Anyone planning a holding structure with Georgia — residence in Tbilisi, a foreign operating company such as a US LLC or UK Ltd — faces one central design question as of July 2026: how do you run the company without creating a permanent establishment (PE) in Georgia? The answer is not a trick but a clean division of roles between owner and director.
The PE rules: a design requirement, not a trap
The starting position is attractive: individuals who are tax resident in Georgia pay 0% income tax on income without a Georgian source (Art. 82.2.u of the Georgian Tax Code, GTC) — including distributions from a foreign company. Details: Tax-free foreign income.
These are not traps but clear design requirements. Build them into the structure from day one and there is no problem; ignore them and you risk retroactive taxation. The target group meets the requirement naturally: owners who do not want to work in day-to-day operations, but want their company run for them.
The director solution: work on the business, not in it
The core of the design: an employed director outside Georgia runs the operating business — client relationships, contract signing, day-to-day decisions, staff management. The owner resident in Georgia confines himself to shareholder rights: fundamental decisions, profit allocation, oversight and the development of new projects.
This is more than tax structuring: delegating to a director is the classic scaling lever. A company that only functions when the owner intervenes daily is neither sellable nor able to grow — the PE-compliant structure and the commercially sensible structure coincide here.
| Owner (Georgia) | Director (outside Georgia) | |
|---|---|---|
| Day-to-day operations, client service | ||
| Contract signing in the ordinary course | ||
| Staff and supplier management | ||
| Fundamental decisions (strategy, budget) | Yes — shareholder level | Execution |
| Profit allocation, distribution resolutions | ||
| Oversight and sign-off on reporting | Yes | Reporting duty |
| Development of new projects/holdings |
The Revenue Service examines substance, not contract titles — the division of roles has to be lived and provable:
- Management/director agreement with duties, powers and arm’s-length remuneration
- Board minutes and shareholder resolutions for fundamental decisions
- Documented decision locations: negotiation, signing and meetings outside Georgia
- Consistent presentation: e-mail signatures, powers of attorney and public-facing roles match the setup
An unpaid nominee director with no real function does not carry the structure.
For Georgian structures — such as an LLC with International Company Status or a locally anchored holding company — BGGE also provides suitable local directors who actually exercise their function, plus real office substance in expansion stages: Registered Address & Substance.
Three structure variants
Variant A — US LLC held directly. A single-member Wyoming LLC is a disregarded entity and, absent a US trade or business, generally not subject to US income tax; distributions to the Georgia-resident individual are foreign-source income and therefore tax-free (Art. 82.2.u GTC). The simplest structure for one owner with one operating company — compliance details (Form 5472, Wyoming Annual Report): US LLC + Georgia.
Variant B — Georgian LLC as holding company. Foreign dividends received are not treated as distributed profit when passed on (Art. 98¹.2.e GTC) — no Georgian corporate income tax on that pass-through; the 5% withholding on onward distribution to the shareholder has to be checked case by case. Interesting as a pooling and reinvestment layer for several holdings.
Variant C — combination with I/E status. Whatever the owner actively performs in Georgia himself — software development, design, project work within the permitted catalogue — is Georgian-source income and belongs in a separate Individual Entrepreneur registration with Small Business Status: 1% on turnover up to GEL 500,000. Active and passive spheres stay cleanly separated. Details: Georgia’s 1% tax.
Drawing the line — and locking in certainty
The boundary follows Art. 104.1 GTC: active service delivery in Georgia creates Georgian-source income and belongs in the I/E or is taxed as employment income. The passive owner role — adopting resolutions, receiving distributions, holding participations — creates no Georgian-source income as long as no permanent establishment arises. Grey areas should be classified in advance, not after the fact.
For transactions between the layers of a structure (management fees, loans, licence or service charges), Georgia’s OECD-aligned transfer pricing reporting also applies since 2026 — but only above a high threshold of GEL 500,000 in controlled cross-border transactions per year. Smaller structures stay out of scope; growing structures should plan the documentation in from the start.
Ongoing accounting and compliance are part of running the structure — and when the time comes, so is an orderly exit.
FAQ
FAQ
Does every US LLC owned by a Georgian resident automatically create a permanent establishment?
No. What matters is whether the company is actively managed from within Georgia (Art. 27–29 GTC). If a director outside Georgia runs the operating business and the owner confines himself to shareholder rights, the structure argues against a PE — but the division of roles must be documented and actually lived.
Am I not allowed to contribute to the company at all as owner?
You exercise shareholder rights — strategy, oversight, profit allocation — and develop new projects. Active operational service delivery while physically in Georgia, by contrast, creates Georgian-source income (Art. 104.1) and should be structured separately, for example through an I/E with the 1% status.
Does the director have to be an unrelated third party?
The director must be a person who actually and demonstrably runs the operating business outside Georgia, with a real contract, real powers and arm’s-length remuneration. A paper director with no function does not carry the structure — the Revenue Service examines substance, not titles.
What does a Georgian holding LLC add compared to holding the LLC directly?
Under Art. 98¹.2.e GTC, passing on foreign dividends received is not treated as distributed profit — the holding company can pool and reinvest participation income without Georgian corporate tax on that pass-through. Mainly useful with several holdings; with direct ownership, distributions are already tax-free under Art. 82.2.u.
How safe is the structure vis-à-vis the Revenue Service?
As safe as its documentation. For additional planning certainty, apply for a binding advance ruling under Art. 47 GTC — the Revenue Service then confirms the treatment of your specific structure in advance. BGGE supports this process.
This article is for general information only and does not constitute legal or tax advice. If you are or remain taxable in your home country, you must declare foreign income, shareholdings and accounts there — always involve a tax adviser in your home country before relocating or restructuring. Last updated July 2026; subject to changes in law.