“I’ll incorporate in Georgia, then the German authorities lose jurisdiction.” We have been hearing that sentence in Tbilisi for years — and it is the most expensive misconception in our business. Not because there is anything wrong with Georgian structures, but because it names the wrong lever. This article works through four areas of law one by one and shows what German jurisdiction actually attaches to: almost never the registered address.
Four regimes, four connecting factors
The central error is assuming there is one jurisdiction. Each area of law has its own connecting factor — and none of them is the registry entry:
| Area of law | What it attaches to | |
|---|---|---|
| Corporate income tax | Seat **or** place of management (§ 1 KStG, § 10 AO) | Where the decisive decisions are actually taken |
| Personal income tax | Residence or habitual abode (§ 1 EStG, §§ 8, 9 AO) | Where you actually live — independent of any company |
| Media supervision | Actual establishment of the provider (MStV) | Where the editorial activity takes place |
| Unfair competition Applicable law, targeting and enforceability are three separate questions — see section 3 | Market-effects principle (Art. 6 Rome II) | Which market the offering specifically targets |
| Data protection | Market-effects principle (Art. 3(2) GDPR) | Whose data you process — plus representative duty |
1. Tax law: the place of management decides
This is where structures most often fail — and the most expensive one, because it applies retroactively.
Under § 1(1) KStG a corporation is subject to unlimited German corporate income tax if it has its seat or its place of management in Germany. The “or” carries the entire weight: a foreign seat does not exclude German tax liability if management sits domestically.
Where management sits is determined by § 10 AO: at the centre of top-level business management — where the decisions governing day-to-day business are actually taken. Not where they are minuted.
Two further provisions apply independently:
§ 42 AO — abuse of legal structuring options
A legal arrangement that serves only to avoid tax and has no non-tax rationale is not recognised for tax purposes. Taxation then proceeds as though the appropriate arrangement had been chosen. A company with no activity of its own, no staff and no economic function is the textbook case.
§§ 7 et seq. AStG — controlled foreign company rules
Where a controlled foreign company earns passive income that is taxed at a low rate, Germany attributes that income directly to the domestic shareholder — regardless of whether any distribution was made. The deferral effect of the intermediate company disappears. Active, operating business with genuine substance is the decisive difference.
And finally: your personal tax liability does not depend on the company at all. Under § 1 EStG you remain subject to unlimited tax liability as long as you have a residence (§ 8 AO) or habitual abode (§ 9 AO) in Germany. No structure in the world changes that. On top of which: Georgia has participated in the automatic exchange of information (CRS) since 2024 — accounts are reported in any case. Details in CRS and Georgia.
2. Media supervision: the actual establishment
This is where the common assumption comes closest to working — supervisory jurisdiction does attach to the provider’s establishment, and the German media authorities determine the competent state authority by the federal state in which the provider is based.
But here too it is the actual establishment that counts, not the registered one: the place where the activity is carried out and the editorial decisions are taken. Someone living in Germany, producing here and publishing here does not move that place through a registry entry. And even if media-law jurisdiction fell away, unfair competition law would remain fully applicable — the practically more relevant channel, as the case in Ad disclosure: a EUR 37,803.50 fine shows.
3. Unfair competition: three questions that get conflated
Precision pays here, because advisory practice routinely fuses three independent questions into one — which produces both exaggerated warnings and exaggerated hopes:
Applicable law, targeting, enforcement
-
1 — Which law applies?
Art. 6(1) Rome II attaches to the market: the governing law is that of the country where competitive relations are affected. But that is only the choice-of-law question — it presupposes that the German market is affected at all.
-
2 — Is the German market actually targeted?
This is where the basis is thinner than often claimed. Under the ECJ case law on directing activity (Pammer and Hotel Alpenhof, C-585/08 and C-144/09), mere accessibility of a website plus the use of a language or currency already customary in the provider's own state is expressly not sufficient. German is an official language in Germany, Austria, Switzerland, Liechtenstein and Luxembourg — a German-language offering priced in euros points just as readily to Austria.
-
3 — Can a judgment be enforced?
Against a Georgian company with no assets in the EU, barely. The European enforcement regimes (Brussels Ia, Lugano) do not cover Georgia, and no bilateral German-Georgian recognition and enforcement treaty exists. A German judgment would have to pass a Georgian exequatur procedure whose success turns on reciprocity.
The second stage deserves particular attention because warning-letter practice likes to skip it. Mere reachability of an offering from Germany does not establish targeting of the German market — otherwise every state could claim worldwide application of its law to everything online. Additional, externally recognisable indicators are needed:
- Delivery or performance into Germany
- German top-level domain (.de) or a German phone number
- Prices, shipping options or references specific to Germany
- Paid advertising geo-targeted at Germany
- German-language content on its own
- Pricing in euros on its own
- Mere accessibility of the website from Germany
- A German-language social channel with no German nexus
4. Data protection: more obligations, not fewer
The most frequently overlooked point actually inverts the expectation. Under Art. 3(2) GDPR the regulation also applies to controllers without an establishment in the EU, where they offer goods or services to people in the Union or monitor their behaviour. The GDPR therefore applies unchanged.
