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Estonian Tax Model in Georgia

0% corporate tax on retained profits β€” pay taxes only when you distribute dividends

What is the Estonian Tax Model?

Georgia adopted the Estonian corporate tax model in 2017, making it one of the most attractive tax jurisdictions in the world. Under this system, companies pay 0% corporate income tax on retained (reinvested) profits. Tax is only due when profits are distributed as dividends.

This model encourages business growth and reinvestment, allowing companies to keep more capital for expansion, R&D, and hiring.

How It Works

Traditional System: Earn 100,000 GEL profit β†’ Pay 15,000 GEL tax β†’ Keep 85,000 GEL

Estonian Model: Earn 100,000 GEL profit β†’ Reinvest β†’ Pay 0 GEL tax β†’ Keep 100,000 GEL

Tax is only triggered when you distribute dividends: 15% on the grossed-up amount (effective rate ~17.65%)

0% on Retained Profits

Reinvest your profits without paying any corporate tax

Accelerated Growth

More capital available for expansion and investment

Tax Deferral

Defer taxes indefinitely while profits remain in the company

Simple Compliance

No advance tax payments, no complex calculations

When Is Tax Due?

Under the Estonian model, corporate income tax is triggered by:

Dividend Distribution

When profits are distributed to shareholders

  • 15% tax on grossed-up amount
  • Effective rate: ~17.65%
  • Withholding tax may apply to non-residents

Deemed Distributions

Certain expenses treated as distributions

  • Non-business expenses
  • Gifts and donations (above limits)
  • Representative expenses (above limits)

Transfer Pricing Issues

Non-arm's length transactions

  • Below-market sales to related parties
  • Above-market purchases from related parties
  • Interest-free loans to shareholders

Liquidation

When company is wound up

  • Accumulated profits become taxable
  • Planning opportunities available
  • Proper structuring can minimize tax

Our Estonian Model Services

1

Tax Structure Analysis

We analyze your business and determine if the Estonian model is right for you.

2

Implementation

Set up proper accounting systems to track retained vs. distributed profits.

3

Ongoing Monitoring

Track deemed distributions, ensure compliance with transfer pricing rules.

4

Dividend Planning

Strategic planning for tax-efficient profit extraction when needed.

Is the Estonian Model Right for You?

βœ… Ideal For:

  • Growing businesses reinvesting profits
  • IT and service companies
  • Holding companies
  • Businesses with long-term growth plans
  • Companies with foreign shareholders

⚠️ Consider Carefully If:

  • You need regular dividend income
  • Business has many non-deductible expenses
  • Complex related-party transactions
  • Planning to sell business soon

Ready to Optimize Your Taxes?

Let us help you understand if the Estonian tax model is right for your business.

Get Free Consultation