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Your Guide to Becoming a Georgia Tax Resident in 2024

georgia residency requirements for tax purposes


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Introduction


Let's face it, taxes are complicated. Especially, in another country's tax system and things can get downright confusing. Georgia has its approach to tax residency, which is important for anyone living or doing business here.


Understanding whether you're considered a resident is key.  It significantly impacts your tax obligations. This article breaks down Georgian tax residency, the rules, and their implications. Yes, there might be a lot to unpack.

Whether you're already in Georgia, considering a move, or simply managing business interests here, this guide will give you detailed knowledge.



What is tax residency?


Tax residency refers to the country where you live, work, and pay taxes. But, the term is not tied to citizenship. You can be a citizen of one country and a tax resident in another.


Tax residency is the country that claims a piece of your income. Where you're considered a tax resident has a HUGE impact on how much you pay in taxes, and where that money goes.



What are the benefits of Georgian tax residency?


georgia tax residency


One of the lowest taxes in the world


The standard corporate tax rate in Georgia is just 15% on distributed profits. That's already a win compared to the U.S. average of 21% and Western Europe's 25-30% range.


But wait, there's more!  Personal income tax is a flat 20%, and dividends are taxed at a mere 5%.  And if you qualify for special statuses like Virtual Zone or International Company, those rates can drop even further.


Foreign income haven


Most passive income earned outside Georgia is tax-exempt. That's a major

draw for those with international income streams.



One of the lowest taxes in the world


Crypto-friendly 


Georgia's tax code doesn't explicitly address crypto gains, and official guidance has deemed it non-taxable if the source is outside Georgia.


Open Bank Account Georgia Non-Resident: Simple & effective banking 


While opening Georgian bank accounts can be tough for non-residents, tax residency streamlines the process. Once you're "in", you'll face less red tape and enjoy simpler banking.


Beat the information exchange trend


Georgia hasn't joined the Common Reporting Standard... yet. Becoming a resident shields you when they eventually do, protecting your financial information.



Georgia residency requirements for tax purposes


The 183-day rule  


This is the simplest for many: physically spend more than half the year (183 days) in Georgia, and you're likely considered a resident for tax purposes.  Those days don't even need to be back-to-back!


The high-net-worth individual (HNWI) program  


It is designed for wealthy investors (including those with major crypto assets), Georgia's HNWI program has specific requirements. 


You'll need:


  • Official documents with proof of EITHER:

    • Net assets over 3,000,000 GEL

    • At least 200,000 GEL annual income for the last three years



The High-Net-Worth Individual (HNWI) program explained



How to Gain Tax Residency in Georgia


Georgia's High Net Worth Individual (HNWI) program attracts investors seeking tax advantages. 


Georgia revised its qualification criteria on April 15th, 2023. Thus, understanding the new requirements is crucial for anyone aiming for this status. Let's break down the key points.


Georgia offers a special tax residency path for wealthy individuals. To qualify as an HNWI, you must meet at least one of the following criteria:


  1. High Net Assets: Official documentation (independently audited or with an apostille) proving net assets exceeding 3,000,000 GEL (approximately EUR 750,000).

  2. High Income: Proof of annual income exceeding 200,000 GEL (roughly EUR 50,000) for three consecutive years.

  3. Georgian Business Ties: Hold a Georgian residence permit (work visa) AND earn a minimum of 25,000 GEL (about EUR 8,000) per year from a Georgian-based source.

  4. Assets Physically Located in Georgia: This recent 2023 update requires you to hold assets physically located in Georgia with a combined value exceeding 500,000 USD.


While the full list of qualifying assets awaits clarification, here's what's likely to be included: 


Paths to HNWI status: Choosing your best option


Depending on your specific financial situation, here are the four possible combinations of the above criteria that unlock HNWI residency:


  1. Asset-Focused Investors: Possess 3M+ GEL in global assets, a Georgian residence permit, AND 500K+ USD in Georgian assets.

  2. Income and Asset Blend: Hold 3M+ GEL in global assets, earned 25k+ GEL from Georgian sources in the past year, AND own 500k+ USD in Georgian assets.

  3. High Global Earners: Have documented income of 200K+ GEL annually for the last three years, a Georgian residence permit, AND 500K+ USD in Georgian assets.

  4. Georgian Income Supplement: Similar to the above, with at least 25K GEL of your total income for the past year earned within Georgia itself, and the Georgian asset requirement still in place.


Advantages of Georgian HNWI Tax Residency


  • Focus on Georgian Income:  Generally, you'll only pay Georgian taxes on income derived from within Georgia.  Most of your international income could remain tax-free.

