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Understanding Tax Residency in Georgia: Two Paths
The 183-Day Rule: A Quick Overview
Georgian tax residency includes two primary paths, one of which is the 183-day rule; it means if you spend 183 days or more in Georgia in a 12-month period, you qualify as a tax resident. This rule is quite straightforward and is common in many countries. The days can span parts of two consecutive years as long as they add up to 183 days.
Becoming a tax resident under the 183-day rule means you can enjoy Georgia’s flat personal income tax rate and exemptions on most foreign income. This rule is ideal if you plan to spend significant time in the country. However, there are exceptions for certain groups, such as diplomats and specific international workers.
The HNWI Program: Your Fast Track to Tax Residency
If spending 183 days or more in Georgia isn't part of your plan but you still want to benefit from its tax advantages, the High Net Worth Individual (HNWI) program is your unique opportunity. This program allows individuals with an income over 200,000 GEL (approx. 80,000 USD) or personal assets in excess of 3 Million GEL (approx. 1,200,000 USD) to obtain Georgian tax residency without meeting the 183-day physical presence requirement.
The HNWI program is perfect for digital nomads, international investors, and global business owners. It offers flexibility and significant tax savings with minimal physical presence in Georgia.
Georgia's HNWI Program: A Deep Dive
Who Qualifies? Eligibility Criteria & Required Documents
To qualify for the HNWI program, you must meet one of the following criteria:
Asset-Based Criteria: Own assets worth at least 3 million GEL (approximately $1.2 million). As of April 2023, at least $500,000 of these assets must be in Georgia.
Income-Based Criteria: Have an annual income of at least 200,000 GEL (approximately $80,000) for each of the last three years. Additionally, as of April 2023, you must own assets in Georgia worth at least $500,000.
You also need either a Georgian residence permit or proof of receiving at least 25,000 GEL from a Georgian source in the year before your application.
Documents Required for HNWI Tax Residency Application
To apply for HNWI tax residency in Georgia, you need to submit specific documents. The requirements are the same for both Georgian residents and non-residents.
Application Form: Complete the HNWI tax residency application.
Identification Document:
Georgian citizens/residents: Provide your Georgian ID card or residence permit.
Non-residents: Provide your passport, officially translated into Georgian and notarized by a notary public.
Proof of Assets: A valuation report from a licensed Georgian appraisal company showing personal assets in Georgia worth more than 500,000 USD. (The requirement for global assets of 3 million GEL has been removed.)
Proof of Income (if applicable): If you are applying based on income, provide documents showing an annual income of at least 200,000 GEL for the past 3 years. Foreign bank statements must be officially translated into Georgian and notarized by a notary public.
Benefits of the HNWI Program: Why Georgia?
Georgia offers several enticing benefits for HNWIs:
20% Flat Personal Income Tax: Simplifies tax planning.
1% Small Business Status Tax: For businesses with an annual turnover of up to 500,000 GEL.
No Tax on Foreign Income: Only Georgian-source income is taxed.
Strategic Location: At the crossroads of Europe and Asia, ideal for accessing multiple markets.
Ease of Doing Business: Georgia ranks high in global ease of doing business indexes. If you are thinking of opening a company in Georgia here is a full guide on How to Register Company (LLC) in Country Georgia.
These benefits make Georgia an attractive destination for high-net-worth individuals looking to optimize their tax liabilities in a stable and welcoming environment.
The Application Process: Step-by-Step Guide
Pre-application Preparation:
Gather necessary documents (proof of assets, income, residence permit, etc.).
Consult a tax professional to ensure all criteria are met.
Application Submission:
Complete the application form.
Submit documents online or in person at the Georgian Revenue Service.
Review and Approval:
The Revenue Service reviews the application and may request additional information.
Upon approval, you receive a Georgian tax residency certificate.
Post-approval Requirements:
Reapply annually to maintain HNWI status.
Keep all documents up-to-date and be prepared for potential audits.
Timeline for Obtaining HNWI Tax Residency in Georgia
Duration of the Process
Obtaining HNWI tax residency in Georgia involves several steps and can take some time. Here’s a simplified breakdown to help you plan:
Document Preparation: This step usually takes about 1-2 months. If you already have a Georgian residence permit or have earned 25,000 GEL from a Georgian source, this can be quicker.
Document Requirements:
You need to gather and prepare all necessary documents, such as proof of income or assets.
Documents must be notarized, apostilled, or legalized, depending on their origin.
Translations into Georgian need to be certified by a Georgia notary.
Application Review: Once your application is submitted to the Georgian Revenue Service (GRS), it typically takes around 3 months for the GRS to review and approve it.
Total Time: From start to finish, the entire process usually takes about 5 months.
Example: If you start preparing your documents in January. By March, you submit your application to the GRS. After their review, you receive your HNWI tax residency certificate in June. Overall, the process took about 5 months.
Optimal Timing for Application
It’s best to start your application process 90-120 days before the end of the year. This timing helps ensure that your application is processed within the same tax year.
Early Applications: If you apply in the early months, you are likely to get your certificate within the same year.
Late Applications: If you apply in December, your certificate might be issued in the following year. However, it will still count for the tax year in which you applied.
