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Georgia Tax Reporting: Monthly vs. Annual Obligations (2024)


Georgia Tax Reporting: Monthly vs. Annual Obligations


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While Georgia's tax system is designed to be user-friendly, having a good grasp of the rules and following them is crucial to steering clear of penalties and running your operations smoothly. This comprehensive guide covers everything you need to know about the tax obligations in Georgia, including corporate, personal, VAT, and more. Let’s take a look at tax table of Georgia for better understanding:



Georgian Tax Table:


Tax Category

Rate

Tax Base

Reporting Period

Key Points & Exemptions

Corporate Income Tax

15%

Gross dividends / 0.85

Monthly

Payable only upon dividend distribution.

Personal Income Tax (Standard)

20%

Taxable profit

Annually

Numerous exceptions with lower rates exist.

Personal Income Tax (Rental)

5%

Gross rental revenue

Annually

For residential property income.

Personal Income Tax (Small Business)

1%

Gross revenue

Monthly

For "small business" status (restrictions apply).

Personal Income Tax (Foreign Income)

0%

Non-Georgian source income

Annually

Full exemption for foreign-sourced income.

Property Tax (Legal Entities)

Up to 1%

Average asset balance

Annually

Varies based on company assets.

Property Tax (Individuals)

0%; 0.05%-0.2%; 0.8%-1%

Market value of assets/cars

Annually

Rates vary based on income and asset value. Exemptions for low-income families.

Land Tax (Non-Agricultural)

0.24 GEL/sq. meter

Land area

Annually

Lower rates for agricultural land. Municipalities may adjust rates.

Value Added Tax (VAT)

18%

Turnover

Monthly

Applies to goods/services within Georgia.

Reverse VAT

18%

Compensation for non-resident services

Monthly

Specific services deemed as rendered in Georgia.

Wage Tax

20%

Gross salary & benefits

Monthly

Plus pension fund contribution. Exemptions for non-Georgian citizens.

Pension Fund Contribution

4% (2% employee, 2% employer)

Gross salary

Monthly

Not applicable to all non-Georgian citizens.

Withholding Tax (Dividends)

5%

Dividend amount

Monthly

Tax treaties may offer exemptions.

Withholding Tax (Non-Resident Services)

10%

Gross amount

Monthly

Applies to "Georgian source income." Tax treaties may offer exemptions.

Withholding Tax (Resident Non-Taxpayers)

20%

Gross amount

Monthly

Plus pension fund contribution.

Withholding Tax (Interest)

5%

Gross amount

Monthly

Does not apply to legal entities.

Withholding Tax (Royalties)

5% (non-residents) / 20% (resident non-VAT payers)

Gross amount

Monthly


Withholding Tax (Tax Haven Payments)

15%

Gross amount

Monthly

Applies to various payments except dividends.


Overview of Taxes in Georgia



Overview of taxes in Georgia


What is the Corporate Tax Rate in Georgia?


Corporate Income Tax (CIT) in Georgia is designed to encourage business growth and reinvestment. Standard Rate is 15% on distributed profits. Tax only when you take money out as dividends. Here’s the breakdown:



Corporate Income Tax


  • Higher Rate: 20% for financial institutions like banks and microfinance companies.

  • Special Tax Statuses:

  • Virtual Zone: 0% CIT for IT services provided outside Georgia.

  • Free Industrial Zones (FIZ): Complete CIT exemption for LLC or other type of businesses operating in these zones.

  • International Company Status: Reduced 5% CIT on profit distributions, ideal for globally focused companies.


Example: A Tbilisi software company distributing dividends will pay 15% CIT, while a business in a Free Industrial Zone pays 0%.


What is the Income Tax Rate in Georgia for Individuals?


personal income tax


Georgia keeps personal income taxes straightforward and attractive for residents with a Standard Rate of 20% flat rate on all Georgian-sourced income:.


  • Special Rates:

  • Rental Income: Only 5% tax on income from residential rentals.

