Georgia’s Ministry of Finance has announced that it has amended its international controlled transaction regulations through Order No. 331 (issued on 2 October 2024) to align with the latest OECD Transfer Pricing Guidelines. The amendment also adds criteria for requalifying controlled loans as capital contributions, effective from 1 January  2025.

The Tax Code of Georgia (TCG) includes provisions regulating the taxation of transactions between related persons in different tax jurisdictions or entities in offshore/low-tax jurisdictions conducting business with Georgian entities.

In 2014, the Minister of Finance of Georgia introduced the “Instruction on Valuation of International Controlled Transactions” (Instruction), which officially came into effect that year.

The Instruction covers transfer pricing in Georgia, detailing methods for valuing international transactions, criteria for market prices, and rules for the advance pricing agreements of international transactions. It also outlines documentation requirements, information sources, and guidelines for using price ranges and terms.

Under the TCG, taxpayers can request a legally binding advance ruling on prices for cross-border transactions if the transaction exceeds GEL 50 million. The ruling, valid for a specific period, must be obtained before the transaction begins and applies for profit tax purposes.

According to the TCG, two people are related if one is directly or indirectly involved in managing or holding capital of another person, or if both are involved in managing or holding capital in a third person.

In a global economy where multinational enterprises (MNEs) play a major role, governments must ensure that MNEs’ taxable profits aren’t artificially shifted abroad and that their reported tax base reflects the economic activity in the country. For taxpayers, it’s crucial to minimise the risk of double taxation.