Georgia’s transfer pricing laws align with the Guidelines set by the Organization for Economic Co-operation and Development (OECD). They are incorporated within the Tax Code.
Arm’s Length Principle
In Georgia, the arm’s length principle means that when a Georgian company carries out transactions with a related foreign entity, both parties must calculate their profits as if they were independent and dealing under normal market conditions. If the terms of the transaction differ from those that unrelated companies would agree to, the tax authorities can adjust the taxable profits.
Related Party Definition
In Georgia, two parties are considered related for transfer pricing purposes if one directly or indirectly controls or manages the other, or holds its capital. Similarly, if the same person or group controls or owns two different entities, those entities are also deemed related. Ownership of more than 50% of a company is automatically treated as involvement in management or control. Furthermore, any resident of a country with preferential tax treatment is always considered related to a Georgian entity they transact with, even without ownership or control links—meaning transfer pricing rules apply by default in such cases.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Georgia are:
- Comparable Uncontrolled Price Method (CUP)
- Resale Price Method (RSM)
- Cost Plus Method (CPM)
- Transactional Net Margin Method (TNMM)
- Profit Split Method (PSM)
The selection of the method is based on the “best method” principle.
Comparability Analysis
The comparability analysis is used to evaluate whether a transaction between related parties is in line with market conditions. The guidance and standard for performing a comparability analysis in Georgia is aligned with Chapter III of the TPG. An uncontrolled transaction is considered comparable if there are not big differences affecting the financial indicators, or if those differences can be adjusted. In Georgia, the specific rules for determining whether a price meets the arm’s length standard are set by the Ministry of Finance. Secret comparables are not allowed, and there is no preference for domestic comparables over external ones.
Documentation Requirements
In Georgia, the transfer pricing documentation includes information on primary accounting records, tax adjustment records, and evidence to demonstrate an arm’s length result. Taxpayers need to provide the data either in Georgian or English and, if requested by the Revenue Service, present it within 30 calendar days.
Country-by-Country Reporting (CbC)
In Georgia, multinational enterprise (MNE) groups with consolidated revenue exceeding €750 million in the previous year must file a Country-by-Country (CbC) report by December 31 following the end of the reporting year. This requirement, effective from January 1, 2025, applies to both ultimate parent entities and surrogate parent entities. The report must include detailed financial and tax information by jurisdiction. Georgia has signed the OECD Multilateral Competent Authority Agreement for the automatic exchange of CbC reports. Failure to submit the report on time may result in a fine of 5,000 GEL.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
Georgia uses both, APA and MAP procedures to manage and resolve international tax disputes, in compliance with OECD guidelines. APAs are agreements made between the taxpayer and the tax authorities, in advance, to avoid tax disputes regarding transfer pricing methodology.
Taxpayers can apply for a unilateral APA with the Revenue Service before starting a transaction. The procedure sets the transfer pricing rules for a specific cross-border transaction and is valid for up to three years, with no rollback option. Once signed, the taxpayer must follow the agreed terms, and the tax authorities cannot impose conflicting taxes or penalties. There is a fixed application fee of GEL 30,000, and companies can apply regardless of the transaction value.
Penalties
Georgia does not apply penalty provisions for improper pricing. Instead, general tax penalty rules apply when tax is underreported or underpaid due to non-arms length pricing.
Taxation at a Glance
Georgia has five national taxes: personal income tax, corporate income tax, value-added tax (VAT), excise tax, and import tax. Georgia also imposes a local property tax. The main tax legislation is the Tax Code of Georgia. The tax authority – Revenue Service, is responsible for administering the tax system. Georgia’s currency is the Georgia lari (GEL).
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 15% |
VAT | 18% |
Withholding tax on dividends to non-residents | 5% |
Withholding tax on interest to non-residents | 5% |
Withholding tax on royalties to non-residents | 5% |
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