In addition, Art. 27 GDPR requires controllers in third countries to designate a representative in the Union in writing. A Georgian company serving German customers ends up with one obligation more than a German GmbH — not fewer.
What actually holds up
That makes the effective lever clear. It is not the corporate seat but relocating your own centre of life and decision-making, backed by substance:
The robust sequence
-
1 — Move your personal residence
Genuinely give up your German residence (§ 8 AO), move your centre of life, establish Georgian tax residency — via the 183-day rule or the HNWI programme. Before that, no structure works.
-
2 — Prepare the departure in tax terms
Work through exit taxation under § 6 AStG and extended limited tax liability under § 2 AStG with your tax adviser at home — before the move, not after it.
-
3 — Actually move the management
Decisions must be taken in Georgia and documented there. A director on the ground, own premises, own staff, own infrastructure — that is the difference between substance and assertion.
-
4 — Wind down domestic interests
As long as substantial economic interests remain in Germany, § 2 AStG stays in play for up to ten years. Only genuinely winding them down ends the connection.
Further reading: Georgia tax residency, building substance, Emigration: 8.2 million Germans and — for the location audit plus the Georgian-company and US LLC building blocks — Germany is quietly falling apart.
What a Georgian company achieves even without relocating
So as not to leave a false impression — the honest counter-calculation. Even while you remain tax resident in Germany, a Georgian structure can be used sensibly, provided it is fully declared:
- Jurisdictional and currency diversification outside the euro area
- Operating base for Caucasus and Black Sea region markets
- Employing Georgian specialists at competitive cost
- A prepared structure for a later, orderly move
- Multi-currency accounts at stable banks (BoG, TBC, Liberty)
- A tool for concealing income from the tax office
- A shield against warning letters from the German market
- A substitute for giving up your German residence
Georgia’s advantage was never secrecy — the country has been a CRS participant since 2024. The advantage is a simple, low and stable tax regime for people who actually move there, and a solid basis for anyone who wants to keep that option open. Which is why the honest answer to “am I out?” is a clear no — and the far better question is: “what would I have to change for this to hold up?”
Frequently asked questions
FAQ
Does a Georgian company take me out of German jurisdiction?
No, not while you live in Germany and take decisions from there. Under § 1 KStG in conjunction with § 10 AO a company is subject to unlimited German corporate income tax if its place of management is domestic — regardless of the registered seat. Your personal tax liability under § 1 EStG attaches to your residence anyway, not to the company.
What exactly is the place of management?
Under § 10 AO it is the centre of top-level business management: the place where the decisions governing day-to-day business are actually taken. What counts is lived practice, not where minutes are signed. Anyone steering a Georgian company from Germany creates a place-of-management permanent establishment there.
Does a Georgian company protect me from unfair-competition warning letters?
It depends, and the question splits into three. First, applicable law: Art. 6(1) Rome II attaches to the market. Second, targeting: under ECJ case law (Pammer and Hotel Alpenhof), mere accessibility plus a language or currency already customary in the home state is expressly not sufficient — German and euros point to Austria just as well. Third, enforcement: against a Georgian company with no EU assets a German judgment is barely enforceable, since neither Brussels Ia nor any bilateral treaty applies. All of this only holds, however, if you are no longer reachable in Germany yourself.
Does the GDPR apply to my Georgian company?
Yes, as soon as you offer goods or services to people in the EU or monitor their behaviour (Art. 3(2) GDPR). In addition, controllers in third countries must designate a representative in the Union under Art. 27 GDPR. On balance this creates more compliance effort than a German company, not less.
So when does a Georgian structure actually help?
When it is paired with genuine relocation: German residence given up, Georgian tax residency, decisions actually taken in Georgia, and domestic interests wound down. And even without relocating it is legitimately useful — for jurisdictional and currency diversification, staff on the ground, and as a prepared option — provided everything is fully declared.
Is this not simply abusive tax structuring?
A structure with genuine economic function, its own substance and non-tax reasons is not. It becomes problematic with companies that have no activity, staff or function — precisely what § 42 AO targets, with CFC taxation under §§ 7 et seq. AStG applying on top for passive, low-taxed income. The difference is substance, not wording.
This article is general information and does not constitute legal or tax advice. Assessing place of management, substance, CFC taxation and departure is always a case-specific question with significant financial consequences. You must involve a tax adviser in your home country and — for advertising activity — a lawyer specialising in competition law. As of August 2026, subject to changes in the legal situation.