Detailed information on internationally controlled transactions becomes mandatory in profit tax returns
On February 25, 2026, Order No. 52 of the Minister of Finance of Georgia was published, on the basis of which an amendment was made to the Instruction “On Tax Administration” approved by Order No. 996 of the Minister of Finance. As a result of the amendment, the Instruction 401 A new paragraph 10 has been added to the article “Filling in the Monthly Income Tax Declaration”, and a new paragraph 20 has been added to the article 41 “Filling in the Income Tax Declaration”.
Implemented The change applies to companies that have so-called international controlled operations, for which the company must submit information about each controlled transaction of the previous year in the March declaration of each year, Which means submitting detailed information about such transactions such as Name of the other party to the transaction, residency, form of relationship, transaction amount, balance of accounts payable/receivable, and other information.
What is an international controlled transaction and which transactions are subject to mandatory reporting?
According to Chapter XVII of the Tax Code, an internationally controlled operation is considered to be a transaction by a resident enterprise A transaction concluded with a so-called non-resident related party or a person registered in a preferential taxation country (so-called offshore).
According to Article 126 of the Tax Code The existence of a relationship between a resident enterprise and a non-resident enterprise is considered interdependent (in this case, the definition of interdependent persons in Article 19 does not apply) if:
a) one person participates directly or indirectly in the management, control or capital of another person;
b) The same persons participate directly or indirectly in the management, control or capital of two persons.
A person participates directly or indirectly in the management, control or capital of an enterprise if:
a) it directly or indirectly owns more than 50 percent of the enterprise;
b) It practically exercises control over the entrepreneurial decisions of the enterprise (explained in detail in Order 423 of the Minister of Finance).
Accordingly, transactions concluded with such a related party or so-called offshore company are considered to be an international controlled operation, such as:
- Purchase/sale of goods by a resident enterprise (e.g., LLC) from such a person.
- Purchase/sale of services by a resident enterprise (e.g., LLC) from a similar entity.
In addition, a transaction concluded with a so-called offshore company will not be considered a controlled transaction if it is proven that there is no interdependence between the offshore company and the resident enterprise.
In general, even before the enactment of the aforementioned change, in such transactions, a resident company was required to prepare relevant documentation (the so-called Transfer Pricing Report) that would confirm the compliance of such transactions with the market price, although the submission of detailed information about such transactions was not mandatory until now.
Accordingly, if, for example, there is some kind of "special relationship" between a Georgian LLC and a non-resident enterprise (ownership of more than 50% of each other's capital or the existence of a person owning more than 50% of the total shares, etc.) or the non-resident enterprise is a person registered offshore, the company may be required to submit detailed information on the supply or purchase of goods or services concluded between them in the form of an appendix to the March profit tax declaration.
In what cases and in what form is it mandatory to submit detailed information about an international controlled operation?
In accordance with the changes made, the monthly income tax declaration and the annual income tax declaration will be submitted for the March reporting period. (Submitted by individuals who have not switched to the so-called Estonian model of profit tax) It is mandatory to fill out a new appendix, which reflects information about internationally controlled transactions provided for in Articles 126-129¹ of the Tax Code of Georgia, If the total volume (amount) of international controlled transactions carried out during the previous calendar year exceeds 500,000 GEL.
In the event that the total volume (amount) of a person's international controlled transactions exceeds 500,000 GEL according to the data of the previous year, the person shall submit detailed information about each such controlled transaction in the following form:
In addition, the total volume of these operations also takes into account the market value of controlled operations performed free of charge and the volume of existing accounts payable and/or receivables. In addition, if, within the framework of a controlled operation, several controlled operations are carried out during the calendar year under the same agreement, information about these operations is reflected in one line.
In addition, for the purposes of this subparagraph, the following shall be considered a controlled operation:
a) Supply/purchase of goods/services;
b) Supply/purchase of tangible/intangible assets;
c) Loan received/issued;
d) Interest income/expense;
e) Guarantee received/issued;
f) Other financial transactions;
g) Amounts paid/received for the use of an intangible asset (royalties);
The latter indicates that information will be submitted in case of borrowing/issuing a loan by a resident enterprise from a non-resident related enterprise or a so-called offshore company. Not only about the loan interest amounts and final balance, but also about the loan principal, which should be reflected in 2 separate lines.
According to the amendment, the said amendment is effective upon publication (25/02/2026) and its effect shall apply to information presented for the reporting period of 2025 and thereafter.
We invariably offer the example discussed in the relevant order.
