Transfer pricing in Georgia: thirty days after the letter is too late

Transfer pricing is treated as a topic for groups. In Georgia it concerns anyone who has a Georgian company and a second one abroad — however small both may be. The threshold is not turnover; it is relatedness.

When two enterprises are related

The Tax Code defines relatedness through participation in management, control or capital — either of one enterprise in the other, or of the same persons in both. That is made concrete through two markers:

• Direct or indirect participation of more than 50 per cent the obvious variant
• Actual control over the enterprise’s business decisions needs no shareholding at all

The second marker is the awkward one. It attaches not to shares but to influence. Anyone effectively steering a foreign company without holding an interest in it is, on the wording, related.

From that follows a rule leaving no discretion: every operation between related persons is a controlled operation. The statute sets no de minimis threshold below which a dealing drops out of scope.

What arm’s length requires

Where a Georgian enterprise carries out one or more financial or commercial operations with a related enterprise that is not a Georgian enterprise, each determines its taxable profit in accordance with the market principle. The scope is therefore expressly cross-border — two Georgian companies with the same shareholder fall outside this chapter.

Profit is arm’s length where the conditions of the operation do not differ from those independent enterprises would have agreed in comparable circumstances. Where they do differ, the profit that would have arisen under arm’s length conditions may be included in taxable profit and taxed.

An independent operation is comparable only where no difference exists between it and the controlled operation that would materially affect the financial indicator being tested — or where such a difference can be neutralised by an adjustment.

The documentation is called for, not filed

Here lies the difference from German practice, and it is routinely underestimated. There is no periodic filing. The taxpayer is obliged, on request of the tax authority, to explain the basis on which they consider their profit arm’s length, and may submit information and analysis in support.

The Minister of Finance instruction sets the deadline: the documentation is to be supplied to the Revenue Service within 30 calendar days of receiving the written request. It may be produced in Georgian or English; where the authority requires English material to be translated, the Georgian enterprise bears the cost.

The annual report — a separate obligation

Since 2026 a genuine reporting duty sits alongside the documentation that is called for. An amendment to the tax administration order added an Annex 4 to the return: “Information on international controlled operations under Arts. 126 to 129¹ of the Tax Code”. It is filed with the return for the March reporting period and carries the previous calendar year’s data — so, on a monthly filing cycle, by 15 April.

It has to be completed where the total of the previous year’s international controlled operations exceeds GEL 500,000. Two components of that total are routinely overlooked:

• The market value of controlled operations provided free of charge counts towards it
• Outstanding payables and receivables count towards it as well
• Name, identification number and residence of the related person must be disclosed

So anyone providing intra-group services at no charge, or leaving balances outstanding, sits closer to the threshold than the invoiced amounts suggest.

The one concession to smaller companies also sits in the instruction: Georgian enterprises with annual turnover below 8 million lari are treated as meeting the documentation requirements even where the search for external comparables is refreshed only every third year — provided there has been no material change in the business, in the comparable operations or in the relevant economic circumstances. That is a relaxation of the refresh cycle, not an exemption from documentation.

When the other country adjusts first

The Tax Code also covers the case people least expect and most fear: a foreign tax authority adjusts the conditions of an operation and thereby taxes profit that was already taxed in Georgia.

Where a double tax treaty exists with that state, the Georgian tax authority will — on the Georgian enterprise’s application — verify whether the foreign adjustment accords with the market principle. Where it concludes that it does, it makes a corresponding adjustment and recalculates the tax. The corresponding adjustment is therefore an application procedure, not automatic, and it presupposes a treaty.

Feature	What the Tax Code sets out	What the instruction governs
Relatedness and controlled operations
The arm’s length principle and the power to adjust
Valuation methods in principle		their detailed application
Documentation content, deadlines, thresholds
Advance pricing arrangements

What is deliberately not in the statute

The Tax Code delegates the operational layer expressly: methods and their application, the determination of comparability, the adjustment procedure, the information to be produced to the tax authority, the list of documents, the sources for market prices, the handling of price ranges and the deadlines are set by order of the Minister of Finance. Whether an international controlled operation is audited is decided by the head of the Revenue Service.

That has a practical consequence for anyone reading figures on this subject: thresholds and dates are not in the Tax Code but in ministerial orders — and in more than one. The documentation rules sit in instruction No. 423 (8 million lari for the refresh cycle, 50 million for an advance pricing arrangement), while the GEL 500,000 reporting threshold sits in the tax administration order. Anyone quoting a number should say which instrument and which version it comes from — otherwise one threshold gets mistaken for the other.

How an audit runs when it comes is set out in Tax disputes in Georgia; if you would rather have the question settled in advance, the route is in Binding rulings in Georgia.

Georgian transfer pricing — frequently asked

When are two enterprises related?

Where one participates directly or indirectly in the management, control or capital of the other, or where the same persons participate in both. The Tax Code names two markers: more than 50 per cent direct or indirect participation — or actual control over the enterprise’s business decisions. The second needs no shareholding at all.

Does this apply to purely Georgian dealings?

No. The provision bites where a Georgian enterprise transacts with a related enterprise that is not a Georgian enterprise. Two Georgian companies with the same shareholder fall outside this chapter.

Must I file transfer pricing documentation every year?

The documentation, no — it is called for, and due within 30 calendar days of a written request. Separate from it is the annual report: Annex 4 to the return is filed with the March reporting period and applies where the previous year’s controlled cross-border operations together exceed GEL 500,000.

What happens if the other country adjusts first?

Where a double tax treaty exists with that state and profit already taxed in Georgia has been taxed there, the Georgian tax authority will — on the Georgian enterprise’s application — verify whether the foreign adjustment is arm’s length, and where it is, make a corresponding adjustment.

In what language is the documentation produced?

Georgian or English. Where the Revenue Service requires English documents to be translated into Georgian, the Georgian enterprise bears the cost.

This article is general information and does not constitute legal or tax advice. Arts. 126 to 129 of the Georgian Tax Code, Minister of Finance instruction No. 423 and the amendment to order No. 996 that introduced Annex 4 are all sourced in their Georgian text. The 15 April date is not a date in the regulation; it follows from filing with the March reporting period, and should be checked separately where the filing cycle differs. As at August 2026.