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Optimizing your taxes in the Land of Wolves: Tax Residency in Georgia
The home of Queen Tamar seeks to regain its past glories with an open economy and tax policies that welcome high net worth individuals and entrepreneurs that trust in the country.
Georgia is one of the most open countries on the planet. Since the times of the Roman Republic, it has been one of the frontiers of Europe. By that time, it was the border between the Roman and Persian Empire, and historically it has been the crossroads of the Caucasus and the lands surrounding the Black Sea.
Georgia is an ideal tax residency destination because:
- It offers a straightforward path towards residency
- It has special tax residency rules for high net worth individuals
- Citizens from more than 80 countries can stay visa-free in Georgia for one year, and for the rest, visas are generally easy to receive
- Georgia is a non-CRS jurisdiction, meaning that its banks don’t immediately report the financial information of their clients to foreign tax authorities
- Georgia has one of the most underrated banking systems in the whole planet (and we can help you open a personal bank account in a few days, see how right here.
- No issues with sanctions for legit Venezuelan and Cuban businesspeople
- Pro-business government that has reduced corruption
- Easy company set-up process
- Virtually tax-free industrial zones with free trade agreements with the EU, Turkey, and China
- Simple tax system with a 15 % corporate tax rate, 20 % income tax rate, 5 % dividend tax rate, 1 % property tax rate, and no capital gains taxes
- A fully territorial tax system for individuals and a solid 56 double taxation treaty network
After centuries of Mongol, Ottoman, Iranian, Russian, and communist domination, Georgia finally became an independent country once again in 1990. But the communist regime did a ton of damage in the Georgian economy and population. The GDP decreased every year between 1990 and 1994 and the 2002 census showed that the population had declined 20 % since 1989.
But the country took a swift turn towards a free economy and a stable democracy since 2004 when the government reduced import and export regulations, decreased red tape, hit corruption, and decreased red tape. A favorable tax regime and a solid banking system were also established.
The result? The second-freest economy between post-Soviet states after Estonia. According to the Index of Economic Freedom, Georgia has the 12th freest economy in the world and is the 7th easiest country to do business. The country is seen a significant rise in FDI but remains somewhat unknown as an asset protection and tax optimization destination.
One of the reasons is because Georgia is a stable democracy with plenty of investment options and not just an unknown island in the middle of nowhere. Georgia is a good place to live and from which to do business.
Moreover, the country enjoys a reliable banking system that is benefited from the fact that Georgia isn’t a CRS signee, giving them plenty of confidentiality possibilities. In fact, Georgia’s two largest banks are listed on the London Stock Exchange. If you go to Georgia, you can open a bank account in a couple of hours, and we can help you do it remotely in a few days. This is especially beneficial when you consider the Kafkian requisites of some European jurisdictions.
The local currency is called lari, but virtually all fifteen banks in Georgia open bank accounts in dollars and euros, and some even work with rubles, francs, yens, and yuans.
This has turned the Georgian banking system the most attractive and robust of the region, and many investors have chosen it as their destination after the Baltic countries imposed new restrictions over offshore banking.
But, as the depths of the Krubera Cave, its wonders are still undiscovered for many.
Georgia’s tax system
Due to the global rise of the de-offshorization process, wealthy individuals and business owners are being trapped by their home countries and countries of residence to report/pay taxes on their international incomes and international savings. Because Georgia is not exchanging information, it ranks among the best off-the-radar places in the world for banking and tax planning. Georgia is an EU-associated country offering very liberal, foreign-friendly legislation, excellent tax incentives, lifestyle, and business climate for foreigners.
The first thing we need to explain from the Georgia tax system is what is the criteria for tax residency. Let’s begin with the criteria for individuals. They are considered tax residents if they comply with one of the following:
- Are actually present in Georgia for 183 or more cumulative days in any period of 12 consecutive calendar months ending in the subject tax year, or are in the Georgian State Service abroad during the subject tax year
- Are citizens of Georgia and apply to the GTA for residency status in Georgia, provided they are a not tax resident of any other country
- Fall under the high-net-worth individual criteria (we’ll explain this in detail briefly). The time of actual presence constitutes the time spent in Georgia or spent abroad for medical treatment, vacation, business trips and/or educational purposes.
However, it must be considered that the time of physical presence in Georgia doesn’t constitute time spent in Georgia for tax purposes for:
- Individuals in diplomatic and consulate missions and their family members
- Staff members of international organizations with international agreements with Georgia, state staff of foreign countries and their family members
- People doing a stopover in Georgia
- People residing in Georgia for medical treatment or vacation/tourism purposes only. The status of residency is determined for each tax year.
