A Georgian Holding Company: How Foreign Dividends and Share Sales Are Taxed
Georgia taxes company profit only on distribution and leaves most foreign-source dividends and gains on foreign shares outside the net. That makes a Georgian company a credible place to hold operating companies elsewhere, provided the exceptions, the substance and the banking are understood before the shares are moved.
A holding company is judged on three questions: what it pays when it receives, what it pays when it sells, and what it pays when it passes the money on. Georgia's answers are unusually simple. Dividends received from foreign companies are generally not taxed, gains on the sale of shares in foreign companies are generally not taxed, and the Georgian company itself pays profit tax only when it distributes. The exceptions are specific and the substance requirements are real, which is why the structure works well for some groups and badly for others.
Exempt
Foreign dividends received
Not taxed on receipt; not taxed on onward distribution, with the low-tax exception
15%
Profit tax, and only on distribution
Georgian-source profit is taxed when it leaves the company, not when earned
50+
Tax treaties
Reduce withholding on what the holding receives and on what it pays out
What Georgia does not tax
Under the distribution-based profit tax, a Georgian company is taxed on distributions and on a short list of deemed distributions, not on income as it arises. Dividends a Georgian company receives from a foreign enterprise are, with the exception described below, not treated as taxable when they are in turn distributed, so profit earned abroad can pass through a Georgian holding to its owners bearing only the 5% dividend withholding, or less under a treaty. Gains on the disposal of shares in foreign companies are foreign-source income; for a Georgian company they enter the same distribution-based system, and for an individual resident in Georgia foreign-source income is outside the scope of Georgian personal income tax. A resident individual selling shares in a Georgian company after holding them for more than two years is also exempt under the Code.
Where the exceptions bite
- Dividends from entities in jurisdictions Georgia lists as low-tax or offshore do not benefit from the exemption on onward distribution; check the current list before adding such a company to the group.
- The exemptions describe the Georgian side only. The country where the operating company sits withholds on dividends it pays to Georgia under its own law and the treaty, and the founder's own country of residence may tax what the founder finally receives.
- Georgia has no general controlled-foreign-company regime of the kind found in the EU, but the founder's home country may well have one that looks through a Georgian holding with no substance.
- Interest, royalties and service income received by the holding are ordinary income, not dividends, and follow their own rules.
The object of profit tax for a resident enterprise is distributed profit and the other outflows the Code deems distributions. A distribution of dividends received from a foreign enterprise is not subject to profit tax, except for dividends received from an enterprise registered in a jurisdiction with preferential taxation or an offshore jurisdiction.
Substance and banking
A holding company that exists only on paper attracts two kinds of trouble: the foreign payer's tax authority may deny treaty benefits for lack of beneficial ownership, and Georgian banks, which underwrite the account rather than the registry entry, may decline to open one for a company whose activity is receiving dividends from countries they cannot assess. A director who actually decides, board minutes that record the decisions, an address and accounts kept in Georgia, and a clear explanation of the group for the bank's compliance team are not optional refinements; they are what makes the structure work.
Banking is the practical constraint. Georgian banks run their own review of a holding's beneficial owners, the source of the funds that bought the subsidiaries and the countries the dividends come from. A group with operating companies in well-regulated jurisdictions and a founder who can evidence their wealth is bankable; a chain of entities in listed jurisdictions is not, whatever the Tax Code says.
Next step
The holding company itself is an ordinary LLC
Whatever the structure above and below it, the Georgian entity is registered the same way, and the charter is where the shareholding arrangements are written. Trustlex drafts both and files them together.
See the registration routeA structure in practice
- 1
Map the group: which operating companies, in which countries, with what withholding on dividends to Georgia under each treaty.
- 2
Form the Georgian holding LLC with a charter that reflects a holding's decisions: share transfers, reserved matters, dividend policy.
- 3
Open the bank account with the group explained in writing, the founder's source of wealth evidenced, and the expected flows described before the first dividend arrives.
- 4
Transfer the shares of the operating companies to the holding in a way that is tax-efficient in their countries; the transfer itself is where most of the foreign tax cost sits. Check the Georgian side as well: as the Tax Code reads at the time of writing, when the holding pays to acquire shares in a non-resident company that are not listed on a recognised foreign exchange, or contributes to its capital, that payment is itself taxed as a distribution, with a credit or refund only when the shares are later sold and the price is received.
- 5
Run the holding as a real company: decisions minuted in Georgia, accounts kept, the annual return filed, the beneficial-ownership declaration current.
The founder consolidating two operating companies
A founder resident in Georgia owns a software company in an EU member state and a services company in the Gulf, each paying dividends to her personally with different withholding and different paperwork every year.
- 1A Georgian holding LLC is formed; the EU and Gulf shares are transferred to it, with advice in each country, Georgia included, on the transfer's tax cost.
- 2The EU subsidiary pays dividends to the holding at the treaty rate for corporate shareholders, lower than the rate that applied to her personally; the Gulf subsidiary's dividends carry no withholding at source.
- 3The holding receives both without Georgian profit tax and, when she wants cash, distributes to her with 5% dividend withholding.
- 4The holding's director, minutes, address and accounts are all in Georgia, which is what the EU payer's tax office and the Georgian bank each ask about.
One set of accounts replaced two personal declarations, the EU withholding fell to the corporate treaty rate, and the Georgian layer added 5% on what she actually took out, on the assumption that bringing the shares into the holding was not itself taxed in Georgia. The structure held because it had substance; the same shares parked in a company with no director in Georgia would have been challenged in the EU and refused by the bank.
Illustrative. It assumes that the holding made no payment to acquire the foreign shares and no contribution to the subsidiaries' capital, either of which is itself subject to profit tax as the Tax Code reads at the time of writing, and that neither subsidiary is registered in a jurisdiction on Georgia's low-tax list, which at the time of writing names several Gulf states. The tax cost of transferring shares into the holding, and the founder's own residence position, decide whether the structure is worth building.
Next step
Thinking about a Georgian holding
We form the holding, draft a charter that fits a group, prepare the bank file that explains the structure, and coordinate with your advisers abroad on the transfers, so the Georgian layer is built on substance from the first day.
Book a scoping callGeneral information, not tax advice. The treatment of foreign dividends and share gains, the low-tax jurisdiction list, the two-year holding exemption and treaty rates are set by the Tax Code of Georgia, government decrees and the treaties, and are subject to change.