Georgia has become a popular tourist destination, and now seven and eight-figure entrepreneurs and investors are embracing its potential as a tax residence. It’s a country that is up and coming and boasts one of the world’s best-performing economies.
Georgia sits in an advantageous location at the intersection between Europe and Asia. It’s also rapidly progressing towards full EU membership. Clearly, there are benefits for a non-resident to set up tax residency there.
This article will outline the Georgian tax system, including the country’s tax rates. Georgia makes for an attractive tax residence as its tax system is fair with moderate rates.
The Georgian Tax System
Flat Tax vs. Progressive Tax
Georgia operates a flat tax system. Here, a single income tax rate is applicable to every taxpayer regardless of earnings and sales.
This is the opposite of a progressive tax system where tiered tax rates mean higher-income individuals pay higher percentages of their income, while those with the lowest incomes pay the lowest tax rates.
No one pays more or less in taxes than anyone else among Georgian residents, as the same rate applies to all taxpayers.
Country, State, and City Taxes
The Georgian government collects taxes at the national, federal, and municipal levels. National taxes include corporate taxes, income taxes, and VAT. Municipal authorities subject Georgian taxpayers to property taxes.
The 183-Day Rule
The Georgian tax system sets the tax rate for tax residents who spend a minimum of 183 days a year on Georgian soil.
Note that the Georgian tax rate is only applicable if you live in the country for half the year, even if you do not do so in one continuous period. Non-residents spend less than 183 days in Georgia and have different tax liabilities.
Tax Rates
There are six Georgian flat tax rates relating to purchases and sales – corporate profit tax, excise tax, import tax, personal income tax, property tax, and value-added tax.
Corporate Profit Tax and Rates in Georgia
Corporate income tax is applied to the money your company makes from:
- doing business, the trading profits
- investments
- sales of assets at a price exceeding their cost, the chargeable gains
In 2008, Georgia started to levy corporate taxes at a flat rate of 15%. Non-distributed profits became exempt from taxation in 2017. This change in corporate income tax was initiated to serve as a magnet for foreign investment.
In 2023 Georgia also introduced a secondary 20% corporate income tax for financial institutions such as banks, credit unions and other lenders.
Excise Tax and Rates in Georgia
An excise tax is a legislated tax on specific goods or services at purchase.
In Georgia, note that excise taxes are levied on the likes of environmentally damaging goods according to Article 188 of the tax code, including gasoline with 1lt GEL300 (Georgian Lari) ($119.77).
Import Tax and Rates in Georgia
Import tax refers to the customs applied to imported goods. Taxation rates are fixed at 0% (where the product is only taxed with VAT and imports tax-free), 5%, and 12% as established by Article 197 of the tax code.
Personal Income Tax and Rates in Georgia
This tax is charged at 20% on local-source income. Foreign-source personal income is tax-exempt. There is a 5% tax on personal income interest, dividends, and royalties.
Property Tax and Rates in Georgia
For any real estate transaction, including residential property purchases and sales, there is a tax rate from a minimum of 0.2% to a maximum of 1%.
VAT and Rates in Georgia
VAT is levied at 18%. Although there are few exceptions for education, exports, and medical care, nearly all goods and services are subject to VAT. Irrespective of the turnover of their business, residents have to register for VAT if it produces or imports goods. Turnovers of less than 100,000 GEL ($39,924.14) are exempt.
Special Tax Regimes
Individual entrepreneurs can also take advantage of Georgia’s lower-than-average tax rates if they’re high-net-worth individuals (HNWI). For Georgian tax residency purposes, you are considered to be an HNWI if:
- the value of your non-Georgian property exceeds GEL3,000,000 ($1,197,724.20)
or - your annual worldwide income received has exceeded GEL200,000 ($79,848.28) during the last three years
The High Net Worth Individual must also satisfy specific additional taxpayer requirements to receive Georgian tax residency status under the Special Residency Regime. In particular, under the Regime, Georgian tax residency status is granted to an HNWI only if:
- you are a natural person with either a Georgian residence permit or Georgian nationality
or - you can verify receiving more than GEL25,000 ($9,981.03) of Georgian source income during a single year
This tax residence is valid for a year. Where the general tax on capital gains is 20%, it is reduced to 5% in the case of the supply of a residential apartment and the land attached to it.
Tax incentives for international companies include a 0% withholding tax on dividends instead of the standard 5%. These zero percent withholding tax rates also apply to royalties.
International company status offers reduced tax rates for entities deemed eligible. This sets the personal income tax rate of the employees of this business at 5% as opposed to the regular 20%.
These are free industrial zone or virtual zone companies.
Why NOMOS?
Because of its tax benefits, Georgia is one of the best tax residency options for foreign investors.
This enterprising country allows residents a tax-friendly environment to carry on their businesses. We can help you go from a non-resident to a resident.
Suppose this article has piqued your interest in Georgia and establishing a tax residence in the country. Set up a call with us to discuss the services we can offer you. We cover everything from the corporate tax section of Georgia to sales taxes in the country.
Perhaps you are not looking to set up tax residence in Georgia. Maybe you want to open a bank account or perhaps obtain Georgian citizenship. Whatever your interest in Georgia, we’ll deal with all the small print so nothing is overlooked.
