Georgia’s “5% corporate tax”: real regime, misleading shortcut

Search results often say “Georgia corporate tax is 15%,” “Georgia has 0% retained-profit tax,” and “Georgia offers 5% corporate tax.” Each can describe part of the system. An ordinary resident company generally pays profit tax when it distributes profit or incurs another taxable deemed distribution. Retained qualifying profit is not taxed merely because the year closes, but that is tax deferral within the model—not proof that the company is exempt.

The 5% headline may refer to International Company status, dividend withholding, a gaming rule or another specific provision. Before comparing jurisdictions, write the complete sentence: 5% of what, paid by whom, at which event and under which eligibility rule?

The Tax Code sets the standard profit-tax rate at 15%. For a cash distribution, the tax base uses a gross-up mechanism; dividing a net distribution by 0.85 and multiplying by 15% produces company tax equal to about 17.647% of the dividend amount. A dividend to an individual is normally also subject to 5% withholding.

This model is attractive for a company that reinvests genuine earnings. It is less magical for an owner who distributes everything each month. Non-business costs, free transfers and certain related-party transactions can also trigger profit tax before a formal dividend.

Georgia’s International Company regime is designed for qualifying enterprises conducting prescribed IT or maritime activities. It is an application-based status with operating-history, activity and substance considerations—not a box selected during ordinary incorporation. A qualifying International Company can have a 5% profit-tax rate and a 5% rate on employment income paid by the company, alongside other statutory features.

Do not confuse it with a Virtual Zone Person. The permitted activities, tax outcomes, employment footprint and evidence differ. A newly registered LLC with generic “IT consulting” in its charter is not automatically entitled to either regime.

Article 130 generally applies 5% withholding to dividends paid by a resident enterprise to a natural person, non-commercial legal entity or non-resident enterprise, subject to exceptions and treaty considerations. This is recipient-level collection at source. It does not replace the distributing company’s profit-tax calculation.

Marketing that says “only 5% when you take the money out” may be omitting the company-level distributed-profit tax. Always model both layers and the shareholder’s country of residence.

Assume an ordinary LLC declares GEL 10,000 payable as a dividend to an individual and no exemption or prior-tax credit applies. The illustrative company profit tax is GEL 1,764.71, while GEL 500 is withheld from the dividend; the shareholder receives GEL 9,500. The total Georgian cash tax connected with that payment is GEL 2,264.71.

That example does not cover corporate shareholders, treaty relief, previously taxed distributions, special status or foreign tax. Its purpose is to show why a single-rate advertisement cannot describe the full cash flow.

Ask the adviser to identify the Tax Code article, eligibility decision, assumed customer location, VAT result, owner residence and recurring compliance cost. Request calculations for retained profit, full distribution and salary. Include accounting, payroll, audit or SARAS reporting and substance costs.

The best regime is the one the real operation can maintain after the promotional year. A higher transparent rate is cheaper than a status the business never qualified to use.