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Guide to Tax Rates in Georgia (Country) 2024

Guide to Tax Rates in Georgia


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Tired of navigating complex tax systems? Dreaming of a business-friendly environment with low rates and attractive incentives? Welcome to Georgia! Georgia’s tax system, known for its competitive rates and simplicity, offers numerous advantages for businesses and individuals alike.


This comprehensive guide covers everything you need to know about the tax rates in Georgia, including corporate, personal, VAT, and more. Let’s look at tax table of Georgia for better understanding:



Georgian Tax Table:


Tax Type

Rate

Who Pays

Notes

Corporate Income Tax

15%

Companies

On dividends

Personal Income Tax

5.49% (2024)

Individuals

Flat rate, some exceptions

Rental Income Tax

5%

Landlords

Residential property

Small Business Tax

19%

Qualifying Businesses

Restrictions apply

Foreign Income Tax

0%

Individuals

Exempt

Property Tax

Up to 1%

Varies

Companies & individuals

Land Tax

0.24 GEL/sq. meter

Landowners

Non-agricultural land

VAT

18%

Consumers

Goods & services

Wage Tax

20%

Employers/Employees

Plus pension contributions

Withholding Tax

Varies

Varies

Dividends, services, etc.



Why Georgia's Tax System is Attractive for Businesses & Individuals



Georgia's Tax System

Georgia's tax system stands out for its simplicity and competitive rates. It's designed to foster economic growth, making it a compelling destination for both businesses and individuals. Here's why:


Key Benefits:


  • Low Corporate Income Tax: A flat 15% rate, applied only on distributed profits (Estonian model), incentivizes reinvestment.

  • Favorable Personal Income Tax: A flat 20% on Georgian-sourced income, with foreign income exempt.

  • Special Tax Regimes: Incentives for small businesses, free industrial zones, and international companies.

  • Double Taxation Treaties: With 56 countries, Georgia offers relief against double taxation.



Tax Type

US Average

Western Europe Average

Georgia (General)

Georgia (Virtual Zone Status)

Georgia (International Company Status)

Corporate Tax Rate

21%

25 - 30%

15%

0% on IT services/products delivered outside Georgia

5% on distributed profits

Personal Income Tax Rate

10-37%

35-50%

20%

20% (with exceptions for IT professionals and qualifications)

5% on employee income

Capital Gains Tax Rate

0-20%

18-28%

0-5%

0-5%

0-5%

Property Tax

0.3-2.23%

0.1-1%

1%

0-5%

0%

Dividend Tax Rate

0-23.8%

20-30%

5%

5% (applicable during distribution to shareholders)

0%

VAT

Sales tax from 2.9% to 7.25%

15-27%

18%

0% on products/services delivered outside Georgia

Standard VAT rules apply, with potential exemptions for B2B services



What is the Corporate Tax Rate in Georgia?


Corporate Income Tax (CIT) is a tax on the profits that businesses earn. In Georgia, this applies to corporations, limited liability companies (LLCs), and similar entities. Here's a clear and engaging breakdown of how CIT works in Georgia and how it can impact your business. If you are thinking of opening a company in Georgia here is a full guide on How to Register Company (LLC) in Country Georgia.


Understanding Georgia's Corporate Income Tax


CIT is a tax imposed on the net profits of businesses. In Georgia, it’s one of the most business-friendly taxes in the region, designed to encourage reinvestment and growth.


  • Standard Rate: 15% on distributed profits for most companies.

  • Higher Rate for Financial Institutions: Banks, microfinance organizations, and similar entities are taxed at a 20% rate.


When Do You Pay Corporate Income Tax?


Georgia's tax system is unique because it focuses on how you use your profits. CIT is only triggered when profits are taken out of the business. Here’s when you need to pay CIT:


  • Profit Distributions: When you distribute dividends to shareholders, CIT applies.

    • Example: If your company earns 1,000,000 GEL and you decide to pay out 200,000 GEL in dividends, that 200,000 GEL is subject to the 15% CIT rate.

