Corporate Tax Rate in Georgia: 15% When Profit Is Paid Out

The 15% corporate tax rate and when it applies

Georgia’s profit tax rate is 15%, set by Article 98(1) of the Tax Code. What sets it apart is the base. Under Article 97(1), a resident company is not taxed on the profit it earns and keeps. It is taxed on four things instead:

• distributed profit
• expenses or other payments not related to its economic activity
• goods or services supplied free, and money transferred free
• entertainment expenses above the legal limit

So a Tbilisi company that reinvests all of its profit owes no profit tax on it. The tax waits until the money leaves the company. This is the distributed profit model, often called the Estonian model. Banks and other lenders are taxed differently, on profit as it is earned.

How profit tax is calculated: the 0.85 gross-up

The 15% is not charged on the payment itself: Article 97(10) divides the payment by 0.85 first and taxes the result. A GEL 85,000 dividend becomes a taxable amount of GEL 100,000, and 15% of that is GEL 15,000. Measured against the dividend actually paid, the tax is about 17.65%.

The gross-up makes the arithmetic clean when you start from profit. Pay out everything and the dividend plus the tax use up the profit exactly.

When the dividend goes to an individual owner or a non-resident company, the company also withholds 5% dividend tax at source under Article 130(1). That is a separate tax on the shareholder, on top of the company’s 15%.

What counts as distributed profit

The law treats these payments as distributed profit:

• a dividend paid to a partner in money, under Article 98.1(1)
• a dividend paid in kind, such as property handed to a partner instead of cash, under the same article
• a deal with a related party at a price different from the market price, where the relationship affects the result and the related party is not itself taxed on the objects in Article 97(1) and (3), under Article 98.1(4)(a)

The related-party rule catches transfers that never look like dividends, such as company property sold to a related party below its market price.

Other payments the tax applies to

These payments are profit tax objects too, without being distributions:

• expenses or other payments not related to the business, under Article 97(1)(b)
• goods or services supplied free, and money transferred free, under Article 97(1)(c)
• a loan to an individual or a non-resident, under Article 98.2(3)(g), unless the lender is a bank, credit union, microfinance organisation or loan provider
• entertainment expenses above the 1% limit, under Article 98.4(2)

The loan rule matters most to owner-managed companies. Moving company money to yourself and calling it a loan does not keep it out of profit tax, because the loan is a profit tax object in its own right.

Entertainment, which the law calls representation expenses, is free of profit tax up to a cap. Article 98.4(2) limits it to 1% of the income earned in the previous calendar year, or 1% of expenses if expenses were higher than income, and only the spending above the cap is taxed.

What is not distributed profit

Article 98.1(2)(a) and (c) take these payments out of distributed profit:

• a repayment to a partner on liquidation or a share buy-back, up to the capital that partner contributed
• a dividend paid to another company formed under the Law on Entrepreneurs, unless it is an individual enterprise or a company exempt from profit tax

So a dividend paid from one Georgian company to another is not distributed profit, and Article 130(2) adds that the receiving company is not taxed at source on it either.

The monthly profit tax return and late penalties

A company on the distributed profit model files a profit tax return every month, by the 15th of the following month, under Article 153(10). Article 153(1)(b) leaves it out of the annual income or profit tax return. Its annual accounts still go to SARAS: Article 9(2) of the Law on Accounting, Reporting and Auditing requires financial statements to reach SARAS by 1 October of the following year.

Late filing costs a share of the tax on the return. The Georgian text of Article 274(1) sets a flat fine of 5% of the tax due when a return is up to 2 months late, and Article 274(2) and (3) raise it to 10% after that, with no fine where the tax due is zero. Tax paid late also runs interest of 0.05% of the unpaid amount for each overdue day, counting the payment day, under Article 272(4).

If you hand the return to an accountant, check that the monthly package covers it. Of the ten Tbilisi accounting firms compared on fees and filing, Tbilisi Expat files monthly declarations to rs.ge before the 15th, with a confirmation sent to the client, and BDO Georgia’s ongoing accounting includes tax returns, bank transfers and SARAS report submission.

Banks and lenders pay 20% on taxable profit

The distributed profit model does not cover four kinds of lender. Banks, credit unions, microfinance organisations and loan providers are taxed at 20% under Article 98(4), on gross income less deductions as Article 97(12) sets out. They pay on profit as it is earned, not when it is distributed.

Other taxes a Georgian company pays

Profit tax is one of several. Sales are taxed whether or not profit is kept: VAT at 18% is charged under Article 166, and registration is mandatory once VAT-taxable supplies pass GEL 100,000 in any 12 consecutive calendar months, under Article 165(1).

Tax	Rate	Return
VAT	18%, under Article 166	Monthly, by the 15th of the next month, under Article 168(1)
Property tax	Up to 1% of average annual net book value, under Article 202(1)	Return and payment by 1 April, under Article 205(2)
Income tax on salaries	20%, under Article 81(1), withheld by the employer under Article 154(1)(a)	Monthly, by the 15th of the next month, under Article 153(5)