Example: If you apply for HNWI tax residency for the 2023 tax year in November 2023 and your certificate is issued in February 2024, the certificate will still indicate that you are a tax resident for 2023.
Practical Tips for a Smooth Process
Plan Ahead: Start early to avoid the rush at the end of the year and ensure your documents are in order.
Be Patient: The review process can take a few months, so build this into your timeline.
Consult a Professional: Working with a Georgian legal expert can streamline the process and ensure you meet all requirements efficiently.
How HNWI Status Can Complement Virtual Zone & International IT Company Benefits
Georgia offers several attractive tax incentives that can intersect to provide significant benefits for high-net-worth individuals, especially those in the IT sector. Here's how the HNWI program can complement the advantages of Virtual Zone or International IT Company statuses:
Income Qualification for HNWI
If you are an IT professional or entrepreneur operating under Georgia's Virtual Zone or International IT Company status, the income you earn through these entities can help you meet the 200,000 GEL annual income requirement for HNWI status. This is particularly beneficial for:
IT Professionals: Those earning a substantial income from software development, consulting, or other IT services.
Entrepreneurs: Business owners who generate significant revenue through tech-based enterprises in Georgia.
Tax Optimization Strategies
Combining HNWI status with Virtual Zone or International IT Company status offers a unique opportunity to optimize your taxes. Here’s how you can benefit from both regimes:
HNWIs: Enjoy a flat 5% income tax rate on Georgian-sourced income, simplifying your personal tax obligations.
Virtual Zone or International IT Companies: Take advantage of reduced or zero corporate income tax and exemption from VAT on certain activities, significantly lowering your business’s tax burden.
What's Changed & How It Impacts You
As of April 2023, the HNWI program has an additional requirement: ownership of at least $500,000 worth of assets in Georgia. This ensures applicants have a substantial financial presence in the country, aligning with Georgia’s goal of attracting significant foreign investment.
The income proof requirement has also changed. Previously, you needed to show Georgian source income in the year of application. Now, you must demonstrate this for the year before your application, necessitating more advanced planning.
Previous HNWI Program Rules
To qualify for Georgian tax residency under the HNWI program, you had to meet two main criteria:
Prove Your High Net Worth (HNWI) Status:
Option 1: Own assets worth at least 3 million GEL (approx. $1,075,000) anywhere in the world.
Option 2: Have an annual income of at least 200,000 GEL (approx. $71,500) for each of the last three years.
Prove Your Connection to Georgia:
Option 1: Hold a Georgian residence permit (can be obtained through owning property, starting a business, etc.).
Option 2: Earn more than 25,000 GEL from a Georgian source (salary, dividends, etc.).
New HNWI Program Rules After April 15, 2023
The new rules add an extra requirement: at least $500,000 of your wealth must be located in Georgia. Here’s what you need to know:
Prove Your High Net Worth (HNWI) Status After April 15, 2023:
Option 1: Own assets worth at least 3 million GEL, including at least $500,000 of assets in Georgia.
Option 2: Have an annual income of at least 200,000 GEL for the last three years and own at least $500,000 of assets in Georgia.
Prove Your Connection to Georgia:
Option 1: Hold a Georgian residence permit.
Option 2: Earn at least 25,000 GEL from a Georgian source in the year before your application.
These updates make the HNWI program more robust and ensure it attracts genuinely high-net-worth individuals contributing to the Georgian economy.
HNWI Requirements: Assets, Income & Residency
Proving Your High Net Worth: What Counts?
To qualify as a High-Net-Worth Individual (HNWI) in Georgia, you must own assets worth at least 3 million Georgian Lari (GEL) (around $1,075,000) globally and own assets in Georgia valued at 500,000 USD or more.
Types of Assets That Count:
To qualify under the asset criterion, provide proof of owning assets worth at least 3 million GEL, including:
Real Estate: Property deeds and valuation reports.
Movable Assets: Vehicles, machinery, etc., with supporting documents.
Financial Assets: Bank statements, investment portfolios, bonds, and stocks.
Cryptocurrencies: Valuation reports and proof of ownership.
Shares in Companies: Publicly and privately held shares, with valuation reports.
Additionally, you must show ownership of at least $500,000 worth of these assets in Georgia. The simplest way to meet this criterion is by transferring funds to a Georgian bank account. If you still don’t have one here is a full guide how to open bank account in Georgia remotely.
Don’t forget individual property taxes in Georgia, which is an annual tax based on the estimated market value of your property. In Georgia, property taxes are calculated at a standard rate of 1% of the property's value.
Georgian Income Criterion for HNWI
If you don't have assets worth 3,000,000 GEL or more, you can still qualify for HNWI status if you've earned over 200,000 GEL (approximately $70,000 USD depending on the current exchange rate) annually in each of the last three years. For instance, to apply for Georgia HNWI tax residency in 2024, you'd need to demonstrate you've earned at least 200,000 GEL in 2021, 2022, and 2023. This income can be sourced from either within Georgia or abroad.
Summary of HNWI Criteria
To qualify for HNWI status, you need to fulfill one of these conditions:
Assets: Hold assets worth at least 3 million GEL worldwide AND own assets in Georgia with a minimum value of 500,000 USD.
Income: OR earn at least