  • Small Business Status: Enjoy a 1% tax rate on gross revenue if you qualify.

  • Foreign Income: Completely exempt, perfect for those earning internationally.


Example: A local freelancer pays 20% on Georgian income, but nothing on earnings from overseas clients.



What are the Specific Tax Rates for VAT in Georgia?



Specific Tax Rates for VAT in Georgia


Value Added Tax (VAT) is Georgia’s primary tax on goods and services with Standard Rate of 18% on most sales within Georgia:


  • Reverse VAT: Apply this 18% when buying services from non-residents, often reclaimable if you're VAT registered.


Example: A local shop charges 18% VAT on every sale, which the end consumer ultimately pays.


What are the Specific Tax Rates for Property Tax?



Property Tax in Georgia

Owning property in Georgia comes with annual tax obligations:


  • Legal Entities: Up to 1% of the average annual asset value.

  • Individuals:

  • Standard Rate: 0.05% to 0.2% based on the property’s market value.

  • High-Value Assets: 0.8% to 1% for luxury cars and significant assets.

  • Low-Income Exemptions: Relief for families with incomes under a specific threshold.


Example: A resident with a high-end property may pay up to 1% annually, while low-income families could be exempt.


What are the Specific Tax Rates for Withholding Taxes?


Tax Rates for Withholding Taxes in georgia

Georgia simplifies tax collection by withholding at the source:


  • Dividends: 5% tax on distributed amounts.

  • Interest: 5% on payments to both residents and non-residents.

  • Royalties: 5% for non-residents; 20% for residents not registered for VAT.

  • Services to Non-Residents: 10% on gross payments.

  • Tax Havens: 15% on payments to jurisdictions with favorable tax regimes.


Example: A company paying dividends to a shareholder will withhold 5% before distribution. 


Note: if you are thinking opening a company in Georgia here is a full guide on How to Register Company (LLC) in Country Georgia (you also can check our blog on How to open an LLC business in Georgia).



Difference between monthly and annual tax reporting obligations


Understanding the difference between monthly and annual tax reporting is crucial for businesses and individuals to maintain compliance and optimize their tax processes in Georgia. Here’s a breakdown to clarify these obligations:


Monthly Tax Reporting


In Georgia, most taxes require monthly attention. Keeping track of these can help you avoid last-minute rushes and penalties. Here’s a quick rundown of what you need to file each month:


Monthly Tax Reporting Requirements



Tax

Reporting Period

Withholding Tax on Wages

Monthly

Withholding Tax on Dividends

Monthly

Withholding Tax on Interest

Monthly

Withholding Tax on Royalties

Monthly

Withholding Tax on Service Fees

Monthly

Small Business (1%)

Monthly

VAT

Monthly

Reverse VAT

Monthly

Corporate Income Tax

Monthly



Due Date: For most monthly taxes, your deadline to submit returns and pay the taxes is the 15th of the next month. For example, for VAT collected in February, the return and payment are due by March 15th. If the 15th falls on a weekend or holiday, the deadline extends to the next business day.


Special Case for Withholding Taxes: When you pay out wages, dividends, interest, royalties, or service fees, you need to withhold and pay the related tax on the same day. However, the tax return can be filed by the 15th of the following month. So, if salaries are paid on the 25th, the tax is due immediately, but you have until the 15th of the next month to submit the return.


Annual Tax Reporting


Some taxes only need your attention once a year. Here’s what to keep an eye on:


Taxes You Need to Report Annually


Tax

Reporting Period

Property Tax of Individuals

Annually

Property Tax of Legal Entities

Annually

Ordinary Personal Income Tax

Annually


Due Date: These annual tax returns are typically due by April 1st of the year following the reporting year. For instance, your personal income tax return for 2021 should be filed by April 1, 2022.


Note: There are some exceptions, particularly for property tax for individuals, so always check the specific requirements.



Navigating Georgian Tax Residency


Determining your tax residency is essential because it dictates where and how much you owe in taxes. Georgia offers a favorable tax environment for those who qualify as tax residents.