  • The Treaty Advantage:  Georgia has tax treaties with 55 countries.  These treaties can offer potential savings that non-residents don't get.  For example, dividends you receive from a treaty country might become tax-exempt when you're a Georgian resident.



The 183-day rule explained


The 183-day rule explained


Many countries, including Georgia, use the 183-day rule as a key factor for determining tax residency.  Here's how it works:


  • Counting the Days: If you physically spend more than half the year (183 days) within Georgia's borders, you'll likely be considered a tax resident. It doesn't matter if those days are spread out or all at once.

  • No Citizenship Required:  The 183-day rule applies equally to Georgian citizens and foreigners.  So, whether you're a local returning home or an expat relocating, this rule plays a major role.


Important Considerations for the 183-Day Rule


  • It's Not the Only Factor: While time spent in Georgia is crucial, other factors can come into play, like owning a permanent residence or having your main "center of vital interests" in the country.

  • Short Stays Don't Count:  Frequent visits to Georgia won't trigger tax residency on their own. The rule is about where you establish your primary base for a significant chunk of the year.

  • Official Business Exemption:  If you are a Georgian government official abroad, you maintain tax residency regardless of how long you're physically outside the country.



Establishing a permanent place of residence


Owning or renting a residence in Georgia plays a significant role in determining tax residency status. However, several important factors distinguish mere property ownership from maintaining a genuine primary home within the country.


Demonstrating Intent:  Georgian tax authorities consider various indicators when evaluating your ties to the country. 


These include:


  • Location of your immediate family or significant social connections

  • Where you receive essential mail and hold utility accounts

  • Memberships in Georgian clubs, organizations, or businesses

  • Whether you actively maintain a residence in another country


Purposeful Design: The regulations surrounding property ownership as a pathway to residency aim to discourage using it solely as a tax avoidance strategy.


Ownership vs. Rental


Owning and renting a Georgian residence can qualify you for tax residency if you demonstrate it as your primary home. 


Residency determination rarely rests on a single factor. The interplay of time spent in Georgia (the 183-day rule), property ties, and other indicators establish your tax residency status.



how to apply tax residency georgia


The Application Process for Georgian Tax Residency Certificate


Understanding the steps and requirements is key for a smooth transition to attain Georgian tax residency certificate. Let's break it down:


Step 1:  Meet the core requirements


  • The 183-Day Rule: Spending more than half the year (183 days) physically present in Georgia generally triggers tax residency.

  • Georgian Residence: Owning or renting a dwelling where you regularly reside is also crucial.


Step 2:  Documentation and submission


  • Proving Your Identity:  Prepare your passport, national ID card, or similar official documents. These establish who you are.

  • Demonstrating Your Georgian Residence:  Show your connection to Georgia with a lease agreement, utility bills in your name, or evidence of property ownership.  Ensure all information is accurate and current.

  • Submitting to the Revenue Service: Start the official process by submitting your documents to the Georgian Revenue Service. Be aware, they might need additional forms from you later on.


Step 3: Obtain your TIN


This Tax Identification Number is essential for your tax interactions in Georgia. Apply for it through the Revenue Service as part of the residency process.


Step 4: Wait for a decision


  • Processing Time: While there's no guaranteed timeline, expect several weeks to a few months for a decision.

  • Outcome: The Georgian Minister of Finance makes the final determination on your tax residency status.


Important deadlines and resources


  • Filing Deadlines: If your stay triggers residency, you'll usually file a Georgian tax return by March 31st of the following year. Late filings incur penalties.

  • Georgia's Online Portal: Familiarize yourself with this system for registration, obtaining your TIN, filing returns, and potentially requesting a tax residency certificate.



Understanding tax implications based on residency status


Understanding tax implications based on residency status


Your tax residency status in Georgia impacts how much tax you pay and where that money goes.  Let's break down the key differences between residents and non-residents:


Residents: A global income perspective


If you qualify as a Georgian tax resident, prepare to report income from all sources worldwide.


This includes:


  • Salary or wages from any job, regardless of where it's performed.

  • Business profits, even if your customers are located internationally.

  • Rental income from properties inside or outside of Georgia.

  • Investment gains, from Georgian or foreign assets.


Good news?  Georgia has a straightforward flat income tax rate of 20% for residents.


Non-residents: focus on Georgia


As a non-resident, your tax obligations are narrower.  You'll primarily be concerned with income directly originating within Georgia's borders. 


Examples include:


  • Salary earned from physically working inside Georgia.

  • Profits from a business based in Georgia.

  • Rental income from Georgian real estate.


The tax rate remains the same –  a flat 20% – but with a limited scope of taxable income.