  • Non-Business Expenses: Expenses not directly related to business operations can trigger CIT.

    • Example: Spending on personal luxury items or unrelated charitable donations.

  • Free Goods or Services: Providing products or services for free, or if inventory goes missing without explanation, these are considered distributions.

    • Example: Giving away company products to friends and family.

  • Excessive Representative Expenses: Spending too much on things like client entertainment beyond the allowed limits can be taxed.

    • Example: Hosting a lavish party for clients that exceeds deductible limits could be partially taxed.


Who Pays Corporate Income Tax in Georgia?


  1. Resident Companies:

    1. Worldwide Income: Georgian-based companies pay CIT on all their income, no matter where it’s earned.

      1. Example: A Tbilisi software company with clients in Europe will pay CIT on all its income, both local and international.

  2. Non-Resident Companies:

    1. Georgian Income: Non-resident companies only pay CIT on the income they generate within Georgia.

      1. Example: A UK firm with a manufacturing branch in Batumi pays CIT on profits from that Georgian operation only.



Special Tax Statuses


Special Tax Statuses


Georgia offers several special statuses that can reduce or even eliminate CIT:


  1. Virtual Zone Companies:

    1. 0% CIT: Applicable primarily to IT-related activities within designated virtual zones.

      1. Example: A software development company operating under Virtual Zone Status won’t pay CIT on its profits.

  2. Free Industrial Zones (FIZ):

    1. Tax-Free: Businesses in FIZs are completely exempt from CIT.

      1. Example: A manufacturing firm in a FIZ doesn’t pay any CIT on its profits.

  3. International Company Status:

    1. 5% CIT: Companies with this status pay a reduced 5% CIT on profit distributions.

      1. Example: A consulting firm with International Company Status only pays 5% CIT when it distributes its profits.



What is the Income Tax Rate in Georgia for Individuals?



Income Tax Rate in Georgia


Georgia’s personal income tax (PIT) is a flat 20%, but only on income sourced within the country. If you're a Georgian resident earning foreign income, it's entirely exempt from taxation.


Let's start with the basics: most taxable income is hit with a 20% tax rate. Simple, right? But things get a bit more interesting when we look at special cases.


Special Tax Rates You Should Know


1. Renting Out Residential Space 


If you're renting out your home to someone for residential purposes, the income from this is taxed at a lower rate of 5%. This is a great break for those looking to make some extra money without a heavy tax burden.


2. Extra Earnings from Property and Vehicles


Got a surplus from providing a residential apartment, house, land, or even a vehicle? Good news – this income also enjoys a 5% tax rate. It's a win for those with assets to leverage.


3. Gambling and Gaming Income 

For those involved in the organization of slot clubs or online games of chance, there's a different rule. Any income from these activities is taxed at 15%.


What Gets Taxed at the Source?


Some types of income are taxed right at the point of payment, which means less hassle for you but important to know for your financial planning:


  • Salaries are directly taxed at 20%.

  • Dividends and Interest both come with a 5% tax rate.

  • Royalties (unless you're a VAT-registered individual) are taxed at 20%.

  • Gambling Withdrawals: Whether it's from slot machines or online gaming (excluding promotional lotteries), you're looking at a 5% tax.

  • Income from Property Transfers: If you transfer property worth more than GEL 1,000 and you're not registered as an individual entrepreneur, this income will be taxed.

  • Service Income: Services rendered by individuals (with some exceptions like VAT payers and micro-businesses) are also taxed at the source.


Reporting and Paying Your Taxes


If your income isn’t taxed at the source, you’re responsible for filing an income tax return by April 1st of the following year. You'll need to pay the due tax by the same deadline.


However, if you work for an international organization with diplomatic status or in a Free Industrial Zone, things work a bit differently. These organizations don't act as tax agents, so you need to handle your income tax monthly, no later than the 15th of the month after you earn the income.


