International Company Status. A Great Status, Great Tax Breaks
7th low-taxed country globally, and 8th in the World Bank’s Ease of Doing business index, Georgia has further enhanced its attractiveness.
The International Company Status offers significant tax incentives. This status provides an opportunity for companies active in the IT sector to move their IT services and management facilities to Georgia. The same is true for a shipping company and maritime-related activities.
What is the International Company Status?
On October 8, 2020, the Georgian government issued Decree No. 619, supplementing Article 23 of the Georgian Tax Code. Georgia provides new tax incentives for foreign and Georgian companies active in the Information Technology and the logistics & shipping sectors. Suppose these companies base a part of their activities in Georgia. In that case, they may qualify for obtaining the status of International Company Georgia. These companies registered in Georgia will enjoy great tax breaks.
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.
- 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. Employees can be Georgian or Foreigners.
- 0% Property Tax. An international company is exempt from Property Tax (except land) if this property is intended for or used to carry out 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.
International Company Status: List Of Authorized Activities
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 can benefit from International Company Status tax breaks.
IT Activities Authorized To Apply For International Company Georgia
- 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 Georgia
- 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 orders. 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
How To Apply For International Company Status?
International Company formation is quite easy if the company meets the fully the requirements. Applications must be made through the Revenue Service of Georgia.
The Revenue Service (RS) process application within ten days usually. Suppose The RS request additional information. In that case, the legal representatives of the applying Company have ten business days to provide the RS with the additional information. Once the RS agrees on the documentation, RS will apply to the Ministry of Finance of Georgia. MoF gives the final approval.
FAQs About International Status for companies
The Company must have 98% of its annual revenue derived from activities in the IT or Maritime sectors and activities listed above.
For obtaining International Company Status, the applying Company must have two years of experience in one of the above-mentioned sectors.
The International Company must show Substance in Georgia. It means that the International Company Georgia « 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 registered/resident 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 for at least two years. This Branch is owned by that non-Georgian / non-resident Mother Company and operates under the Mother Company name.
Option 3. A Georgian company (the Applicant) is owned no less than 50% by another company, Georgian or non-resident. Still, this Mother company must have at least two years of experience and operations in the IT or Maritime sectors.
Option 4. A foreign Company can be the main shareholder of any Georgian enterprise.
The parent company would not have to show that they derive 98% of its annual revenue within the required sectors. Still, the foreign Company must have at least two years of experience within the IT and Maritime sectors.
According to the Georgia Tax Code and regulations provided by the Ministry of Economy, there is no VAT exemption for International companies. It means such a Company will be liable to Georgia’s standards and VAT rules. VAT in Georgia is set at 18%.
But, There Is Always Some Exception. If the International Company’s clients are located outside Georgia, a few VAT exemptions apply :
- If International Company products and/or services are provided exclusively in a B2B scheme, then ICS should not charge VAT.
- Suppose the International Company is voluntarily registered as a VAT payee in Georgia. In that case, the International Company can claim back VAT on purchases and avoid Georgian reverse VAT.
- If International Company products and/or services are provided in a B2C scheme, 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.
The Ministry of Finance (MoF) can revoke International Company Status if the International Company operates outside the above criteria and conditions.
The most important rule to follow: the International Company must generate its income from authorized activities (cf. list of official activities). If more than 2% of International Company income comes from non-authorized activities, MoF could revoke the status immediately.