LumenHow is a Georgian company (LLC) taxed on its profit?
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Under the Tax Code of Georgia, a resident company pays 15% profit tax on what it distributes, not on profit it keeps. Taxed items are distributed profit, spending unrelated to the business, free supplies and representation costs above the limit; the amount is divided by 0.85 first. Returns are monthly. Dividends paid to individuals are taxed another 5% at source.
Key facts
| What | The law says | Source |
|---|---|---|
| Who pays | Resident enterprises (and non-resident enterprises with a permanent establishment or Georgian-source income) | Tax Code, art. 96 |
| What is taxed | Distributed profit; expenses or payments not related to economic activity; free supply of goods or services and free transfers of funds; representation expenses above the limit | Tax Code, art. 97(1) |
| Rate | 15% | Tax Code, art. 98(1) |
| Exceptions | 20% for banks, credit unions, microfinance organisations and loan providers; other rates for oil and gas agreements and gambling | Tax Code, art. 98(2), (4)–(6) |
| How the base is worked out | The amount paid out is divided by 0.85 | Tax Code, art. 97(10) |
| Distributed profit | Profit paid to a partner as a dividend, in money or in kind | Tax Code, art. 98¹(1) |
| Not distributed profit | Returning a partner’s capital contribution on liquidation or share buy-back, up to the amount contributed | Tax Code, art. 98¹(2)(a) |
| Period and return | Calendar month; return by the 15th day of the following month | Tax Code, arts. 135(2), 153(10) |
| Dividends to individuals | 5% withheld at source; a resident individual pays no further tax on them | Tax Code, art. 130(1), (3) |
Tax on distribution, not on earning
Under the Tax Code, a resident company doesn’t pay profit tax on profit it earns and keeps. Article 97(1) lists what is taxed instead:
- distributed profit;
- expenses or other payments not related to the company’s economic activity;
- goods or services supplied for free, and funds transferred for free;
- representation expenses above the limit set by the Code.
The rate is 15% (art. 98(1)). Banks, credit unions, microfinance organisations and loan providers pay 20% (art. 98(4)), and they are taxed on the difference between gross income and deductions for the year (art. 97(12)).
How the 15% is worked out
Article 97(10) says the taxable amount is the payment or expense divided by 0.85. So the 15% is charged on the grossed-up amount, not on the net sum paid out.
Distributed profit means profit paid to a partner as a dividend, in money or in kind (art. 98¹(1)). Returning a partner’s capital when the company is wound up or buys back a share isn’t distributed profit, as long as it doesn’t exceed what the partner contributed (art. 98¹(2)(a)). Transactions with related parties at non-market prices can count as distributed profit (art. 98¹(4)).
Monthly filing
For a company taxed this way, the accounting period is a calendar month (art. 135(2)). It files a profit tax return by the 15th day of the following month (art. 153(10)).
Dividends paid out
When a resident company pays a dividend to an individual, a non-commercial legal entity or a non-resident company, 5% is withheld at source (art. 130(1)). A resident individual doesn’t include that dividend in gross income and isn’t taxed on it again (art. 130(3)).
Related questions
- Individual entrepreneurs: see the pages on Georgia’s small business status and personal income tax rate.
Sources
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