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Partnership Tax Structuring

Can a foreign company join a Georgian partnership without a local branch?

Yes, a foreign legal entity can be a partner in a Georgian Joint Venture (Partnership) without establishing a separate branch. However, tax implications regarding permanent establishment must be carefully analyzed.

How is VAT handled in a Joint Venture?

The Joint Venture itself registers as a separate VAT payer. It issues VAT invoices and claims input VAT credits independently from its partners. This centralization simplifies tax compliance for the project.

What is the tax rate on partnership profits?

The partnership itself is not taxed on profit. Instead, profit flows through to the partners. Corporate partners include it in their corporate tax base (15% on distribution), while individual partners pay personal income tax (20%).

Is a written agreement mandatory for tax purposes?

Yes, a written partnership agreement is essential. It must be submitted to the Revenue Service to obtain a Tax ID number and clearly define profit/loss sharing ratios to avoid disputes during tax audits.

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A Partnership (Joint Venture) is a form of business where partners unite for a specific goal without necessarily creating a separate legal entity (or forming a General Partnership - GP). Partnership taxation differs from LLC taxation and is characterized by specific rules. Specifically, a partnership is not a profit tax payer in the classical sense; its income is distributed to partners and taxed at their level (though exceptions and nuances exist). Tax structuring is essential to determine who pays the tax (the partnership or the partner), how VAT credits are allocated, and how losses are carried forward. An improperly structured partnership often leads to tax disputes and uncertainty among partners.

Our service includes creating a partnership tax model. Specialists offer:

  • Tax analysis of the partnership agreement;
  • Developing a profit/loss distribution scheme for tax optimization;
  • Procedures for registering the partnership for tax purposes;
  • VAT and excise registration issues (a partnership can be a separate VAT payer);
  • Harmonizing tax regimes of partners (individuals and legal entities);
  • Assessing tax risks of Joint Ventures.
This service ensures transparency and fairness among partners.

Partnership structuring is needed in projects like joint real estate development. A landowner and a developer sign a partnership agreement. It is crucial to determine when the tax liability arises — upon transfer of apartments or upon sale. Another example is a consortium of two companies participating in a tender. They must decide who will be the tax agent and how income will be distributed to avoid double VAT. Also, for partnerships of individuals, correct administration of income tax is important.

The legal framework relies on the "Tax Code of Georgia" (special articles on partnership taxation) and the "Civil Code." The Tax Code obliges the partnership to act as a tax agent for partners in certain cases. A lawyer ensures this complex mechanism is set up correctly.

The process begins with analyzing the partners' status and contributions. The lawyer drafts an agreement detailing tax liabilities. Then, the partnership is registered with the tax authority (obtaining an ID number). With the help of a specialist on Legal.ge, you will create a flexible and effective structure for joint business.

Legal.ge is a platform giving you access to experts in complex transactions. A partnership is a specific tool requiring professional tuning. Manage your partnership successfully with Legal.ge.

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