New income tax treaty between Georgia and Moldova

March 21 2018

A tax treaty between Georgia and Moldova is the first of its kind concluded between the two countries, and will enter into force after the ratification instruments are exchanged.

The treaty was signed following the Georgia-Moldova Business Forum held in Tbilisi, in April 2017, where participants explored business opportunities between the two countries in the agriculture, consulting, textile, information technology, tourism and development sectors, among others.

The parties signed a convention on the avoidance of double taxation and prevention of tax evasion in regards to income tax, in order to support the development of cooperation between the business communities of the two countries.

The treaty covers Georgian profit tax and income tax, as well as Moldovan income tax. In terms of withholding tax rates, the maximum rate of 5% was established on dividends, interest and royalties. Anti-treaty shopping provisions have been implemented in those articles as well.

A permanent establishment is deemed to include a building site or construction/installation project with a duration of more than six months within a 12-month period. The same applies to the provision of services (including consultancy) lasting more than three months in a 12-month period.

Both countries will apply the credit method and the exemption-with-progression method for the elimination of double taxation.