Now, we can explain the rules for high net worth individuals to become tax residents in Georgia without having to qualify for one of the residency criteria established above.
A high net worth individual for tax purposes in Georgia is an individual who holds property exceeding 3 million lari (about $983k), or whose annual income has exceeded 200k lari ($65k) for the last three years. A “high net worth” individual can become a tax resident of Georgia if he:
- Proves that his Georgian source income amounts to 25k lari ($8.1k) or more per tax year
- Holds a residence permit or local Personal ID card (we’ll talk about that briefly)
Provided the above conditions hold, tax residency for a tax year is granted to ”high net worth” individuals by the Minister of Finance of Georgia within nine days of submitting an application. No actual presence in Georgia is required.
Now, for companies, the criteria are simple: tax residency is immediately granted to legal entities incorporated in Georgia by Georgians foreign individuals or foreign legal entities registered in Georgia.
The Law of Georgia on Entrepreneurs sets forth an exhaustive list of enterprises that can be established in Georgia and can be deemed tax residents:
- Joint-Stock Company (JSC)
- Limited Liability Company (LLC)
- General Partnership (GP)
- Limited Partnership (LP)
- Cooperative (CO)
- Individual Enterprise (IE)
Even better, we can help you register the company remotely. Check our article right here for more information. We can also provide you with information about Free Zone and Virtual IT companies in Georgia.
The best of this is that Georgia applies a territorial tax system for individuals, which means that tax residents in Georgia only pay taxes on their Georgian-sourced income, including dividends received from foreign companies. Georgian companies are taxed depending on their types:
- Georgian Free Zone Company: 0 % on foreign income, 0 % dividend tax.
- Georgian Virtual Zone IT Company: 0 % on foreign income, while paying 5 % dividend tax to make free cash out.
- Standard Georgian Company: 15 % on foreign income and 5 % dividend tax to make free cash out.
All this means that you can receive a tax residency certificate in Georgia and only pay taxes in that country, taking advantage of its solid double tax treaty network.
Now, what taxes are levied in Georgia?
- Income tax rate: 20 %
- Rental income tax rate: 5 %
- Vehicle and real estate sales tax rate: 5 %
- Corporate income tax rate: 15 %
- Property tax rate: 1 %
- Dividends, interests, and royalties withholding tax rate: 5 %
How to become a tax resident in Georgia?
Georgia has one of the most attractive and liberal immigration policies on the planet. Generally, a foreign citizen that wants to go to Georgia must obtain a Georgian visa. However, citizens of 98 countries, including all EU countries and many more, can even reside, work, and study in Georgia without a visa or residence permit. You can check the full list right here. Moreover, there’s also a list of 50 countries whose residents can enter Georgia without visas for a determined period. In fact, the EU and Turkish citizens can enter Georgia without a passport; they only need to present their ID.
Now, if you’re from one of the countries that need a visa or wish to spend more time than you’re allowed to (for example, Uruguayan citizens are only allowed to spend 90 days in Georgia without a visa) you’d need to apply for a visa or a residence permit.
Now, there are dozens of different residence permits. Let’s mention some of the most significant:
- Temporary residence permit for entrepreneurs and workers that will carry out business in Georgia and must certify a six-month employment contract with a monthly salary of at least 1k lari (around $330) in a foreign company with an annual income of at least 50k lari ($16.4k) or at least $20k if it’s a company incorporated by themselves.
- Investment residence permit for foreigners that invest at least $300k in Georgia, including their spouse and underage dependents.
- Short-term residence permit for foreigners that hold immovable property over $100k, including their spouse and underage dependents.
Residence permit for indefinite stay for foreigners that:
- Invest $300k
- Show an annual turnover from business activity of $50k for the first year, $100k for the second, and $120k for the third, fourth, and fifth years.
- If the investor receives an investment residence permit because he owns $300k in real estate property and has held them for five years.
- Permanent residence permit for foreigners that have held temporary residence permits for six years.
A residence permit is issued by the authorities within 30 days after receiving the required documents.
If you receive a tourist visa, that time doesn’t count toward tax residency time but can be used for looking for a job or starting or investing in a business, which will allow you to apply to one of the above-mentioned visas.
Who are we, and what can we do for you?
In Mundo, we have 25 years working along with NTL to provide top financial, tax, and immigration advice for high net worth individuals and family offices all over the world.
We want to see you live, travel, work, and invest freely. In today’s world, tax authorities all over the world impose further regulations and new taxes, Georgia seems like a paradise.
And we can help you relocate your tax residency to Georgia to improve your tax planning strategy. We have a top expert team that can provide you all main banking, corporate, and tax solutions in the land of wolves.
All you need to do is contact us right now!
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