Benefits of Tax Residency in Georgia
Obtaining Georgian Tax Residency in 2024 is in-demand as never before. Tax residency can have many benefits for a person both for tax optimization purposes and for financial, banking purposes. In this article we will discuss the following issues in detail:
- What is the difference between tax residency and Georgian residence permit;
- Ways of obtaining tax residency in Georgia;
- Results of obtaining tax residency of Georgia.
As for the start - a prerequisite for obtaining tax residency is registration as a taxpayer, after which a person is assigned a 9-digit taxpayer identification number and is given a taxpayer's certificate and the user data and password needed to access the portal of the Revenue Service.
Difference between Tax residency and Georgian residence permit
The Georgian residence permit gives the opportunity to stay / live in Georgia for the period specified by the permit, while the Georgian tax residency determines the place of origin of a person's main tax obligations and grants the tax resident certain tax rights and obligations.
A person may be a residence permit holder of Georgia, or even a citizen, but at the same time, she/he may not be a tax resident of the country, therefore, she/he may not have the obligations of a tax resident towards the tax authorities of Georgia (for example, if a person has not been in the country for more than 183 days in any consecutive 12-month period, he/she will not have tax residency status, therefore, will not incur tax obligations as a tax resident). And vice versa, one might be a tax resident but not have residence permit / citizenship (for example, to have tax residency based on the fact that she/he is a High-net-worth individual).
Here we note that not having tax residency does not always exclude the existence of tax liability to Georgia, which shall be analyzed in each case separately.
It should be noted that one of the benefits of Georgian tax residence is the ease of opening a bank account in Georgia.
Read more to find out more about obtaining Georgian tax residency
Grounds for obtaining Georgian tax residency
According to the Tax Code of Georgia, a Georgian resident for the entire current tax year shall be a physical person:
- Who has actually stayed in the territory of Georgia for 183 or more days in any continuous 12-calendar-month period ending in that tax year;
- A physical person who is High-net-worth individual and meets the requirements stipulated by the relevant Order;
- A physical person who was in a foreign country in the public service of Georgia during that tax year.
In the article, we will consider the first two cases.
Georgian tax residency based on actual presence in Georgia
The time of actual stay in the territory of Georgia shall be the time during which a physical person stayed in Georgia, as well as the time he/she spent outside Georgia specifically for treatment, leisure, business trip or education.
The day after crossing the border of Georgia is considered to be the day of actual stay in the territory of Georgia, during which the individual was in Georgia, in this case the length of stay within that day is not important.
The time of actual stay in the territory of Georgia shall not include the time, during which a natural person stayed in Georgia:
- a) as a person having a diplomatic or consular status or as a family member of such person;
- b) as an employee of an international organisation acting under an international agreement of Georgia or as a person in the public service of a foreign country in Georgia or as a family member of such person, other than Georgian citizens;
- c) when moving from one foreign country to another through the territory of Georgia;
- d) for treatment or leisure.
Documents that applicant needs to submit to obtain tax residency based on actual presence in Georgia:
Tax and customs authorities of Georgia technically control the fact of crossing the border by an individual. Therefore, to prove your stay in Georgia, it is enough to present your identity document to the tax authority. In some cases, when the actual presence must also be additionally confirmed by a business trip to another country, for treatment, vacation, or study - documentation confirming the relevant basis may be required: service order, leave form, treatment documents, business trip forms, etc.
In order to determine Georgia's tax residency on this basis, it is sufficient for a person to actually be in Georgia for 183 days or more during any continuous 12-month period. As we mentioned, the actual presence also includes the case when a person left the territory of Georgia for treatment, vacation, business trip or study.
Georgia Tax residency for High-net-worth individual
The joint order of the Minister of Finance of Georgia and the Minister of Justice of Georgia No. 991, as well as the Law of Georgia on Securities Market establishes the definition of High-net-worth individual.
High-net-worth individual is an individual whose proven assets exceed GEL3 million (approx. USD1 million) or whose annual income over the last 3 years exceeds GEL200,000 (approx. USD70 thousand).
Tax residency of Georgia is granted to High-net-worth individual if:
a) She/he has assets of USD500,000 in Georgia and has a Georgian residence permit / Georgian citizenship;
or
b) She/he has assets of USD500,000 in Georgia and receives income from a source in Georgia during the previous tax year in the amount of GEL25,000 (approximately USD8,500) or more.
Documentations for High-net-worth individual to obtain Tax residency
a) Citizenship / residence permit and documents confirming that the property of a natural person exceeds GEL3 million or his annual income during the last 3 years exceeds GEL200,000;
or
- b) Documents confirming that the property of an individual exceeds GEL3 million or his annual income for the last 3 years exceeds GEL200,000 and documents confirming that the individual receives income in amount of GEL25,000 or more during the tax year from a source in Georgia. income;
- c) Power of attorney (if the application is filed remotely by a person under the power of attorney);
- d) Colored copy of passport.
- e) Proof of Georgian assets, whose value exceed USD500,000.
For example, if a person owns real estate/properties worth GEL3 million (in total or separately), a document confirming the ownership of said property and at the same time a certified appraisal document of this property, thereby confirming the value of the property, must be submitted.
The income received from the source in Georgia differs in each specific case and depends on the activity of a specific person. The income received from the existing source in Georgia can be - income received from apartment rental, income received from deposit, income received from economic activity and or income received as salary.
The application for the granting of Georgian residency to High-net-worth individuals is reviwed by the Revenue Service, and the granting of Georgian residency is carried out by the Minister of Finance of Georgia.
As a rule, the review takes an average of 1-2 months.
Results of obtaining tax residency of Georgia
It is important that obtaining tax residency in Georgia gives rise to both tax rights and obligations for the whole tax / calendar year for which the tax residency was obtained.
The standard rate of personal income tax for tax residents of Georgia is 20%.
The most significant right that tax residents of Georgia enjoy is that income received by a resident (including benefits) that does not belong to income received from a source in Georgia is exempt from taxation.
It is very important that the tax residency of Georgia does not exclude the possibility of taxing a person in another country. Especially, if the person has a place of residence / center of economic interests different from Georgia - the existing double taxation agreement between Georgia and the relevant country (if any) should be taken into account.
Such an agreement always regulates the issue of residency. Therefore, before you decide to obtain tax residency in Georgia, we recommend that you consult a tax advisor of the country in which you have your main residence / center of economic interests.
Most often, Georgian tax residency is interesting for a person who does not live in any country for more than 183 days.
It is important that Georgian residency is granted to a person separately for each tax year. Therefore, for each repeated request, the documents defined by the law must be submitted again.
If you are a person with significant property and want to obtain Georgian tax residency - contact our law firm in Tbilisi and we will promptly advise you on choosing the most convenient way to achieve this goal.
DISCLAIMER: This is not legal, tax or investment advice. Our opinion is not binding for any court or tax authorities. Any kind of investment bears risks.
