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LLC Tax Planning

Does an LLC pay tax on foreign income?

Yes, a Georgian LLC is taxed on its worldwide income if that income is distributed. However, foreign-sourced income might be exempt from VAT. Also, Double Taxation Treaties can allow you to credit taxes paid abroad against Georgian liabilities. We analyze your international flows to optimize the tax load.

Can I expense my personal car or rent?

You can only deduct expenses directly related to business activities. Renting an office is deductible. Using a personal car for business requires a lease agreement between you and the LLC, or proper fuel logs. Without documentation, the tax authority will treat these as personal benefits (taxable salary) or non-economic expenses (15% tax).

What if my LLC has no activity?

If your LLC is inactive, you must file "zero" tax declarations monthly to avoid penalties. Alternatively, you can apply to the Revenue Service to pause the tax status. However, annual property tax declarations might still be required if the LLC owns assets. We manage compliance for dormant companies.

Is it better to pay salary or dividends to the founder?

Generally, dividends are more cash-efficient because they avoid the 4% pension contribution required on salaries. Both attract a ~20% effective tax rate (15% CIT + 5% Dividend vs. 20% Income Tax). However, paying a minimal salary is often recommended to justify the director's work and maintain banking compliance.

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The Limited Liability Company (LLC) is the most common business form in Georgia, characterized by flexibility and limited liability. LLC Tax Planning involves selecting the optimal tax model for Small and Medium Enterprises (SMEs). While standardly all LLCs are taxed under the "Estonian Model," special statuses ("Small Business" for individuals, but not for LLCs) often cause confusion. Many entrepreneurs face a dilemma: register as an LLC or an Individual Entrepreneur? How to plan VAT registration? How to manage dividends for partners? Tax planning helps LLCs avoid unnecessary costs and utilize all legislative advantages.

Our service includes developing a tax strategy tailored for LLCs. Specialists offer:

  • Analyzing the feasibility of LLC registration relative to the business model;
  • Calculating the benefits of voluntary VAT registration;
  • Optimizing the ratio of founder's salary to dividends (salary 20%, dividend 5%+15% deferred);
  • Analyzing the tax efficiency of lease, loan, and service agreements;
  • Implementing an internal expense documentation system;
  • Planning the tax calendar and cash flow.
This service is ideal for startups and growing companies.

LLC tax planning is needed, for example, when a company approaches the 100,000 GEL turnover threshold. This triggers VAT liability. Planning can defer this moment or prepare for price adjustments. Another example is when a partner wants to withdraw money from the business. Taking it as salary incurs an immediate 20% tax, while dividends incur less but are procedurally more complex. Also, an LLC with high operating expenses needs meticulous documentation to avoid them being taxed as "non-economic expenses."

The legal framework relies on the "Tax Code of Georgia" and the "Law on Entrepreneurs." The LLC tax regime differs from the Individual Entrepreneur regime (which can enjoy a 1% tax), so the right choice is critical. A lawyer will help you assess whether LLC status is worth it for your specific activity.

The process begins with analyzing the business plan. The lawyer simulates: What taxes will the LLC pay over one year under different scenarios? Then, the optimal model is selected and implemented. With the help of a specialist on Legal.ge, you receive tax solutions tailored to your business.

Legal.ge is a platform supporting SMEs. Managing an LLC shouldn't be a tax nightmare. Make your business efficient and compliant with Legal.ge.

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