Income Tax, Dividend Tax, VAT: A Practical Guide to Georgia’s Business Taxes
- Tinatin Tolordava
- 4 days ago
- 8 min read
Table of contents
Introduction
Georgia is quickly becoming a top choice for entrepreneurs, remote companies, and tech startups looking for a tax-friendly environment. Whether you’re a freelancer launching your first business or a founder scaling globally, understanding business tax rates in Georgia can make the difference between operational freedom and costly surprises.
Georgia’s system isn’t just attractive, it’s built for action. Low taxes, minimal bureaucracy, and a territorial taxation model make it one of the most competitive jurisdictions in Europe for international founders. But to fully benefit, you need to understand how income tax, dividend tax, and VAT work, and how to stay compliant.
This guide walks you through everything you need to know about Georgia’s business taxes in practice, using real-world scenarios, not abstract theory.
Why Georgia’s Tax System Works for Global Entrepreneurs
Georgia’s tax system is based on simplicity and accessibility. Its core advantage is the territorial model: only income earned within Georgia is taxed. This means if your business serves foreign clients, that income is typically tax-exempt under local law.
You don’t need to be a Georgian citizen or even live there full-time to register a company or benefit from its tax incentives. Company formation in Georgia is open to all, with no restrictions on foreign ownership, no forced local partnerships, and a digital-first government that makes compliance manageable, even remotely.
Add in a flat corporate tax system, one of the lowest dividend tax rates in Europe, and exemptions for digital services sold abroad, and it becomes clear why Georgia is on the radar for anyone interested in optimizing tax while staying fully legal.
If you want to understand how to structure your business setup efficiently, read our companion guide: Tax Accounting & Bookkeeping in Georgia: The Complete 2025 Guide
Income Tax in Georgia: Simple, Transparent, and Predictable
Georgia applies a flat 20% personal income tax. This applies to both employees and entrepreneurs unless they qualify for special regimes.
If you operate as an Individual Entrepreneur and register under the Small Business Status, your tax drops to 1% of your turnover (up to 500,000 GEL annually). This regime is a game-changer for solo consultants, freelancers, and small teams.
There are no income tax brackets. No complex deductions. No endless tax planning. You know what you owe and when it’s due.
For employees, income tax is withheld at the source by the employer. For entrepreneurs, it’s self-declared monthly or quarterly depending on your business structure.
If you're in Georgia for more than 183 days in any 12-month period, you become a tax resident. That triggers tax on your global income, unless it’s protected by a double taxation treaty.
For most nomads and freelancers with international clients, Georgia offers a clean, legal base with much lower income tax exposure than Western Europe or North America.
For a deeper comparison, explore Georgia’s Income, Profit, and Property Taxes
Corporate Business Tax Rates in Georgia: What Founders Need to Know
Corporate tax in Georgia is set at 15%, but here’s the catch: it only applies to distributed profits. If your company reinvests its income or keeps the funds in a retained earnings account, you pay zero corporate tax.
This model is based on the Estonian corporate tax system and it rewards long-term reinvestment. You only pay tax when money actually leaves the company in the form of dividends or non-business spending.
Let’s say your company earns $100,000 this year but you reinvest all of it into new hires, software, and marketing. You pay zero corporate tax. Now imagine you withdraw $50,000 in dividends. That’s the only amount subject to the 15% tax rate.
For founders used to paying tax on gross or net profit regardless of distributions, this is a huge advantage.
To stay compliant, you’ll need to:
File an annual financial report
Track what counts as distribution vs reinvestment
Declare any profit distributions monthly through the Revenue Service portal
Want a clearer breakdown? Read How Corporate Tax Reporting Works in Georgia
Dividend Tax in Georgia: Low and Straightforward
Once your company pays 15% corporate tax on distributed profits, there’s a flat 5% dividend tax when you withdraw that money personally.
That means the total tax burden on distributed profits is capped at 20%. For comparison, many European countries tax dividends at 25% to 35%, on top of much higher corporate income taxes.
If you’re a foreign shareholder, your home country might also try to tax your dividend income. But Georgia has signed over 50 double taxation treaties. With the right documentation, you can avoid double taxation or claim a tax credit in your home country.
This is especially valuable for founders who are non-residents of Georgia but want to withdraw profits from their Georgian company.
To use treaty benefits, you’ll need a valid certificate of tax residency from your country and a local accountant who understands how to apply it correctly.
This is one of the most overlooked areas by first-time founders in Georgia. Improper filing of dividend taxes or ignoring treaty filings can result in fines or taxation in both jurisdictions.
If you’re unsure, this is where consulting a local expert like Gegidze can save you money and stress.
VAT in Georgia: When You Pay and When You Don’t
Georgia’s standard VAT rate is 18%. However, many businesses, especially service-based ones, never need to register for VAT at all.
VAT registration is mandatory if your annual turnover exceeds 100,000 GEL. Below that, you can voluntarily register if it benefits your business.
If you sell digital services or software to foreign clients, your revenue is typically exempt from VAT under Georgia’s territorial rules and Virtual Zone status. This means you don’t charge VAT and don’t owe VAT on that income.