Keeping Up with Current Payments for Entrepreneurs


If you're an entrepreneur, you're required to make quarterly tax payments based on last year's annual tax:


  • By May 15: Pay 25%

  • By July 15: Pay another 25%

  • By September 15: Pay the next 25%

  • By December 15: Pay the final 25%



VAT in Georgia (Country): How Does It Work?



VAT in Georgia


VAT, or Value Added Tax, is a type of indirect tax applied to the sale of goods and services at each stage of production and distribution. In simpler terms, it's a tax on the added value that each business contributes to a product or service as it moves through the supply chain. Let’s break down how VAT works, especially in the context of Georgia.


The Basics of VAT in Georgia


In Georgia, the VAT rate is set at 18%. This tax applies to most goods and services sold within the country.


How Does VAT Work?


Applied at Every Stage - VAT is charged at every point in the supply chain where value is added, from production to the final sale to the consumer. Here’s a simple example:


  • A manufacturer adds VAT when selling to a wholesaler.

  • The wholesaler adds VAT when selling to a retailer.

  • The retailer charges VAT to the final consumer.


Passed on to the End Consumer


While VAT is collected at multiple stages, the end consumer ultimately bears the full cost. Each business in the chain collects VAT on its sales (output VAT) and can deduct the VAT it paid on its purchases (input VAT), with the consumer paying the cumulative VAT amount.


Reclaiming VAT


Businesses can reclaim the VAT they pay on their inputs, known as input VAT. They charge VAT on their outputs (sales to customers) called output VAT. The difference between the output VAT and input VAT is either paid to the government or reclaimed if input VAT exceeds output VAT.


When Do You Need to Register for VAT?


Your business must register for VAT if your VAT-able transactions exceed 100,000 GEL in any continuous 12-month period. However, businesses can also choose to register voluntarily before reaching this threshold for strategic benefits, such as reclaiming VAT on purchases.


Who Can Register for VAT?


Almost any business entity can register for VAT, including:


  • Natural persons

  • Individual Entrepreneurs (IEs)

  • Small Businesses (IEs with Small Business status)

  • Limited Liability Companies (LLCs)

  • LLCs with Virtual Zone status


Note: Natural persons with Micro Business status are not eligible to register for VAT.


VAT Exemptions and Special Cases


Foreign Transactions


If your business provides services to foreign-based companies, you typically don’t need to charge VAT on these transactions. Additionally, importing services involves declaring and paying VAT monthly through a process known as reverse charge VAT. If you’re VAT registered, these declared purchases usually result in zero VAT due, as the tax can often be reclaimed.


Industry Exemptions


Certain sectors are exempt from charging VAT on sales. For example, businesses involved in medical services, educational services by accredited institutions, and financial operations don’t need to charge VAT. However, these businesses can still register to reclaim VAT on their purchases.


Exemptions with Right of Deduction


Some activities, like exports or providing services to diplomats, allow businesses to claim back VAT paid on purchases while being exempt from charging VAT on sales.


How to Calculate and Pay VAT


Once registered for VAT, you need to:


  • Calculate and declare VAT monthly by the 15th of each month.

  • Submit a VAT return online through the Revenue Service of Georgia portal.

  • Deduct the VAT paid on business purchases from the VAT collected on sales.

  • Manage VAT invoices: Upload invoices to the portal when selling to VAT payers and request VAT invoices from suppliers to reclaim VAT.


Special VAT Rules for Foreign Services


When purchasing services from foreign companies, reverse charge VAT applies. This means you’ll declare the VAT you would have paid if the service was purchased in Georgia. For instance, subscribing to software services from a foreign provider requires including the VAT amount in your declarations. However, if eligible, you won’t owe additional tax as this amount can be reclaimed.



Property Tax & Rental Income in Georgia


Purchasing property in Georgia is just the beginning. Once you own real estate here, understanding your tax obligations is crucial. Whether it's property tax, income tax from rentals or sales, or VAT, staying informed will help you manage your investments effectively. Here’s what you need to know.


