Quick facts
| Parameter | Details |
|---|---|
| Profit tax rate | 15% on the distributed amount |
| When the tax is triggered | At the moment of distribution (dividends and equivalent transactions) |
| Rate on reinvested profit | 0% |
| Dividend withholding tax | 5% (15% for non-residents in blacklisted jurisdictions) |
| Who this applies to | LLCs, JSCs, and other legal entities on the standard regime |
| Who is NOT on this regime | IEs with Small Business status (1% of turnover), Virtual Zone (0%), International Company (5%) |
| Annual filing deadline | 31 March of the following year |
What "only distributed profit is taxed" means
A standard corporate tax in most countries works like this: a company earns profit over the year, tax is charged on it, regardless of whether the company spends the money on growth or keeps it in the bank. Georgia works differently.
As long as profit remains inside the company, whether reinvested in equipment, spent on salaries, or covering business-related operating costs, no profit tax is triggered. The rate is 0%.
The 15% tax is not an annual year-end charge. It is triggered by a specific transaction classified as a distribution. The most obvious case is a dividend payment. But the law treats several other transactions as equivalent to a distribution: expenses not connected to the company's economic activity, gratuitous transfers of assets, and representation or other expenses exceeding statutory limits. In practice, tax is charged transaction by transaction, whenever value leaves the company, not once a year on total profit.
Who is on this model, and who is not
It matters not to confuse the Estonian model for legal entities with other regimes operating in Georgia in parallel.
On the Estonian model (15% on distribution): LLCs, JSCs, and other legal entities on the standard tax regime.
Not on this model:
- Individual entrepreneurs with Small Business status pay 1% of turnover, not 15% of distributed profit. See the Small Business Status article for details.
- Companies with Virtual Zone Person status, a benefit for IT companies serving foreign clients, pay no profit tax at all: 0%.
- Companies with International Company status pay 5% instead of 15% and are exempt from dividend tax.
The choice between these regimes depends on the legal form, turnover, and type of business. If you are unsure which regime applies to your structure, it is worth confirming before registration, not after.
Dividend tax: a second rate on top of the first
When a company pays out dividends, potentially two taxes apply, not one.
First, 15% on the distributed amount, this is the profit tax charged at the company level. Then, when dividends are paid to an individual, a dividend withholding tax of 5% applies to the amount remaining after the first tax. For non-residents in jurisdictions blacklisted by Georgia's Ministry of Finance, the withholding rate rises to 15%. Applicable double taxation treaties can reduce this rate for specific countries, down to 0% where certain ownership thresholds are met.
Illustrative calculation. A company earns 100,000 GEL and decides to distribute the full amount:
| Step | Amount |
|---|---|
| Net profit to distribute | 100,000 GEL |
| Profit tax at 15% | −15,000 GEL |
| Remaining after first tax | 85,000 GEL |
| Dividend withholding tax at 5% | −4,250 GEL |
| Received by the shareholder | 80,750 GEL |
The combined tax burden on distributed profit in this example is approximately 19.25%. This is an illustrative example without accounting for treaty relief, the exact figure depends on the recipient's status and tax residency.
What is not taxed
As long as profit does not leave the company, there is no tax. In practice this covers:
- Reinvestment in equipment, inventory, or business expansion
- Paying market-rate salaries to staff (taxed separately as payroll income tax, not profit tax)
- Reasonable operating expenses connected to the company's business
A company can operate for years, growing its assets, and never pay the 15% rate if it never distributes profit to owners.
Deadlines and filing
The annual profit tax declaration is filed through the personal cabinet on rs.ge. The filing and payment deadline is 31 March of the year following the reporting year. If the company made distribution-equivalent payments during the year (dividends, expenses over the statutory limit), those also carry periodic reporting obligations during the year, not only the annual return. See the dedicated article for a full walkthrough of filing an LLC's tax declaration in Georgia.
Does an LLC owe profit tax if it never pays dividends?
No. As long as profit stays inside the company and is not distributed, no profit tax is triggered. This is the core distinction of the Estonian model from a standard corporate tax.
How does LLC profit tax differ from the 1% Small Business status?
These are different regimes for different legal forms. Small Business status at 1% is available only to individual entrepreneurs and is calculated on turnover. The 15% profit tax applies to legal entities and is calculated on distributed profit, not turnover.
What is the combined tax burden on distributed profit?
In the standard scenario, this is 15% at the company level plus 5% dividend withholding tax on the remaining amount, giving an effective rate of roughly 19.25%. The exact figure depends on the recipient's residency and any applicable double taxation treaty.
What counts as a distribution besides dividends?
The law treats expenses not connected to the company's economic activity, along with certain expenses exceeding statutory limits, as equivalent to a distribution. This means tax can be triggered without a formal dividend payment.
Does this model apply to IT companies?
IT companies can opt into preferential regimes: Virtual Zone Person status at 0% on income from services to foreign clients, or International Company status at 5% with dividend tax exemption. The Estonian model's 15% remains the default regime for them if no preferential status has been obtained.