The importance of reporting


Regardless of your residency status, you're required to file a Georgian tax return if you meet any of these conditions:


  • You qualify as a Georgian tax resident.

  • You earn any type of income from sources within Georgia as a non-resident.



Avoiding double taxation: A Step-by-Step Guide


Double taxation agreements and their impact


Double Taxation Agreements (DTAs) are the backbone of fair taxation for individuals and businesses with cross-border income. Georgia maintains DTAs with numerous countries, and understanding the one relevant to you is crucial for avoiding nasty tax surprises.


What DTAs do?


Consider these agreements as rulebooks for international tax situations. They answer two key questions:


  • Who has taxing rights?  DTAs prevent you from getting taxed on the same income by Georgia and your home country. They outline which country gets to tax specific types of income.

  • How much do I owe? Even if Georgia can tax a certain income source, a DTA might reduce the rate or provide credits for taxes already paid elsewhere. This can save you significant money!


DTAs for Georgian residents: Implications for foreign income


Understanding DTAs is key for Georgian tax residents.  Especially when it comes to income earned outside Georgia's borders.  Here's where things get interesting:


  • Possible Exemptions: Certain types of foreign income (like dividends) are potentially tax-free in Georgia.  That's thanks to DTAs.

  • The Credit Option:  Already paid tax in another country? Georgia might give you credit for that, so you don't pay twice on the same income.  DTA terms are crucial here.

  • Treaty Talk:  It's not a one-size-fits-all situation.  What YOU get out of the DTA depends on the deal Georgia struck with your home country.


Income reporting as a Georgian resident: DTAs in action


Your tax residency status means you'll likely need to report all your worldwide income to Georgia. But, this is where those DTAs come into play:


  • Exemptions in Effect: If the DTA exempts certain income, you might not even need to include it on your Georgian return.

  • Credit Claims: Thorough record-keeping is key for claiming any foreign tax credits allowed by the treaty.



Avoid double taxation


While becoming a Georgian tax resident offers potential benefits, it's crucial to remember that this doesn't automatically terminate your tax obligations in other countries. Here's why:


  • Varying Procedures:  The process for ceasing tax residency differs between countries.  Some require specific forms or actions, while others might base it on time spent outside their borders.

  • Deadlines Matter:  Tax authorities often impose deadlines for revoking residency in a given tax year.  Missing these can result in double taxation for that year.

  • When Time is the Only Factor: If you exceed Georgia's 183-day rule, changing residency purely based on that may be impossible.  You'll need alternative strategies.


Treaty Analysis is Key: Investigate if your previous country has a Double Taxation Agreement (DTA) with Georgia.  These treaties offer mechanisms to avoid being taxed on the same income twice. The exact benefits hinge on the specific treaty's wording.


The Path to Single Residency:  If no DTA applies, ending tax residency in your previous country before the deadline might be the solution. This streamlines your tax situation, making you solely a Georgian tax resident.



Maintaining tax residency status


Obtaining Georgian tax residency is a significant achievement. Maintaining that status requires ongoing attention. Here are the key elements:


  1. Focus on the 183-Day Rule: Track the spent time in Georgia each year. This is often the determining factor for whether you retain residency status.

  2. Maintain a Georgian Residence: Whether you rent or own, demonstrating a physical connection to Georgia is crucial. Proof of this residence, like utility bills or a lease agreement, will be important.

  3. Understanding Worldwide Taxation: As a Georgian resident, be prepared to report and potentially pay taxes on income earned all around the globe. Strategic financial planning is important.



Expert Help; Tax Status; Legal Foundation


How we help


Understanding the steps to becoming a tax resident in Georgia is crucial for unlocking potential benefits.  But the process has layers, and we are here to navigate it smoothly.  Here's the breakdown:


Step 1:  The Legal Foundation


Before-tax residency, you must be a legal resident of Georgia OR have significant income generated within Georgia.  If you don't meet those, Gegidze can assist you with obtaining legal residency, simplifying that sometimes tricky process.


Step 2:  Official Tax Status


Once you're a legal resident, we work with you to gather documentation and submit your tax residency application to the Revenue Service.  Our expertise helps ensure you demonstrate your High Net Worth Individual status effectively, maximizing your chances of approval.


Step 3:  Maintaining Your Residency


This isn't a one-and-done situation!  Georgian tax residency must be renewed annually. This means providing updated documentation each year.  Gegidze makes this process painless, keeping you on track and in compliance.



Gegidze Free consultation click here


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 is a Tax Identification Number (TIN)?

What are Double Taxation Agreements (DTAs)?

How can I maintain my tax residency status?


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