Royalty in Georgia: Taxation explained in simple terms

What is a royalty?

Royalties are remuneration paid for the use of intellectual property such as copyrights, patents, trademarks and know-how. For example, it could be a fee for using a song, software, or a secret formula.

How are royalties taxed in Georgia?

Royalty tax in Georgia depends on several factors:

• Residence of the payer: Whether the company paying the royalties is a resident of Georgia or not.
• Residence of the recipient: Whether you, as the recipient of the royalties, are a resident of Georgia or not.
• Presence of a permanent establishment: Whether the company paying the royalties has a permanent establishment in Georgia.

Basic rules for taxation of royalties

• If the company paying the royalties is a non-resident of Georgia and does not have a permanent establishment in Georgia, then a tax of 5% is withheld from the royalty amount.
• If the company, paying the royalties is a resident of Georgia, and you are a resident of Georgia, then a tax of 20% is withheld from the royalty amount.
• If the company paying the royalties is a resident of Georgia, and you are a non-resident of Georgia, then a tax of 5% is withheld from the royalty amount.

Important to understand

• The tax is withheld by the royalty payer. You do not need to pay this tax yourself.
• The amount of withheld tax is reflected in your tax return.

Example: Imagine that you, as a resident of Russia, created a mobile application and sold a license for its use to a Georgian company. This company will withhold 5% of the royalty amount and transfer it to the Georgian tax service.

What to do if you received royalties?

• Keep all documents related to the payment of royalties: contracts, payment documents, etc.
• Include information about the royalties received in your tax return.
• If you are a resident of Georgia and received royalties from which a 20% tax was withheld, you can claim the right to offset this tax when calculating other taxes.

When to consult a tax advisor?

If you have difficulties understanding the taxation of royalties in Georgia or your situation is non-standard, it is recommended to consult a tax advisor.