What is Georgia International Company

As defined by the Georgian Tax Code, an international company is a Georgian enterprise that carries out activities defined by the Georgian Government and receives income only from permitted activities.

According to this definition, a company wanting to get the status of an International Company shall be operating in Georgia. This requirement does not prevent foreign companies from establishing their businesses in Georgia and applying for the status here. However, some conditions must be met, and we will talk more about that.

The Ordinance №619, of 8^th of October, 2020 of the Government of Georgia, “On Determining the Status of an International Company and Approving the List of Permitted Activities and Certain Expenses”, defined the exact list of permitted activities for enterprises holding (or wanting to get) the status. The document also defines rules for getting the status. The Georgian Tax Code determines tax incentives for such companies.

The International Company Status is given indefinitely and may also be revoked.

The status may be granted to businesses operating in the following sectors: IT (Information Technology) and Maritime (see detailed list of Permitted Activities below).

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  Corporate Income Tax – 5%

  On dividend payment instead of the usual 15%

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  Salary Income Tax – 5%

  On salary payment instead of the usual 20%

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  Dividend Income Tax –0%

  On dividend payment instead of the usual 5%

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  VAT on services abroad - Exempt

  Delivery of services in a foreign country is not subject to VAT.

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  Property Tax (other than land) – Exempt

  On a portion of the property used within the scope of the activity permitted by the Government.

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  Dividends paid by an International Company are not taxable at the payment source and are not included in the gross income of the dividend recipient.

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  International Company has the right to reduce the amount of taxable corporate income by the expense of the salary paid to the resident in Georgia and at the expense of scientific research, design and test-design services.

Revocation of International Company Status

The Government of Georgia makes a decision to revoke the International Company 1) status based on a person’s application; 2) If the Company carries out activities (s) other than those permitted under the status, the income from which exceeds the threshold amount; 3) If the Company does not operate from Georgia and does not meet the other requirements of the status.

Requirements for obtaining the Status of International Company.

There are five requirements a company has to comply with to get and maintain the status of an International Company:

1. Be a Georgian Company – the International Company Status can be obtained only by a Georgian Enterprise, meaning a company must carry out its core income-generating activities permitted under the status in Georgia. It is strongly required that the Company has operational expenses and adequate human resources (full-time employees) to carry out such activities with the necessary qualifications and shall ensure the coverage of appropriate operating costs. So, this requirement means an enterprise has to have a physical presence and employees in Georgia.
2. Have sufficient Experience – The Company seeking the status has to have operated for more than two years in the field for which it requests the status. This 2-year experience can come from the Georgian Company itself, or from a foreign company the Georgian Company represents or a foreign company that the Georgian Company is owned by (in this case, a parent company having sufficient experience must have at least 50% ownership of a company in question). The ability to have a foreign parent company with enough experience is an important recent addition to the law, as it allows foreign companies to establish a subsidiary or a representative in Georgia to obtain the status of an International Company.
3. Have 98% of income from permitted activities – The Company having the IC status is allowed only to carry out activities permitted by the certificate. If the activities are not allowed to exceed 2% of the income, the status will be revoked (abolished). This is a requirement a company has to give substantial attention to, as in case the status gets revoked, the decision on revocation becomes effective from the date of granting the status of international Company, meaning the Company would have to pay regular taxes on all activities, from the beginning of its operation, as if the status was never obtained. There is no experience or practice regarding this issue. Still, there is a high possibility that the Revenue Services will ask for payment of taxes on previous activities/dates in case the requirement is not met.
4. Deliver services outside Georgia -There was a recent addition to the ordinance №619 of the Government of Georgia, stating that an International Company will have to only deliver to the person(s) of which place of registration OR place of management are located outside of Georgia.
5. Not to be established in a Free Industrial Zone - the Georgian Enterprise seeking/having the status may not be established in a Free Industrial Zone.
6. Not to be an Enterprise of Virtual Zone - If a company already is a VZ entity, it will lose the VZ status and get the IC one.