Georgia International Company Status
A Great Status, Great Tax Breaks

Georgia International Company Status, A Great Status, Great Tax Breaks
Georgia International Company Status, A Great Status, Great Tax Breaks

International Company Status Georgia provides great tax incentives for foreign and Georgian companies active in the Maritime and Information Technology sectors.

Already one of the least taxed countries globally, 8th in the World Bank’s Ease of Doing business index, strategically placed on the New Silk Routes between Asia and Europe, Georgia has further enhanced its attractiveness.

On October 8, 2020, the Georgian government issued Decree No. 619 supplementing Article 23 of the Georgian Tax Code. It provides new tax incentives for foreign and Georgian companies active in the logistics, shipping, and information technology sectors. If these companies base their activities in Georgia, they may qualify for becoming an International Company Status Georgia and will benefit from great tax breaks. 

This International Company Status should incentivize international foreign companies to relocate their IT service centers in Georgia. The same is true for a shipping company and Maritimes-related activities, which can significantly reduce expenses by relocating their management center to Georgia.

What is International Company Status?

The International Company Status (ICS) is a tax status available to certain companies operating in Georgia. To benefit from these tax incentives, the Company must be registered in Georgia and prove Substance within the country: The Georgian Company must have an office in Georgia and carry out the work within Georgia.

A Georgian or non-Georgian (but resident in Georgia) company operating in one of the IT or Maritime sectors, listed by the Ministry of Economy and the Georgian legislation, can benefit from these very nice tax breaks provided by the International Company Status. 

International Company Status: List Of Authorized Activities

The Ministry of Economy of Georgia has issued this list according to Decree No. 619 supplementing Article 23 of the Georgian Tax Code 

IT Activities Authorized To Apply For International Company Status

  • Of remote system
  • Automatic online installation of filters on websites
  • Automatic firewalls installation software
  • Computer programming, consulting, and related activities
  • Computer programming activities
  • Computer management-related activities
  • Consulting in the field of computer technology
  • Database management software
  • Driver software connecting computers to peripherals
  • Online delivery of allocated memory capacity
  • Production and delivery of digital products, software support, delivery of software updated versions
  • Releasing of computer games
  • Software release
  • Software updates
  • Software blocking ads banner
  • SaaS software, such as sales force software, accounting software, antivirus software, and their updates
  • Website development and delivery
  • Web hosting, software, and hardware remote maintenance

Maritime Activities Authorized To Apply For International Company Status

  • Activities related to the coordination of shipbuilding, berthing, and repair activities. 
  • Activities related to the performance of inspections following the requirements of industry regulators
  • Activities related to controlling the compliance of vessels in operation with the International Safety Management Code, especially for pollution prevention.
  • Activities related to the management of disputes, cargo-related claims, commercial and legal issues, and chartering agreements
  • Commercial and maintenance services by a shipowner
  • Monitoring of a vessel’s physical condition. The supply of spare parts to a ship. Supplying a boat with food products
  • Organization and management of new vessel construction order. Purchase and Sale of second-hand vessels
  • Route instructions to a ship In Real Time
  • Ship rental with or without a crew
  • Sea routes planning and analysis

 

Main Tax Benefits Of The International Company Status

  • 5% Corporate Income Tax (instead of 15%). Tax is due when profit distribution occurs. Retained or reinvested profits are not taxed. 
  • 0% Dividends Tax (instead of 5%). 
  • 0% VAT on International Business Income. You can also reclaim VAT (18%) when purchasing from other VAT Taxpayers registered in Georgia. Therefore, you will have to registerer as a VAT Taxpayer at the Revenue Service of Georgia.
  • 0% Export tax on exports. The export of IT services and products are not subject to customs duties.
  • Employees can be Georgian or Foreigners. A 5% tax applies to the gross salary of non-resident employees (instead of 20%). + 4% pension contributions if the employee is a Georgian resident.
  • An international company is exempt from 0% Property Tax (except land) if this property is intended for or used to carry out the international company activities.
  • AN international Company can reduce the Corporate Income Tax base by deducting real expenses from salaries and R&D expenses.
  • The Company’s profits are not taxed until they are distributed to individuals and not taxed (0%) if distributed to another Georgian resident legal entity or reinvested.

 

What Are The Criteria To Get The International Company Status?

The Company must have 98% of its annual revenue derived from activities in the IT or Maritime sectors and activities listed above.

The essential prerequisite for obtaining International Company Status and thus benefiting from the tax incentives is that the applying Company has at least two years of experience in at least one of the above-mentioned sectors.

The Georgian Company must show Substance in Georgia. It means that the Georgian Company shall carry out basic income-generating activities in Georgia and have adequate local human resources to carry out such activities, with the necessary qualifications,”

Option 1

The Company must be a company registered in Georgia for more than two years in the sectors and activities listed above.

Option 2

Be a Georgian company but representative of a foreign (non-resident) company. The non-resident Company must operate in the IT and Maritime sector and activities listed above for over two years in the IT and Maritime sectors.

Indeed, a non-Georgian company can register a company in Georgia as a representative. This representative Company would operate under the mother company name and be owned by that non-resident mother company. To summarize, this non-Georgian / non-resident mother company opens a local Georgian branch.

Option 3

A Georgian company (the applicant), is owned by another company (mother company – Georgian or non-resident). The Mother company must have at least two years of experience and operation in the IT or Maritime sectors listed above and must have more than 50% ownership of the Georgian Company.

Option 4

A foreign Company can be the majority shareholder of any Georgian enterprise and apply that way.

The parent company would not have to show that they derive 98% of their annual revenue within the required sectors, still, the foreign company must have at least two years of experience within IT and Maritime sectors.        

 

International Company Status & VAT

According to the Georgia Tax Code and regulations provided by the Ministry of Economy, there is no VAT exemption for International Company Status. It means such a Company will be liable to Georgia’s standards VAT rules.

 

But, There Are Always Some Exceptions

If ICS’s clients are located outside Georgia, a few VAT exemptions apply :

  • If ICS products and/or services are provided exclusively in a B2B scheme, then ICS should not charge VAT.
  • If ICS is voluntarily registered as VAT payee in Georgia, then the ICS can claim back VAT on purchases and avoid Georgian reverse VAT.
  • If ICS products and/or services are provided in a B2C scheme, in some cases, those transactions might be VATable.

Each specific situation requires consultation with a senior tax adviser on these matters.

Please, contact us, and one of our advisors will be pleased to answer you.

Contact us about company formation in Georgia.