Tax and trade relations between Georgia and China have gained particular importance in recent years, driven by the Free Trade Agreement between the countries and the growing transit potential of the "Middle Corridor." Doing business with China requires specific tax knowledge, as it involves not only standard tax regulations but also a complex system of international trade, customs taxation, and cross-border transactions. Georgia is one of the few countries in the region with a free trade regime with China, which implies zero customs duties for more than 90% of Georgian products. However, to benefit from these exemptions, correct administration of certificates of origin and adherence to the "direct transport" rule are essential. Additionally, a Double Taxation Avoidance Treaty exists between the two countries, regulating the taxation of dividends, interest, and royalties. Incorrect tax planning when dealing with Chinese partners can lead to significant financial losses, such as overpayment of import VAT or high withholding taxes on service payments.
Through our platform, you can connect with specialists who provide full support in Georgia-China tax matters. This service includes:
- Application of Free Trade Agreement: Consulting on rules of origin to benefit from 0% customs rates during export and import.
- Double Taxation Relief: Utilizing the Georgia-China DTT, including applying reduced withholding tax rates (5% or 10%) on dividends, interest, and royalties.
- Import Taxation and VAT: Proper management of VAT taxation and credit mechanisms for goods imported from China.
- Structuring Transit Operations: Tax planning for cargo moving from China to Europe via Georgia (re-export regimes).
- Taxation of Services: Issues regarding VAT exemption and reverse charge rules for services provided to Chinese companies (e.g., marketing, IT).
- Opening Representation and Taxation: Registration of branches of Chinese companies in Georgia and determination of their tax liabilities.
In practice, we often encounter situations where this service is critical. For example, a Georgian wine producer plans to export to China and wants to ensure their products are exempt from Chinese import duties; this requires properly preparing documentation analogous to the EUR.1 certificate. Another example is a Georgian trading company buying electronics in China and selling them to a third country without the goods physically entering Georgia; questions arise here regarding corporate income tax and VAT. Also common is the case where a Chinese construction company implements an infrastructure project in Georgia and needs to manage Permanent Establishment risks and pay local taxes.
The legal framework is based on the Tax Code of Georgia and the Free Trade Agreement between the Government of Georgia and the Government of the People's Republic of China. Also crucial is the Agreement on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital. The combination of these documents creates a unique regime, knowledge of which is essential. For instance, the Free Trade Agreement defines "criteria of origin," violation of which leads to the cancellation of benefits. Specialists also utilize provisions of the Customs Code when defining import/export procedures.
The service process begins with a detailed analysis of the transaction. If it concerns trade in goods, the expert checks HS Codes and their status in the Free Trade Agreement. For services, the place of supply is determined for VAT purposes. If the Chinese party requests tax withholding, the Georgian consultant helps the client obtain a residency certificate and apply DTT benefits. Contracts are also reviewed from a tax perspective to avoid unforeseen tax liabilities (e.g., "Gross-up" clauses).
Legal.ge is the ideal place to find lawyers and tax consultants with experience working with China. The Chinese tax system and business culture are specific, so a qualified advisor is necessary for successful operations. Specialists registered on our platform will help you utilize all tax advantages of the strategic partnership between Georgia and China. Find your expert on Legal.ge today.
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