What is the 183-Day Rule?


The 183-Day Rule is the threshold for tax residency in Georgia:


  • Tax Residency: You become a tax resident if you spend 183 days or more in Georgia within any 12-month period.

  • Counting Days: All days, even partial ones, count towards the 183 days.


Do I need to file a tax return in Georgia if I spent less than 183 days in the country this year?


If you haven't met the 183-day requirement to become a Georgian tax resident this year, the need to file an annual return depends on several factors.


Triggering Tax Residency:


  • Tax residency in Georgia is established the moment you reach 183 days in the country within any 12-month period, not just within a single calendar year. This means you might trigger tax residency even if you spend less than 183 days in a single tax year.


Example:


Consider Sarah's situation:

  • Sara stays in Georgia from November 1, 2022, to April 15, 2023 (166 days).

  • She leaves Georgia and returns on October 1, 2023.

  • She stays from October 1 to November 15, 2023 (46 days).

Days in 2023:

  • Total in 2023 - 106 days.

Days in the 12-month period:

  • From November 1, 2022, to November 1, 2023 - 212 days.

In this case, Sarah is considered a tax resident for the entirety of 2023 because she spent more than 183 days within the 12-month period ending in 2023.


Why Tax Residency Matters:


  • Global Income Taxation:

    • Residents: Must report and pay taxes on worldwide income, ensuring compliance with Georgian tax laws.

    • Non-Residents: Only pay taxes on income earned within Georgia.

  • Access to Benefits:

    • Favorable Tax Rates: Benefit from Georgia’s low corporate and personal income tax rates.

    • Special Statuses: Access advantages like the Virtual Zone or Free Industrial Zones for reduced tax liabilities.

    • Double Taxation Agreements (DTAs): Leverage agreements to avoid being taxed twice on the same income by different countries.



High-Net-Worth Individual (HNWI) Status in Georgia


High-Net-Worth Individual


Georgia’s HNWI status is designed for those with substantial financial resources, offering significant tax advantages and streamlined residency processes.


Why Choose HNWI Status?


Tax Savings:

  • Flat Income Tax: Pay a straightforward 20% on Georgian-sourced income.

  • Low Dividend Tax: Enjoy a reduced 5% tax on dividends.

  • No Wealth Tax: Georgia doesn’t impose a tax on your overall wealth, allowing you to retain more of your earnings.

Easy Residency:

  • Minimal Bureaucracy: The qualification process is straightforward, with reduced red tape for those meeting financial criteria.


Exclusive Economic Zones:

  • Virtual Zones: Operate tax-free in designated IT-related activities.

  • Free Industrial Zones (FIZ): Enjoy full CIT exemptions for businesses in these zones.

  • International Company Status: Reduced 5% CIT on profit distributions for qualified companies.


How to Qualify for HNWI Status:


  • Showcase Your Wealth:

    • Net Assets: Hold assets over 3,000,000 GEL, supported by audited or apostilled documents.

  • Prove High Income:

    • Annual Income: Demonstrate an annual income of at least 200,000 GEL over the past three years.

  • Engage in Georgian Business:

    • Local Income: Earn 25,000 GEL annually from Georgian sources and hold a residence permit.

  • Hold Significant Assets:

    • Georgian Assets: Own assets worth at least 500,000 USD within Georgia.


What If I Already Paid Taxes in Another Country?


If you've already paid taxes in another country, the implications depend on whether Georgia has a Double Taxation Avoidance Agreement (DTA) with that country.


Double Taxation Avoidance Agreement (DTA):


  • With a DTA: If a DTA exists and you are not considered a Georgian tax resident:

    • Paying taxes in the country where you are deemed a resident might suffice, depending on the terms of the DTA.

    • It’s essential to review the specific DTA treaty to understand your obligations and benefits.

  • Without a DTA or Georgian Tax Residency:

    • If no DTA exists, or if you are considered a tax resident of Georgia under the DTA, you may need to pay taxes on that income in Georgia.

