Discover the nuances of Georgian tax residency, from benefits like low tax rates and exemptions to criteria such as physical presence or the High Net Worth Individual program in this article.
Types of Residencies
Georgia distinguishes between two types of residencies: Legal residency and Tax residency. To qualify for the benefits mentioned above, individuals must be Georgian tax residents. It is possible to hold legal residency without tax residency, or vice versa. Furthermore, it is entirely feasible to hold both simultaneously.
Benefits of Georgian Tax Residency
Tax residency regulations in Georgia are generally straightforward, though they can be subject to individual circumstances. There are compelling motivations for tax residency in Georgia.
Firstly, it is low tax rates:
- Personal Income Tax (on salary) – 20%
- Revenue Tax for Individual Entrepreneurs (with Small Business Status): 1%
- Social Security (Pension Fund) – 2%
- VAT: 18% (applicable only to local transactions)
- Corporate Tax: 15%
- Income Tax on Dividend Withdrawal: 5%
- Property Tax: 1% (only on property that you own in Georgia)
Secondly, they include an exemption from paying taxes on foreign income (mostly passive income). The tax code of Georgia states that income (including gain) being received by a resident natural party and not belonging to Georgian source income shall be exempt from taxation.
Thirdly, they incorporate tax free crypto gains. The Public Decision of the Ministry of Finance of Georgia issued on June 28, 2019, qualifies income from crypto asset sales as a non-Georgian source income and thus does not tax it in Georgia.
Additionally, it is double taxation avoidance treaties. Georgia has active agreements with more than 55 countries for avoiding double taxation. These treaties allow tax residents to avoid taxation from the country from where they receive income. They pay taxes according to Georgian legislation only.
Last but not the least, it is access to the Georgian banking system. To open a fully functional bank account in a Georgian bank, tax residents do not go through heavy compliance and KYD procedures.
Criteria for Tax Residency
- The main criterion for tax residency in Georgia is physical presence. An individual qualifies as a tax resident if they spend 183 days or more in Georgia during any consecutive 12-month period.
- There is another way of getting tax residency through the High Net Worth Individual (HNWI) program.
To start with, HNWIs are individuals whose financial status meets specific criteria outlined by Georgian authorities. Qualifications include exceeding GEL 3,000,000 in property value or maintaining an annual income over GEL 200,000 for three consecutive years.
On another note, applicants must possess $500,000 or more in wealth within Georgia, as mandated by a Ministry of Finance order effective from April 15th, 2023.
Additionally, HNWIs must meet one of the following conditions: hold Georgian legal residency, be a Georgian national, or verify an annual income of at least GEL 25,000 from a Georgian source.
Finally, HNWIs must apply for tax residency annually, submitting all relevant documents for renewal. This process ensures ongoing compliance and review of financial status.
Understanding the residency rules is essential for individuals and businesses to manage their tax obligations effectively.
Relying on Eurofast for expert guidance will empower you to confidently navigate the intricacies of tax residency in Georgia. For further information please contact Eurofast professionals in Tbilisi at tbilisi@eurofast.eu.
Irina Lopatina
Country Manager
Eurofast Tbilisi
tbilisi@eurofast.eu