Georgia or Cyprus: the difference is called the EU

The comparison is almost always run on rates and almost never on the line that actually counts. Cyprus is a member state of the European Union, Georgia is not — and German international tax law treats the two sides of that line differently.

Where the line becomes visible in the statute

Controlled-foreign-company taxation attributes certain income of a foreign company to a German-taxable shareholder as though they had earned it themselves. There is a defence against it: anyone who shows that the company pursues a substantial economic activity can avert the attribution. That defence is limited under section 8(2) AStG to companies with their seat or place of management in an EU member state or an EEA state.

What each of them speaks for

Constellation	Cyprus	Georgia
Shareholder remains taxable in Germany the substance defence is open only to EU/EEA
The person actually leaves the CFC regime then no longer applies anyway	possible, but not the core of the location
Legal framework	EU law, EU directives, euro	an independent legal system outside the EU
Reporting standard	participating state	participating state

The question before the country question

• Is the person being relocated, or only a company incorporated?
• Does unlimited taxation in Germany continue?
• Can a substantial economic activity at the seat be shown at all?
• Does exit taxation stand in the way — and has it been settled?

Anyone who has answered these four needs no country comparison, because the answer follows from them. On the last: exit taxation; on when Germany continues to reach across despite departure: extended limited tax liability.

Georgia and Cyprus — frequently asked

Why is EU membership the decisive point?

Because German international tax law attaches to it. The substance defence that averts controlled-foreign-company taxation is, on the wording of the statute, limited to companies in EU and EEA states. For a third-country company that route is not open in the same way.

Does that make Cyprus better?

Only for one constellation. The point bites while the shareholder is taxable in Germany. Anyone who actually leaves and is no longer subject to unlimited German taxation falls outside the regime — and the advantage falls away with it.

What speaks for Georgia then?

The case where the person is relocated and not merely a company incorporated. Georgia is a home base with territorial taxation; Cyprus is first of all a corporate location inside the EU legal framework.

Can the two be combined?

Combinations are conceivable, but they increase the number of legal systems in which everything has to be right. We advise it only where there is a concrete reason, not because it looks like more protection.

This article is general information and does not constitute legal or tax advice. What is sourced here is the Georgian and the German side; the legal position of the country compared should be confirmed there before any decision. As at August 2026.