Transfer Pricing Documentation in Georgia: What Businesses Need to Know
A Georgian company buys goods from its foreign parent, takes an intra-group loan, or provides IT services to colleagues abroad. These are first of all commercial decisions. But under Articles 126–129¹ of the Tax Code of Georgia, such deals are international controlled transactions: the price must be consistent with the arm's length (market) principle, and the business must be able to support that with documents. In practice this area is called transfer pricing, and the supporting file is transfer pricing documentation (often a "local file" or TP report).
Since 2026 the topic has become more pressing: a new annex to the corporate income tax return now gives the Georgia Revenue Service (GRS) systematic visibility of companies with controlled transactions.
What Transfer Pricing Means in Georgia
Transfer pricing aims to ensure that intra-group terms produce the result that independent parties would have reached in comparable circumstances. The Georgian rules follow the OECD arm's length principle.
The regulatory framework in brief:
▪ Tax Code of Georgia - Articles 126–129¹;
▪ Order No. 423 of the Minister of Finance dated 18 December 2013 - valuation methods, comparability, adjustments and the documentation list;
▪ OECD Transfer Pricing Guidelines - applied to issues the Georgian rules do not address directly.
The law recognises all five OECD methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split. The choice depends on the facts of the transaction and the quality of available data, not on convenience.
Who Is Affected: What Counts as an International Controlled Transaction
The rules apply to a Georgian company or the Georgian branch (permanent establishment) of a foreign company that transacts with:
▪ a foreign associated entity, including a foreign head office; or
▪ any person resident in a low-tax (offshore) jurisdiction on the list set by the Government of Georgia, whether or not related.
Covered transactions include purchase or sale of goods, provision or receipt of services (including loans), royalties and any other business transaction, including transfers of business activity.
Typical Georgian scenarios:
▪ a Georgian distributor buys products from a foreign parent and resells them in Georgia;
▪ a Georgian company provides software development, call-centre, technical support or intermediary services to foreign group members;
▪ a Georgian company receives group management, IT or financial services;
▪ a Georgian company borrows from or lends to a foreign related party;
▪ a Georgian branch receives services from its foreign head office;
▪ payments for the use of a trademark, technology or franchise.
New in 2026: Transfer Pricing Annex to the CIT Return
Amendments of 24 February 2026 to Order No. 996 of the Minister of Finance introduced a new reporting obligation. It applies to Georgian companies and branches whose international controlled transactions in the prior calendar year exceeded GEL 500,000. The threshold includes outstanding receivable and payable balances arising from those transactions, as well as free-of-charge and barter transactions.
For each controlled transaction the annex requires: the counterparty's name and country of residence, the nature of the relationship (more than 50% direct or indirect ownership, or a low-tax jurisdiction), the type of transaction, and the annual value in both original currency and GEL.
Taxpayers must also declare the status of their transfer pricing documentation: prepared, not prepared, in preparation, or intended to be prepared.
Companies under the Estonian CIT model
Other companies
Submitted with
The March monthly CIT return
The annual CIT return
Deadline
No later than 15 April
1 April of the following year
The first deadline, for 2025 transactions, was April 2026. By the same logic, 2026 transactions would be reported in spring 2027 if the GEL 500,000 threshold is exceeded in 2026. Please verify the exact form and deadlines in the current version of the rules.
The practical effect: GRS now has information on which companies are potential transfer pricing audit candidates. A company that does not declare documentation as prepared may attract closer attention, and a company that declares it prepared must actually have the file ready to hand over.
The 30-Day Rule Is Shorter Than It Looks
Within 30 calendar days of a written GRS request, a company must provide documentation showing that its profit is consistent with the market principle. The wording matters: the documentation must already be prepared when the request arrives. Thirty days is not time to start the analysis.
Further points:
▪ documentation may be submitted in Georgian or English; if GRS requests it, English documents must be translated into Georgian;
▪ Georgian rules do not formally require a Master File and Local File, although the expected documentation resembles a Local File in practice;
▪ there is no de minimis exemption in the law - a small transaction does not automatically remove the obligation;
▪ where annual turnover is below GEL 8 million and nothing material has changed in the business, the comparable companies or economic conditions, the external benchmark may be refreshed once every three years. In practice this leaves the burden of proof with the taxpayer, so annual updates are often the safer course;
▪ multinational groups with consolidated revenue of EUR 750 million or more are subject to separate Country-by-Country reporting rules.
What Happens Without Documentation
Missing or late documentation increases risk in two ways.
First, the burden of proof shifts to the company. If adequate documentation is provided on time, GRS must show that the company's approach is wrong. If it is not, the company loses that position.