Property Tax in Georgia


When you own real estate in Georgia, be it a condo, house, villa, commercial area, or land, you’re subject to property tax. Here’s how it works:


  • Rate: Property tax is 1% of the market value of the property.

  • Self-Assessment: You determine the market value yourself—no official audit required. However, be honest in your valuation to avoid scrutiny from the tax authorities.

  • Annual Payment: Property tax is paid once a year.


Exceptions to Property Tax:


  • Low Income Exemption: If your total annual income is less than 40,000 GEL (~17,000 USD), you are exempt from paying property tax.

  • Land Tax: For non-agricultural land, the tax is 0.24 GEL (~0.08 USD) per square meter annually. Note that foreigners cannot own agricultural land in Georgia. Find out more about Tax Optimization for foreigners in Georgia.

Payment and Declaration:


  • Deadline: The property tax declaration must be submitted by October 1st each year.

  • How to Pay: Submit your declaration on the Revenue Service of Georgia website. Payments are made from your Georgian bank account to the state treasury .


Tax on Rental Income


If you rent out your property in Georgia, the income is subject to taxation. Here’s how it breaks down:


Income Tax Rates for Rentals:


  1. Rental to Individuals:

    1. Rate: 5% income tax.

    2. Note: This rate applies to long-term or short-term rentals to individuals for living purposes. Expenses cannot be deducted.

  2. Rental to Businesses:

    1. Rate: 20% income tax.

    2. Note: If you rent to a business, you can deduct related expenses before calculating the taxable amount. If you’re an individual entrepreneur, you pay this tax; otherwise, the renting business pays and declares the tax on your behalf.


Declaration and Payment:


  • Deadline: Declare rental income by April 1st of the following year.

  • How to Pay: Use the Revenue Service website to declare and pay your taxes, either by visiting a branch or via a proxy with a Power of Attorney.



What are the Employment Tax Rates and Payroll Obligations in Georgia?


Georgia’s payroll tax system is relatively straightforward with a flat 20% income tax and shared social security contributions. Businesses benefit from the simplicity of no additional mandatory taxes. Choosing the right business structure and understanding tools like POA can further streamline your payroll processes. Always stay updated with the latest tax rates and regulations from the Revenue Service of Georgia to ensure compliance and optimal financial planning.


Income Tax: Flat and Simple


Georgia employs a flat income tax rate for all employees:


  • Income Tax Rate: 20%

  • This flat rate simplifies payroll calculations, making it easy to predict payroll expenses and deductions.


Social Security Contributions: Shared Responsibility


Both employers and employees contribute to Georgia's Social Security system:


  • Employer Contribution: Employers pay a percentage of the employee's wages into the Social Security system.

  • Employee Contribution: Employees also contribute a percentage of their wages.


No Extra Mandatory Taxes


Unlike many other countries, Georgia does not impose additional mandatory taxes such as unemployment or disability insurance. This makes Georgia’s payroll tax system simpler and more predictable.


Understanding Payroll Management


Payroll management is the complete process of managing employee payments within a business. It covers everything from calculating salaries to ensuring compliance with tax laws. Here’s a breakdown of what payroll management involves:


Key Components of Payroll Management


  1. Calculating Employee Pay

    1. Regular Pay: Determine each employee's earnings based on their hourly rate or salary.

    2. Bonuses and Commissions: Include any additional earnings like bonuses or commissions.

    3. Overtime: Calculate extra pay for overtime hours worked.

    4. Deductions: Subtract any employee-specific deductions such as health insurance or retirement contributions.

  2. Handling Payroll Taxes

    1. Withholding Taxes: Deduct necessary taxes from employee paychecks, including income tax and social security contributions.

