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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 in 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
About
Georgia
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
countryoffering very liberal, foreign-friendly legislation, excellent tax
incentives, lifestyle, and business climate for foreigners.
The first 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 millionlari (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 is 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?
For individuals:
- Income tax rate: 20
%
- Rental income tax
rate: 5 %
- Vehicle and real
estate sales tax rate: 5 %
For companies:
- 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 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 stayfor 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.
Or,
- 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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