conducting these activities is exempt from profit tax.
An international company is a Georgian enterprise that provides certain types of services abroad and earns income solely from those activities, unless ancillary income is immaterial (less than 2% of the income from principal activities). Status of an International company can be granted only to persons operating under the new CIT model.
The following rules apply for an international company:
- An international company should not be set up within a FIZ.
- Distribution of dividends and incurred CITable expenses by an international company are subject to CIT at 5%.
- Dividend distribution by an international company is exempt from WHT.
- Salary income received as a result of employment in an international company is subject to 5% WHT, and an international company is liable to act as a tax agent by submitting monthly PIT returns and remitting PIT due to the state budget.
- An international company is exempt from property tax (except for land) if that property is intended for use or is used for the activities allowed by the ordinance of the government of Georgia.
- If the status of a virtual zone person is granted to the entity, then status of an international company is cancelled.
The ordinance of the government determines the rules for granting the status of an international company and provides the list of permitted activities that, inter alia, includes:
- Software development.
- Information technologies and other computer servicing activities.
- Web hosting.
- Supply of images, text, and information.
- Certain commercial and technical services supplied by a ship owner or related to this ownership.