Second, assessments and penalties. GRS may adjust the tax. Penalties on understated tax are 10%, 25% or 50% depending on the share of the understatement in the total tax in the return, and late-payment interest runs at 0.05% per day. A general penalty for failing to provide a requested document starts at GEL 400, though this amount is often small compared with the other consequences.
Note also that under the Estonian model a transfer pricing adjustment is taxed immediately.
In practice, requests have been issued with much shorter notice than 30 days, on the argument that the documentation should already exist. A file that exists only formally, without objective analysis, will not protect the company from an additional assessment either.
Transactions That Need Particular Attention
Risk grows with the size and complexity of a transaction and with the jurisdiction of the counterparty.
Intra-group loans. Georgia has no thin capitalisation rules, but that does not make the interest rate free: principal, tenor and rate must fit the borrower's credit profile. A loan without a repayment schedule, security or business purpose raises questions about both the interest and the economic substance.
Intellectual property and royalties. A contract is not enough. Who created the asset, who develops and protects it, who bears the cost and risk, and what economic benefit does the licensee receive?
Intra-group services. In Georgian practice the key question is often not price but the benefit test - did the company actually receive the service? Work descriptions, deliverables, correspondence, staff involvement and a consistent cost-allocation logic are essential.
Supply of goods. Resale margin and the distributor's real functions (inventory, market risk, marketing) must match the chosen method.
Start with Functions, Not the Method
A common mistake is choosing the method first. Functional analysis establishes who takes orders, manufactures, holds inventory, manages clients and bears market, credit, currency or inventory risk. A routine service provider with limited risk should earn a different return from a company that makes strategic decisions and uses unique assets.
Comparability analysis (benchmarking) is not a search for a perfect twin. Differences in product, market, contract terms and functional profile must be identified and explained. In Georgian practice, database search criteria, geographic scope, the choice of tested party and the treatment of loss-making comparables carry particular weight. For this reason a group-level document should be reviewed by a local specialist before it is used in Georgia.
Documentation Must Match Business Reality
A good file is not last year's template with updated numbers. The facts it describes must match contracts, accounting records, management reports and tax returns, and the revenue, cost and profit figures used in the analysis must reconcile to the financial statements. If the file describes the company as a limited-risk entity while the accounts show recurring losses, the reasons need to be explained clearly.
Evidence to keep on time: contracts, invoices and payment records, service reports, correspondence, internal approvals, budgets, cost-allocation calculations and reconciliations of financial data.
The most common weaknesses:
1. the contract describes one function while staff and decisions show another role;
2. costs are allocated automatically without assessing benefit;
3. the benchmarking study is outdated and ignores changes in the business model;
4. transfer pricing figures do not reconcile to the financial statements;
5. the CIT annex says documentation is prepared, but the file does not exist or is out of date.
How to Manage the Process Through the Year
1. Controlled transactions register - every foreign related party, contract, transaction type, value in GEL and original currency, and an owner. Update it when a new contract, reorganisation or financing change occurs.
2. Mid-year review - monitor the total of controlled transactions against the GEL 500,000 threshold, compare margins with the market range and adjust before year-end if needed.
3. Prepare documentation right after fiscal year-end - so the file already exists when the annex is completed in March-April.
4. Clear responsibilities - finance controls the numbers, legal controls the contracts, and operational managers confirm what was actually done.
Frequently Asked Questions
Is documentation required if the related-party transactions are small?
The law sets no minimum threshold. The GEL 500,000 threshold determines the CIT return annex, not the obligation to prepare documentation. For very small transactions the depth of the file can be proportionate to the risk, but that still calls for professional judgement.
When should the documentation be prepared?
It must be ready at the moment of a GRS request. In practice, soon after the fiscal year ends.
Can documentation be submitted in English?
Yes, but a Georgian translation must be provided at the company's expense if GRS asks for it.
Do the rules cover transactions between two Georgian related companies?
The documentation and CIT-annex obligations concern international controlled transactions.
Can the price of a future transaction be agreed in advance?
The law provides for advance pricing agreements (APAs), under which the methodology for specific transactions is agreed with the tax authority in advance. Their practical use needs a separate assessment.
Conclusion
Transfer pricing documentation in Georgia is not a formality. Since 2026 it is directly connected to the CIT return annex, the burden of proof and audit exposure. It works best when prepared alongside business decisions rather than after the fact, when the past has to be explained.
AGIC's combined audit, tax and advisory experience helps companies treat the file not as a stand-alone document but as part of their financial control system.
Do you have transactions with foreign related parties? Need a transfer pricing risk assessment, documentation or help with the CIT return annex? Get in touch - agic.ge
This article is for general information only and is not tax advice. Please verify current rules and forms with the latest version published by the Georgia Revenue Service. Last updated: October 2026.