Georgia: Treaty analysis: Georgia-Belarus double tax treaty enters into force

Anna Pushkaryova

On April 23 2015 Georgia and Belarus signed an agreement on avoidance of double taxation, prevention of evasion of income and capital taxes (DTT). The DTT applies to profit tax, income tax and property tax in Georgia and the tax on income, tax on profits, income tax on individuals and tax on immovable property in Belarus.

Among other provisions, the DTT stipulates, in particular, the following:

• The profits of a company resident in one state will be taxable in that state only, unless the company has a permanent establishment (PE) in the other state, in which case the profits of said company may be taxed in that other state if attributable to that PE. The DTT determines PE as, in particular, a building site or construction or installation project lasting more than 12 months. The treaty also contains a number of exceptions when an enterprise shall not be deemed to have a PE;

• A withholding tax on dividends at the rate of 5% (in case of at least 25% participation in the company paying the dividends) and at the rate 10% in all other cases;

• A withholding tax rate of 5% on interest;

• A withholding tax rate of 5% on royalties;

• Income derived by a resident of one state from immovable property (including income from agriculture or forestry) located in the other state may be taxed in that other state;

• Gains realised by a resident of one state from the alienation of shares or other participation interests of which more than 50 % of the value is derived directly or indirectly from immovable property situated in the other state, may be taxed in that other state.

According to the DTT, double taxation will be eliminated by applying a deduction from the tax of the Georgian resident in amount of the tax paid in Belarus and vice versa.

The DTT was ratified by Georgia on June 12 2015 and by Belarus on November 10 2015. Per the treaty's provisions, it entered into force on November 24 2015 and is effective as of January 1 2016.

Anna Pushkaryova (anna.pushkaryova@eurofast.eu)

Eurofast Georgia

Tel: +995 595 100 517

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