Nobody wants to pay high taxes, much less twice. If you are a non-resident of the country and receive income in Georgia, it may happen that you will need to pay taxes here and in the country of residence. To prevent this from happening, there is an agreement between the countries aimed at avoiding double taxation. Georgia has signed relevant international treaties with more than 50 states. Read this article to find out what will help to confirm your preferential status, and how to correctly draw up a certificate from a non-resident of Georgia to avoid double taxation.
What is Double Taxation Avoidance Agreement
The main purpose of the double taxation treaty is to control tax evasion and to promote trade cooperation between countries, as well as to stimulate foreign investment. The standard agreement concluded by Georgia with friendly countries is based on the model agreement of the OECD tax convention, according to which tax rights are distributed among partners depending on the agreed conditions. Namely, a resident of one country receiving income from another country may be taxed both in the state of the source of income and in the country of residence. In order to avoid double taxation, income received by a resident of one country from another country will be credited to the tax account of the source state. The Double Taxation Treaty also regulates issues related to the prevention of tax evasion and the means of applying internationally recognized standards for the exchange of information for tax purposes.
Georgia has 57 double taxation treaties for 2021.
How to avoid tax problems during a transaction with foreign counterparties
When importing / receiving services from non-residents, there is a tax at the source. If Georgia has an agreement on the avoidance of double taxation with the country where the counterparty is registered, then this tax can be avoided. But the agreement avoids only the withholding tax. As for the reverse VAT that arises when purchasing services from a non-resident - with the help of this agreement, you will not be able to avoid paying.
What documents are the official confirmation of the possibility of avoiding double taxation
In order not to pay tax at the source, you need to submit twice to the Tax Certificate stating that the counterparty who provides the service is a tax resident of the country with which Georgia has an agreement. You can find out the entire list of countries by clicking on the link given above. This certificate is issued by various authorities in different countries, in Georgia, it is the Revenue Service.
Certificate form to avoid double taxation
Practically all over the world, a unified form of the certificate has been adopted in order to avoid double taxation, the so-called 'Certificate of Residence'. It is filled indifferently, but the essence is the same. It indicates that an individual or legal entity is tax residents of a particular country. The certificate is valid for 1 calendar year.
How to prove the authenticity of the certificate for the state
It is mandatory that a certificate of tax residency, which avoids double taxation, is legalized in some countries, and in some, it is apostilled. There are countries that have signed a special agreement for the CIS, according to which documents are accepted without legalization and apostille. These include all CIS countries, except for the Baltic states.
Apostille is a state procedure for legalizing documents issued by anybody or certified by a notary, a special form adopted by the countries that signed the Hague Convention in 1961. This procedure is considered a more simplified document legalization system. The Hague International Convention abolishes the requirements for the legalization of foreign documents for the participating countries but requires a mandatory apostille.
The rest of the countries accept the document of another country only after legalization. Therefore, apostille or legalization depends only on the country of residence. Georgia is included in the list of countries that have signed the Hague Convention.
An official translation is required. In Georgia, the certificate must be submitted in the Georgian language, because the state authorities of the country do not accept documents in a foreign language. The translation must be notarized. The certificate may not be legalized and not apostilled (for example, issued by Ukraine, which does not require these procedures in Georgia), but the translation must be notarized and made by a certified translator.
We will give an example from the experience of our clients in order to clearly show the procedure for avoiding double taxation in Georgia:
Our client is a resident of Slovakia, but at the same time, he is the founder of a company in Georgia. When the founder distributes profits and receives dividends, he pays tax on dividends not in Georgia, but in Slovakia, where he is a tax resident. In Slovakia, the tax on dividends is 7%, in Georgia, it is 5%, so the beneficiary does not have any obligation to declare the difference in tax downward. Every year he provides a standard certificate of his tax residency, which will be translated into Georgian and notarized.
Important! Payments to non-residents are declared monthly in the income tax return. It is necessary to indicate that this person is a non-resident and is a resident of another country with which Georgia has an agreement on the avoidance of double taxation. But evidence of this (in the form of a certificate) is submitted only once a year - until April 1 of the year following the reporting year.
If you have any questions or need a certificate from a non-resident of Georgia to avoid double taxation, leave a request to get a free consultation.