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Corporation Tax Optimization

Does the "Estonian Model" allow indefinite tax deferral?

Yes, under the current Georgian tax code, you can defer corporate income tax payments indefinitely as long as you do not distribute profits (dividends) and do not incur expenses unrelated to economic activity. If you reinvest your profits into business expansion, buying assets, or paying salaries, your corporate tax liability remains zero for that period.

How are expenses for foreign employees taxed?

Expenses for foreign employees (housing, travel, meals) can be deductible if they are part of the employment contract and deemed necessary for business operations. However, if these are seen as personal benefits rather than business necessities, they may be taxed as "non-economic expenses" or as employee salary benefits. Proper structuring of employment contracts is key to optimization.

What counts as a "valid" document for tax deduction?

To avoid expenses being classified as non-economic (and thus taxable), every transaction must be supported by a valid tax document (e-invoice uploaded to the RS.ge portal). Simple receipts or foreign invoices without proper translation and proof of payment might be rejected during an audit, leading to penalties. We ensure your documentation meets strict local standards.

Can I write off bad debts without paying tax?

Writing off bad debts is complex. Simply deciding a debt is uncollectible is not enough; you generally need to prove that you have taken all legal measures to collect it (e.g., court decision or enforcement bureau act). Without this evidence, writing off a debt is treated as a taxable transaction (gratuitous supply). We guide you through the legal steps to write off debts tax-efficiently.

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Corporation Tax Optimization in Georgia relates directly to the correct application of the "Estonian Model." In effect since 2017, this model offers a unique opportunity for businesses to defer tax liabilities indefinitely as long as profits remain in the company and are used for its development. However, optimization entails more than just deferral; it involves managing expenses to minimize the risk of being classified as "non-economic expenses." Many companies overpay taxes because they fail to substantiate the economic substance of an expense or document it incorrectly. The goal of optimization is to legally minimize the taxable base at the moment of profit distribution.

Our service includes a comprehensive approach to profit tax management. Specialists offer:

  • Auditing the expense structure for tax purposes (deductible vs. non-deductible);
  • Planning an optimal dividend distribution schedule;
  • Strategies for issuing loans and advances to prevent them from being qualified as dividends;
  • Legally documenting write-offs of shortages and losses;
  • Effectively using limits on representative expenses;
  • Analyzing alternative taxation methods (e.g., small business status for certain activities).
This service directly results in an increase in your company's free cash flow.

Optimization examples are diverse. For instance, a company plans overseas training for employees. If not properly documented (as qualification improvement), this expense might be considered a personal benefit to the employee and taxed. Another example is marketing activity — giving gifts to clients. If the value and purpose of the gift are not correctly documented, it counts as a gratuitous supply and is subject to profit tax. Also, writing off bad debts requires strict adherence to procedures for the tax authority to recognize it as an expense.

The legal framework relies on Articles 97 and 98 of the "Tax Code of Georgia," which define the object of taxation (distributed profit, incurred expense). Ministry of Finance situational manuals explaining the economic substance of specific expenses are also important. A lawyer uses these regulations to substantiate the connection of your expenses to economic activity.

The process begins with an analysis of the company's expenditures. The lawyer identifies "gray areas" — expenses with high tax risk. Recommendations are then developed: how to modify contracts, what additional documentation is needed (e.g., defect acts, travel reports). With the help of a specialist on Legal.ge, you can transform tax obligations into a controlled and predictable process.

Legal.ge is a platform connecting you with practicing tax experts. Do not pay more than the law requires. Optimization is your business right — use it with Legal.ge.

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