On 29 January 2021, “Convention between Japan and Georgia for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” (hereinafter referred to as the New Convention) was signed in Tbilisi, the capital of Georgia by H.E. Mr. IMAMURA Akira, Ambassador Extraordinary and Plenipotentiary of Japan of Japan to Georgia and H.E. Mr. Ivane Matchavariani, Minister of Finance of Georgia.

The New Convention wholly amends the existing Convention (Convention between the Government of Japan and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income), which entered into force in 1986, between Japan and the Georgia by expanding the extent of reduction of taxation on investment income, introducing measures for prevention of abuse of the New Convention and assistance in the collection of tax claims, and reinforcing the exchange of information concerning tax matters. It is expected that, while eliminating double taxation and preventing international tax evasion and tax avoidance, the New Convention promotes further mutual investments and economic exchanges between the two countries.

Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
　

• Prevention of Abuse of the New Convention
  In order to prevent abuse of benefits under the New Convention, it is provided that only residents who satisfy specified conditions, such as qualified persons, may be entitled to the exemption from tax on royalties. In addition, any benefit under the New Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
• Mutual Agreement Procedure
  Taxation not in accordance with the provisions of the New Convention may be resolved by mutual agreement between the tax authorities of the two countries.
• Exchange of Information and Assistance in Collection of Tax Claims
  In order to effectively prevent international tax evasion and tax avoidance, the scope of taxes and cases subject to the exchange of information concerning tax matters is expanded and the mutual assistance in the collection of tax claims between the two countries are introduced.

After the completion of the necessary domestic procedures in each of the two countries (in the case of Japan, approval by the Diet is necessary), the New Convention will enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval.

The New Convention will not affect the application of the current Tax Convention (Convention between the Government of Japan and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income) between Japan and some of the former Soviet Union countries other than Georgia.