FACTUAL CIRCUMSTANCES:
In 2020, a credit line agreement for 2,000,000 USD was signed between LLC “A”, a resident of Georgia, and enterprise “B”, a resident of the Swiss Confederation. “B” is the owner of 52% of the shares of LLC “A”. In 2020, 2022, 2023 and 2024, 8 loan agreements were signed based on the credit line agreement, a total of 1,500,000 USD was received, including the following loans received in 2024:
1) 15.03.2024 – 350,000 USD;
2) 15.08.2024 – 300,000 USD.
In addition, the loans received in 2020-2023 have been repaid in full. On December 31, 2024, LLC “A” repaid 250,000 USD of the principal amount of the loan received, and on the same date, the interest payable by LLC “A” amounted to 97,500 USD, which was also paid in full. At the time of filing the declaration, LLC “A” does not possess documentation related to the valuation of operations.
Result:
In the declaration for the reporting month of March 2025, LLC "A" will reflect the following information in two lines in the new annex to the declaration:
Operation I (reflection of the loan principal)
1) In the first - 3rd columns, indicate - the name of the enterprise "B", its identification number, country of residence - the Swiss Confederation;
2) Column 4 reflects the form of interdependence – direct ownership of more than 50 percent of the enterprise;
3) Column 5 reflects the type of operation performed – loan received;
4) Column 6 reflects the total amount of the loan received during 2024 – 650,000 USD, and column 7 – the amount of the loan in accordance with the official exchange rate of the GEL against the relevant foreign currency determined by the National Bank of Georgia on the day of the transaction – 1,744,340 GEL (350,000*2.6758 (US dollar exchange rate against GEL as of 15.03.2024) + 300,000*2.6927 (US dollar exchange rate against GEL as of 15.08.2025));
5) Column 8 reflects the balance of accounts payable – 400,000 USD (650,000 – 250,000);
6) Column 9 reflects the date of the credit line agreement signed between the parties – 2020;
7) Column 10 reflects information on the possession of documentation related to the assessment of controlled operations – “I do not have”.
Operation II (reflection of loan interest):
1) In the first - 3rd columns, indicate - the name of the enterprise "B", its identification number, country of residence - the Swiss Confederation;
2) Column 4 reflects the form of interdependence – direct ownership of more than 50 percent of the enterprise;
3) Column 5 reflects the type of operation performed – interest expense;
4) Column 6 reflects the amount of interest expense for 2024 – 97,500 USD, and column 7 reflects the amount based on the official exchange rate of GEL against the relevant foreign currency set by the National Bank of Georgia on the day of the transaction – 273,663 GEL (97,500*2.8068 (US Dollar exchange rate to GEL as of 31.12.2024));
5) Column 8 reflects the balance of interest debt – 0;
6) Column 9 reflects the date of the credit line agreement signed between the parties – 2020;
7) Column 10 reflects information on the possession of documentation related to the assessment of controlled operations – “I do not have”.
Results, possible errors and ambiguities
As already mentioned, the above-mentioned exemptions require the submission of detailed information on controlled transactions of the previous year if the volume of such transactions exceeds 500,000 GEL, which is why companies will have to spend additional time to submit this information. In addition, when filling out this form, the taxpayer is obliged to indicate whether he has prepared documentation for the controlled operation (I have/don't have/will prepare/will prepare), which implies the implementation of additional control mechanisms by the tax authority in this direction. The obligation to prepare documentation for the controlled operation (the so-called Transfer Pricing Conclusion) (which is not a cheap service in Georgia for various reasons) was imposed on companies even before the enactment of this amendment, however, as a result of the submission of such information, the private sector becomes more accountable to the tax authority.
Although the intention of the Revenue Service and the Ministry of Finance is clear, the amendment clearly contains several possible errors, technical flaws or ambiguities. For example, according to the above example, a Georgian LLC took out a loan of 650,000 USD, after which it returned 250,000 USD, which is why, as we read in the example, the taxpayer should reflect the balance of 400,000 USD as the balance of receivables. Up to this point, it is unclear how a loan obligation taken out and payable by a company can be considered receivables when we are talking not about receivables but about payables.
In addition, according to the amendment, the obligation to submit the aforementioned information is established for information submitted for the reporting period of 2025 and beyond. In the latter case, it is unclear why information for 2024 is being submitted (as mentioned in the example provided) if the aforementioned amendment applies to information submitted for the reporting period of 2025 and beyond.
In addition, the amendment contains other ambiguities, regarding which we hope that the shortcomings will be corrected as soon as possible.
The amendment became effective upon publication, i.e. from February 25, 2026, and its effect extended to information presented for the 2025 and subsequent reporting periods.
For detailed information about the change, see the link:
https://matsne.gov.ge/ka/document/view/6791670?publication=0