Note: This article has initially been published by Gela Barshovi on MNETax
On 8 October, Georgia’s government published decree #619, providing new tax incentives for foreign
and Georgian companies involved in shipping and information technology.
Decree #619 supplements article 23 of the Georgian tax code.
Georgia is receiving greater attention from the international business community as it is becoming an
attractive investment destination with low or no taxes and easy regulations.
Indeed, Georgia offers many tax incentives for both Individuals and legal entities, starting from Georgia’s
special corporate income tax regime under which corporate income tax is payable only upon
distributions of dividends to shareholders.
Also, there is 0% taxation of individuals on foreign source income and 1% taxation on Georgian source
income up to 500 000 Georgian Lari (approx. USD 157 000) per annum and many other benefits.
Additional tax benefits for investment are now in place from 8 October.
In particular, income earned by Georgian or foreign entities deemed “international companies” that operate in the
field of information technology services or ship rental, transportation, and similar activities, will receive tax
incentives.
For these companies, a corporate income tax rate of 5% (instead of 15%) will apply. Wage tax will be
assessed at a 5% rate instead of 20%. Moreover, withholding tax on dividend distributions will be 0%
instead of 5%.
In addition, these companies will be partly exempted from property tax and can decrease the basis of
corporate income tax with salary and R&D expenses.
The most important preconditions for obtaining a status of “international company” and thereby benefit
from tax incentives is that an applicant has at least 2 years’ experience of operating in at least one of the
above-mentioned businesses. Also, they must demonstrate business substance in Georgia (expenses
accrued in Georgia, hired staff present in the country, etc.). In other words, “letter box” companies will
not qualify as “international companies.”
Notably, IT companies applying for the status of “international company” are required to conduct the IT activities
based on a service agreement.
It is important to note that Georgian tax law already provides tax exemptions for IT enterprises. In
particular, companies that provide certain types of IT services in Georgia abroad can obtain a certificate
of “Virtual Zone Person” (VZP) and enjoy a full exemption from corporate income tax in Georgia.
However, VZPs do not qualify for tax incentives on dividends, wages, and property as international
companies will.

The new tax regime for international companies should incentivize multinationals to relocate their IT
service centers to Georgia. Not only will they save tax, but wages and salaries for IT staff are much lower
in Georgia than in most developed countries.
Similarly, shipping/marine businesses might reduce considerable expenses if they shift their place of
management to Georgia.
About the author: Gela Barshovi is an international and Georgian tax adviser and a managing
partner of Georgian accounting/consulting firm TPsolution. You can directly contact him at:
Gela.barshovi@tpsolution.ge

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