    • Work performed from within Georgia generally makes that income subject to Georgian taxation.

    • You may be able to claim tax relief or credits for taxes paid abroad, depending on the foreign country's tax laws and the provisions for tax credits.



What is a Tax Obligation?


Let’s be practical - imagine this scenario: Your Georgian business had a taxable event during the reporting period, but you missed the deadline to file the relevant tax return. What’s at stake? Substantial Penalties let’s dive into it:


The Georgian Tax Code doesn’t take missed filings lightly. You could be hit with penalties of up to 50% of the unpaid taxes. On top of that, you’ll face late payment interest accruing at 0.05% per day on the outstanding amount. This can quickly add up and become a significant financial burden (Refer to Articles 275, 272, and 274 of the Georgian Tax Code).


  • Late Submissions: If you miss filing for a taxable event, you could face penalties of up to 50% of the unpaid tax amount. Additionally, there’s a daily interest charge of 0.05% on the overdue payment. These costs add up quickly, so timely filing is crucial.

  • No Activity? No Excuse: Even if your business didn’t have any taxable activity for the month, you still need to file a zero return. Not doing so can result in fines. Georgia's tax system requires regular reporting regardless of activity.

  • Incorrect Information: Failure to update your taxpayer information or submit necessary declarations can incur penalties of 100 GEL for each month you’re late. Accuracy and timely updates are essential to avoid these fines.


Staying Compliant with Statutory Bookkeeping and Reporting in Georgia


Electronic Submission: In Georgia, all tax returns are submitted electronically through the Georgian Revenue Service’s online platform. Each business and individual entrepreneur has their own page on this platform. This is where you submit your tax declarations, provide general information about your business, read official notifications, and send necessary reports to the national statistics office.


Managing Your Online Tax Profile: It’s crucial to regularly manage and monitor your taxpayer’s page on www.rs.ge. This involves not just submitting tax returns but also staying updated with statutory notifications and ensuring all required information and reports are up-to-date.



Gegidze: Your Partner in Georgian Tax Navigation


Navigating the complexities of Georgian taxes, especially property and rental income taxes, can be daunting. But you don't have to do it alone. At Gegidze, we offer comprehensive business consulting and full-stack services, including expert tax advice and optimization strategies.


Our Tax Services:


  • Property Tax: We ensure your property tax declarations are accurate and compliant, helping you avoid penalties and optimize your tax liability.

  • Rental Income Tax: We guide you through the intricacies of rental income taxation, ensuring you understand your obligations and maximize your deductions.

  • Tax Advisory: We provide personalized tax planning and consulting to align your tax strategy with your overall financial goals.

  • Tax Optimization: We analyze your financial situation and recommend strategies to legally minimize your tax burden.

  • Payroll management: We handle tax filings, payments, and communication with Georgian authorities on your behalf

  • Tax Accounting & Bookkeeping: We provide customized bookkeeping and accounting solutions, uniquely tailored to your business, and work alongside you to achieve your financial goals.


Your Financial Success Starts Here


Don't let tax complexities hold you back from achieving your financial goals. Contact Gegidze today for expert guidance and support in navigating the Georgian tax landscape. Your property investments are in safe hands with us.



georgia taxes free consultation gegidze


Frequently Asked Questions (FAQs)


What is the 183-day rule?

Think of it as your tax residency countdown. Clock more than half the year physically in Georgia, and you're likely looking at filing those Georgian returns.

How does tax residency affect my taxes?

What are Double Taxation Agreements (DTAs)?

What are the specific tax rates for corporate income?

What are the specific tax rates for personal income?

What are the specific tax rates for VAT?

What are the specific tax rates for property tax?

What are the specific tax rates for withholding taxes?

What are the reporting periods and key deadlines for corporate income?

What are the reporting periods and key deadlines for personal income?

What are the reporting periods and key deadlines for VAT?

What are the reporting periods and key deadlines for property tax?

What are the reporting periods and key deadlines for withholding taxes?


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