Italy
Georgia
Italy and Georgia signed a tax treaty in Rome on 31 October 2000, in force since February 2004. It removes Georgian tax on interest and royalties and limits it on dividends. The Italian question is Article 167 of the TUIR, the controlled foreign company rule, and Georgia's distribution model gives it a simple answer on the rate: a Georgian company that reinvests shows zero tax.
This guide covers the treaty, the CFC test, the treatment of dividends in an Italian company and for an individual, and the renumbering of the Italian income tax code on 1 January 2027.
What Georgia asks of an Italian founder
- One shareholder and one director, Italian or otherwise.
- No minimum capital for a limited liability company.
- An apostilled power of attorney with a Georgian translation; for an Italian parent, an apostilled registry extract (visura camerale) and articles.
- A legal address in Georgia.
The steps are in how to register a company in Georgia.
The 2000 treaty
| Income from Georgia to Italy | Treaty | Georgian domestic rate | What applies |
|---|---|---|---|
| Dividend, holding of 10% or more | 5% | 5% | 5% |
| Dividend, other cases | 10% | 5% | 5%, the domestic rate |
| Interest | 0% | 5% | 0% |
| Royalties | 0% | 5% | 0% |
The 5% tier is reported for holdings of at least 10%; we did not read Article 10 itself. Either way, Georgia's own 5% caps the dividend withholding.
Tax estimate
How much tax could you save?Three questions, then the yearly difference between your current rate and three jurisdictions.
Article 167: the effective taxation test
Article 167 applies to Italian companies and individuals who control a foreign entity or hold more than 50% of its profits. Foreign profit is attributed to Italy when two conditions are both met.
- 1Do you control the Georgian entity?Control under Article 2359 of the Civil Code, or more than 50% of profits
- 2Effective taxation below 15%?Taxes in the accounts divided by profit before tax: zero if profit is reinvested
- 3More than one third passive income?Interest, royalties, dividends, leasing, low value intragroup sales and services
- 4Both met: profit attributed to ItalyUnless you show a real economic activity with staff, equipment and premises
Why the ratio fails. The test divides current and deferred taxes in the accounts by profit before tax. Under Georgia's model, a company that keeps its profit records no profit tax for the year. The ratio is zero, below 15%. In a distribution year the ratio depends on how much is paid out.
What keeps an operating company out. The second condition: passive income must exceed one third of total income. A Georgian company that sells its own services or goods to outside clients usually does not meet it. A company that invoices low value services to the Italian group, or holds licences, does.
| Georgian company profile | Ratio | Passive income | Outcome |
|---|---|---|---|
| Operating company with Georgian staff and outside clients | Below 15% | Under one third | Not attributed |
| Service company billing the Italian parent | Below 15% | Likely over one third | Attributed, unless substance is shown |
| Holding or IP company | Below 15% | Over one third | Attributed, unless substance is shown |
Substance is the exit. The rule does not apply if you show a real economic activity with staff, equipment, assets and premises. An advance ruling from the Italian tax agency is available.
Dividends to an Italian company
Article 89 of the TUIR excludes 95% of a dividend from the receiving company's income. The exclusion is refused for dividends from a privileged regime, measured with the same effective taxation test, unless the parent proves the income was not located there to save tax.
| Source of the dividend | Taxable in the Italian parent |
|---|---|
| Georgian company, with proof that income was not located there to save tax | 5% of the dividend |
| Georgian company, with proof of real economic activity only | 50%, with a credit for the tax the subsidiary paid |
| Georgian company, no proof | 100% |
A minimum holding condition added by the 2026 Budget Law was repealed by Article 11 of Decree-Law 38 of 27 March 2026.
Dividends to an Italian individual
For an Italian resident individual, three rules apply:
- Dividend from an ordinary foreign company: 26% substitute tax.
- Dividend from a privileged regime: fully taxable at progressive rates.
- Reporting: shares in a Georgian company go in the RW section of the return, and IVAFE applies to foreign financial products at 2 per mille of their value.
The article numbers change on 1 January 2027
Legislative Decree 117 of 19 June 2026 replaces the TUIR with a new consolidated income tax act from 1 January 2027. The rules survive, the numbers move:
- CFC rule: Article 167 becomes Article 186.
- Dividends: Article 89 becomes Article 98.
- Privileged regimes: Article 162.
- Residence: Article 82.
Advice dated before 2027 will cite the old numbers.
The bottom line
The treaty is favourable: no Georgian tax on interest and royalties, 5% at most on dividends. Article 167 is the hurdle. A Georgian company that reinvests shows zero effective taxation, so it is protected only if its passive income stays under one third or it has real substance. For dividends to an Italian company, the proof you can give decides whether 5%, 50% or 100% is taxed.
corpsec registers the Georgian company and provides its registered office. See the Georgia formation service, or read how Georgian profit tax works.
Frequently asked questions
Is there a tax treaty between Italy and Georgia?
Yes. It was signed in Rome on 31 October 2000 and is in force since 19 February 2004. Georgia lists 5% or 10% on dividends and 0% on interest and royalties.
Does Italian CFC law apply to a Georgian company?
It can. A Georgian company that reinvests shows no tax in its accounts, below the 15% line. It is attributed to Italy only if more than one third of its income is passive and it lacks real substance.
How is a Georgian dividend taxed in an Italian company?
5% of it is taxable if you prove the income was not located in Georgia to save tax, 50% with proof of real activity only, and 100% without proof.
How is a Georgian dividend taxed for an Italian individual?
At the 26% substitute tax for an ordinary company, or at progressive rates if it comes from a privileged regime. The shares go in the RW section, with IVAFE on their value.
What changes for Italian rules in 2027?
A new consolidated income tax act applies from 1 January 2027. The CFC rule moves from Article 167 to Article 186 and the dividend rule from Article 89 to Article 98.
Sources
- Ministry of Finance of Georgia, treaty table: Italy, in force 19 February 2004, dividends 5% or 10%, interest 0%, royalties 0%
- Normattiva, Presidential Decree 917/1986 (TUIR), Article 167 as applicable in 2026: control, the 15% effective taxation test, the one third passive income test and the substance exemption
- Normattiva, Legislative Decree 117 of 19 June 2026: new consolidated income tax act applicable from 1 January 2027, with the CFC rule moved to Article 186
- Tax Code of Georgia (consolidated 15 October 2026): no tax on retained profit, 15% on distribution with a base divided by 0.85, 5% dividend withholding
Official, read on 26 October 2026: the Georgian treaty table and Tax Code; the Italian parliamentary papers on the ratification of the 2000 convention (XIV legislature), from which the signing date comes, read as search extracts. Read on 5 October 2026 for this series on Normattiva: TUIR Articles 89 and 167, Decree-Law 38/2026 Article 11, Legislative Decree 117/2026 Articles 82, 98, 162, 186, 376 and 377. The text of Article 10 of the convention was not read: the 5% rate for holdings of at least 10% comes from a parliamentary extract we could not attribute with certainty, consistent with Georgia's table. Applying the Article 167 ratio to a company under Georgia's distribution model is our reading, not a published position of the Italian tax agency. This is not legal or tax advice.