Another successful case of Just Advisors in the field of tax planning concerns obtaining the status of an International Company for the Georgian IT business.The possibility of obtaining the status of a company became real from 08.10.2020, when the Georgian government issued Resolution No. 619, clarifying the procedure and conditions for obtaining the status previously enshrined in the Tax Code of Georgia.
JA’s tax lawyers scrupulously approached the formation of the package of documents, which ensures obtaining the status in a short time and without requests from the Tax Service and the Ministry of Finance.
The value of the status lies in preferential taxation. As a reminder, International companies are exempt from dividend tax, property tax (except for land), the income tax rate is 5% instead of 15%, and the income tax rate for the payment of salaries of such companies has been reduced from 20% to 5%. During the period from October 2020 to July 2021, the Government of Georgia granted international status to only 24 companies.
Read more about getting an international company status in Georgia in our article.
Article 23 of the Tax Code of Georgia allows companies registered in Georgia to obtain international company status. The actual receipt of this status became possible after 08.10.2020, when the Government of Georgia issued Resolution No. 619 (hereinafter – Resolution No. 619), clarifying the procedure and conditions for obtaining the status.
Which company can get «International status»?
The status of the International company can be assigned, meeting the requirements:
1. Carries out activities defined by Resolution No. 619, and receives income only from the implementation of activities (hereinafter – permitted activities).
2. Has at least two years of experience in conducting permitted activities:
a) on its own behalf, OR
b) is a representative office of a non-resident enterprise of Georgia, if this non-resident has at least two years of experience in conducting permitted activities, which is engaged in a Georgian company; OR
c) participants/shareholders owning more than 50% of the shares/companies of this Company, individually (each person separately) at least two years of experience in conducting permitted activities carried out by the Company.
The list of permitted activities is closed.
It includes, among other things*:
- software development,
- creation of computer games (creation of computer games for all platforms),
- computer programming,
- IT consulting and related activities,
- computer equipment management activities.
* the types of activities are directly specified in Resolution No. 619 and, before applying for obtaining, require a thorough check for compliance with the actual activities of the Company-applicant for the status.
Tax benefits for enterprises that have received the status of «International Companies»:
- The salary paid to an employee of an International Company is taxed at the rate of 5% (general income tax rate is 20%).
- Dividends paid to members / shareholders of an International Company are not subject to withholding tax and are not included in the recipient’s gross income (general dividend tax rate 5%).
- The corporate tax rate for an International Company is 5% (the general corporate tax rate is 15%).
- An international company is exempt from property tax (excluding land tax) if the property is used or intended to be used for the purpose of conducting a permitted activity (general property tax rate up to 1%).
- In accordance with Resolution No. 619, an International Company is allowed to reduce the taxable income base (from which the corporate tax is calculated) by the amount of the following expenses:
- The cost of wages paid to employees who are citizens of Georgia.
- Expenses for research, design and experimental work in an area permitted for a person with the status of an international company of activities.
Just Advisors offers a business tax planning service for legal entities and citizens.
Here and in other articles, the company’s successful cases in this field.