On the other hand, if you buy services from abroad, like cloud software, digital ads, or contractors, you may be required to file reverse VAT declarations and pay 18% VAT on those imported services. This is known as reverse charge VAT.
Reverse VAT is one of the most misunderstood tax obligations in Georgia. Even if you don’t charge VAT on your own services, you may still need to pay VAT on services you purchase internationally.
To manage this, you should:
Track all foreign service purchases
Keep invoices and receipts
File reverse VAT monthly, even if it’s zero
Register voluntarily if you want to claim back eligible VAT costs
Mistakes in VAT registration and reporting are some of the most common reasons for audits and penalties. To avoid this, review our list of Common Tax Reporting Mistakes in Georgia
Business Tax Rates in Georgia: What You Actually Pay
Here’s how Georgia’s business tax rates stack up in practice:
Income tax: 20% flat, or 1% on turnover for Small Business Status
Corporate tax: 15%, but only on distributed profits
Dividend tax: 5% flat, only on actual dividends
VAT: 18%, only if you register or cross the threshold
The result? Many founders legally pay 0% corporate tax and 0% VAT while keeping personal income tax as low as 1%.
This is why Georgia isn’t just another offshore destination. It’s a legitimate, fully compliant business base with favorable tax treatment built into national law.
If you structure correctly, stay compliant, and file on time, Georgia offers one of the best setups in Europe for growing a remote or global business.
Special Tax Regimes That Reduce Business Tax Rates in Georgia Even Further
Georgia offers special statuses that dramatically reduce your tax obligations, legally. These regimes were designed to attract IT companies, freelancers, and growing startups.
Virtual Zone Status
If your business provides software development or digital services to clients outside Georgia, you can apply for Virtual Zone status. This gives you 0% corporate income tax on foreign revenue and 0% VAT on exported services.
To qualify, your Georgian company must:
Be registered as an LLC or JSC
Operate in the IT or digital services sector
Generate revenue from non-Georgian clients
You do not need a physical office or local employees. That makes it ideal for remote-first teams and nomads who want a lean setup with legal tax exemptions.
Virtual Zone status doesn’t exempt you from accounting or reverse VAT reporting. But it eliminates most of the tax burden for software businesses operating globally.
International Company Status
This regime is for mature IT or maritime businesses with at least 2 years of operations. You’ll need a physical office and a team working in Georgia, but the tax benefits are strong:
5% corporate income tax (on distributed profits)
0% dividend tax
0% property tax on qualifying assets
It’s best suited for larger companies or scale-ups that want to build a serious base in Georgia.
Unlike the Virtual Zone, this status requires local substance and annual reporting that proves the work is being done in Georgia.
Small Business Status for Individual Entrepreneurs
If you register as an Individual Entrepreneur (IE), you can apply for Small Business Status. This gives you a 1% income tax rate on revenue up to 500,000 GEL annually.
You can operate as a freelancer, coach, consultant, designer, or developer. You must not operate in a restricted sector like financial services, legal advice, or construction.
With this structure, you’ll avoid corporate tax, dividend tax, and reduce your compliance burden. It’s one of the simplest and most affordable business setups in Europe.
Tax Residency in Georgia: When Does It Matter?
If you spend more than 183 days in Georgia in any 12-month window, you become a tax resident. This matters for two reasons:
Your global income could become taxable in Georgia
You may need to declare foreign assets or income in certain situations
Georgia does not have a wealth tax or capital gains tax for individuals, and foreign passive income is often exempt. But you still need to plan accordingly.
If your home country taxes worldwide income and doesn’t recognize Georgia’s tax residency rules, you may still owe taxes back home.
To avoid this, secure a tax residency certificate in Georgia, properly exit your old tax residency, and apply any double taxation treaty between the two countries.
This is especially important if you plan to withdraw dividends, receive foreign income, or hold assets in multiple jurisdictions.
How to Avoid Penalties and Stay Compliant in Georgia
Georgia’s tax system is simple, but it’s not optional. Even if your tax due is zero, you must file the correct forms monthly or annually.
Here’s what every business owner should be doing:
File monthly VAT declarations (if registered)
File reverse VAT reports on foreign service purchases
File monthly payroll reports (if you have employees)
File annual corporate tax reports (even if you reinvested profits)
Keep records in Georgian or provide certified translations
Most penalties arise not from underpayment, but from missed or incorrect filings. This is why working with a local accountant is essential, especially if you’re abroad.
If you don’t speak Georgian, don't want to deal with the Revenue Service portal, or want help choosing the right structure, Gegidze handles everything for you, from business setup to monthly compliance.
Frequently Asked Questions (FAQ)
What are the standard business tax rates in Georgia?
The corporate tax rate is 15% but applies only to distributed profits. Dividends are taxed at 5%. Personal income tax is 20%. However, under Small Business Status, you can pay just 1% income tax, and under Virtual Zone status, you can pay 0% corporate tax on foreign-sourced income.
