Double Tax Treaties in Georgia
Double Tax Treaties in GeorgiaUpdated on Monday 08th March 2021
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Foreign investors who open companies in Georgia have many benefits among which there are also various tax incentives. These advantages have helped the country to strengthen trade relations with various countries around the world. In order to enhance these relations, Georgia also signed double taxation agreements under which the imposition of taxes of various categories of foreign taxpayers in Georgia and Georgian taxpayers in the respective countries is made in a way that they do pay the same levies in both countries.
Below, our lawyers in Georgia present the most important general provisions of the double tax treaties signed by this country. If you need help in any business-related matter or assistance in tax legislation, our law firm can help you.
The main tax aspects covered by Georgia’s double taxation agreements
The majority of the double tax agreements signed by Georgia follow the OECD standard model and provide for specific tax-related matters, among which the following:
similar taxes that fall under the double taxation agreement in both countries,
the taxation based on residency of individuals and companies,
the mechanisms used for the avoidance of double taxation in both countries (tax credits, exemptions or refunds);
other special provisions such as the enforcement and termination of agreement.
Another important aspect to consider about the double taxation treaties signed by Georgia is that they can be amended if any changes occur in the tax legislation on one of the signatory states. Moreover, such agreements also cover taxes that are levied differently in the states entering it, and these benefit from special provisions.
Given the particularity of each agreement, if you need information on a specific treaty, our lawyers in Georgia can provide updated information and its appliance.
Georgia has more than 50 double tax treaties
At the beginning of 2020, Georgia had in place 56 double taxation agreements with countries around the world and several others ratified or in course of ratification. Among these, we mention the following:
in Europe, Georgia’s list of double tax treaties includes Austria, the Netherlands, Belgium, Ireland, Romania, Poland, Greece, France and Germany;
in Asia, Georgia has double taxation conventions with China, Singapore, the UAE, India, Bahrain, Japan and South Korea;
Georgia has also a ratified agreement with Portugal and has signed another one with Liechtenstein;
among the countries Georgia has initiated other treaties with are Canada, New Zealand, Brazil, Montenegro, Jordan, Ecuador, and Argentina.
Our lawyers in Georgia can provide updated information on the list of double tax treaties signed by government until this moment.
Taxes covered by Georgia’s double taxation conventions
Each double taxation treaty signed by Georgia has its own terms and covers the most important taxes paid in Georgia and in the other state. The following taxes are paid in Georgia and can fall under the provisions of a double tax agreement:
the corporate tax;
the personal income tax;
the property tax levied on companies;
the personal property tax.
Depending on the other state signing the agreement, the same taxes, as well as other levies can fall under the provisions of such a treaty.
Generally speaking, in most conventions, the corporate and personal income taxes are covered by double taxation agreements as these are the most important impositions.
It should be noted that all Georgian double taxation treaties contain specific provisions related to the fiscal residency of the taxpayer. Foreign citizens and companies are taxed differently if they are residents of Georgia or not.
Foreign investors interested in moving to Georgia can rely on our local law firm for assistance.
The taxation of companies under the DTTs signed by Georgia
One of the most important reasons for which Georgia has entered and continues to expand its network of double taxation conventions is that these favor foreign investments here, but also Georgian businesspersons and companies doing business in the respective countries. For this purpose, the taxation of companies benefits from special regulations under these agreements.
Two of the business forms that benefit from special provisions of Georgia’s double tax treaties are permanent establishments and associated enterprises.
With respect to permanent establishments, the following entities are considered for special tax regulations according to the treaties on double taxation in Georgia:
fixed businesses that can include branches, offices, and/or management places,
factories, workshops, construction sites, and other similar facilities
gas and oil wells, mines and quarries.
When it comes to Georgia, in order to be deemed as permanent establishments, these must operate on the territory of the country for at least 6 months to fall under the incidence of these agreements.
When it comes to associated enterprises, there are two types of entities that enter this category under Georgia’s DTTs. The first one is an enterprise of a contracting country that has a direct or indirect participation in the management, capital or control of a company registered in the other state. The second one implies companies that have direct or indirect participation in other entities in both parties in the double tax treaty.
Business profits obtained by companies that do not fall under the scope of permanent establishments will be taxed in the country in which the enterprises operate under the laws of the respective state, however, there are also cases in which an entity can be taxed in both states.
If you need information on the taxation of companies under the double tax treaties signed by Georgia, you can rely on our law firm for detailed information on the legislation in this sense.
Taxation of companies under DTTs is very complex, which is why we recommend you use the services of specialists in the accounting field who can respond to specific inquires on a case to case basis.
The taxation of immovable property under Georgia’s DTAs
Georgia is a very appealing country to buy a property in, especially since there are a few restrictions when it comes to foreigners’ rights to own real estate here. This is one of the main reasons that covering the taxation of real estate is important in a double tax treaty.
Under the double tax treaties signed by Georgia, the income resulted from ownership or rental of real estate of a resident in one of the contracting countries will be taxed in the state where the property is located. Also, the law respected under the agreement will be the one in the country in which the real estate is placed.
What should be noted about real estate taxation under Georgia’s double tax conventions is that incomes resulted from the use agricultural lands and forests will also be considered for taxation under the chapters that provide for the taxation of immovable property. These will also include:
equipment used to cultivate the land,
natural resources used during the activities.
The taxes imposed on immovable property covered by Georgia’s double taxation treaties will apply the same way to companies and natural persons.
For details and assistance in how to buy a property in Georgia, we kindly invite you to discuss with our lawyers.
Special provisions under Georgia’s double tax treaties
All Georgian double tax conventions contain specific provisions with respect to the taxation of foreign companies conducting various activities here. Foreign companies setting up their operations as local companies will not benefit from the provisions of these agreements, however, they can also be registered as permanent establishments or associated enterprises, thus, obtaining tax reliefs or deductions.
It is important to note that under these agreements, a foreign company must operate through a permanent establishment for a minimum period in order to fall under the incidence of the respective convention. It is possible for each country signing a double tax treaty with Georgia to have different arrangements in place with respect to permanent establishments. Under the current agreements, permanent establishments can be set up for at least 90 days (in the case of India) and up to 6 or 12 months in the case of the rest of the contracting states.
All double tax treaties Georgia enters into are signed by the Ministry of Finance. Our Georgian lawyers can offer information on the general provisions related to the taxation of foreign companies here.
Tax reliefs under Georgia’s double taxation agreements
Georgia’s double taxation treaties contain special regulations related to the taxation of certain incomes deriving from dividend payments, interests and royalties. The following reduced rates can apply:
in the case of dividend payments, the rates range between 0% and 15%, however, there are countries which levied the withholding tax at a rate of 10%;
interest payments are also imposed with reduced rates which range between 0% and 15%;
royalties are subject to reduced rates ranging between 0% and 10%.
If you want to open a company in Georgia and need information about the existence of a double tax treaty, do not doubt and contact our law firm.