Foreign Direct Investment — the Georgian Tax Interface
Georgia's investment regime is open: there is no law imposing special screening or capital requirements on foreign investors, and what actually governs a foreign investor is the interface of the Tax Code: the denial of a permanent establishment for mere shareholding, taxation only through an establishment or at source, the 5 percent dividend withholding rate, source rates and treaty relief. The state-treaty layer is treated on another page; here the carrier is the Tax Code. Note also that foreign investment-treaty frameworks are not Georgian domestic law — the page is carried by Georgia's open-entry, tax-interface regime.
No Establishment from Mere Shareholding
The Tax Code's permanent-establishment rules contain the investor's principal protection written directly into the text: the ownership by a foreign enterprise of Georgian shares or units does not by itself create a permanent establishment. Portfolio and holding structures remain outside the tax net: owning a share in a Georgian company does not create a production or tax presence. On this norm the residency discussion also turns: the form of the investor's entry into the Georgian market decides whether it falls into the tax net only when it carries on real activity.
At the same time, the list of what is equated to a permanent establishment is broad: a construction site, an assembly or installation object and the supervisory activity connected with them; a rig or a ship used for the exploration of natural resources; the permanent base of a non-resident individual; and the place of management, a branch, a representation or any other subunit. And more: the management of the enterprise carried out by another person in its name and interests for more than three months is itself deemed a permanent establishment — prolonged management service must therefore never be confused with the neutrality of mere ownership.
Who Is a Taxpayer and When
A non-resident enterprise pays profit tax only on income derived from the activity of a Georgian permanent establishment or received from a Georgian source. Income from the realization of shares not attributable to a permanent establishment is taxed on the difference between the aggregate annual income and related deductions — this is the holding-exit formula when the investor sells the Georgian company to a third person.
The Code also gives an additional instrument to the non-resident with source-taxed income: until 1 April of the year following the reporting year it may submit a declaration demanding the recalculation and refund of the withheld tax. In that case its taxable income is determined as the difference between the aggregate Georgian-source income and the deductible amounts provided by the Code, and the tax paid may not exceed the amount taxed at source.