    2. Employer Contributions: Calculate and pay employer’s share of payroll taxes, such as social security.

  3. Filing Taxes and Reports

    1. Tax Filings: Submit accurate payroll tax returns to tax authorities.

    2. Reporting: Generate and file necessary payroll reports on time to comply with legal requirements.

  4. Disbursing Employee Pay

    1. Timely Payments: Ensure that employees receive their paychecks on the scheduled payday.

    2. Payment Methods: Process payments through various methods like direct deposit, checks, or electronic transfers.


Why Payroll Management is Important


Effective payroll management ensures that employees are paid accurately and on time, which is crucial for maintaining their satisfaction and trust. It also helps businesses:


  • Stay Compliant: Avoid penalties by adhering to tax laws and regulations.

  • Financial Control: Maintain clear financial records and control over payroll expenses.

  • Operational Efficiency: Streamline processes to reduce administrative workload and errors.



Tax Withholding in Georgia: What You Need to Know


Withholding taxes in Georgia impacts businesses, contractors, and employees alike. Here’s a clear breakdown of how these taxes work for different scenarios.


Withholding Tax on Salaries


For Resident Employees:


  • Standard Tax: Salaries paid to Georgian residents are taxed at 20%.

  • Pension Contributions: Employers must also contribute 2% of the gross salary to the Georgian pension fund, with an additional 2% withheld from the employee’s salary.


Special Cases:


  • International Company Status: If your company has this status, salaries are taxed at a reduced rate of 5%, plus pension contributions if applicable.


For Non-Resident Employees:


  • Standard Tax: Salaries paid to non-residents can be taxed up to 20%.

  • Double Taxation Avoidance (DTA): If there’s a DTA between Georgia and the employee’s home country, the tax rate could be reduced or even zero. The employee will then handle taxes according to their home country’s laws.

  • No DTA: Without a DTA, Georgia may tax non-resident salaries at 20%. The employee might also face taxation in their home country but can often seek tax relief or credits there.


Withholding Tax on Dividends


  • Standard Rate: Dividends distributed by Georgian companies are taxed at 5%.

  • Free Industrial Zone (FIZ) Entities: Dividends are exempt (0% tax).

  • International Company Status (ICS): Dividends are also exempt (0% tax).

  • For Residents: Georgian residents receiving dividends don’t pay additional personal income tax on them.


Withholding Tax on Interest


  • To Individuals & Non-Residents: Interest payments are taxed at 5%.

  • To Offshore Residents: Interest paid to residents of offshore jurisdictions is taxed at 15%.

  • FIZ Entities: Interest payments are exempt (0% tax).


Withholding Tax on Royalties


  • To Resident Individuals: Royalties are taxed at 20%.

  • To Non-Residents: Royalties paid to non-residents are taxed at 5%.

  • To Offshore Residents: Royalties to residents of offshore jurisdictions are taxed at 15%.


Withholding Tax on Other Services


When purchasing services from non-residents, withholding tax rates vary:


  • With DTA: If there’s a DTA, services might not be taxed at the source.

  • Without DTA: For countries without a DTA, the tax rate can be 10%.

  • Offshore Jurisdictions: Services from countries with preferential tax regimes are taxed at 15%.


These rules apply to other Georgian-sourced income that hasn’t already been taxed. Article 104 of the Georgian tax code provides detailed information on what qualifies as taxable services in Georgia.



Understanding Import Tax in Georgia


In Georgia, the import tax rates are applied based on the type of goods you are importing. To find the exact rate for a specific product, you can use its special code or search for its Georgian name. You can also refer to Article 197 of the Georgian Tax Code, which lists all the items and their respective rates. Here’s a breakdown of what each percentage rate applies to:


Import Tax Rates in Georgia


0% Import Tax


Goods that are typically essential or have a significant impact on the economy and society often fall under the 0% import tax rate. Examples include:


  • Raw Materials: Items like unprocessed goods used in manufacturing or production.

  • Capital Goods: Machinery and equipment used for production that help boost industrial activity.

  • Certain Agricultural Products: Basic foods and essential farming equipment.

  • Books and Educational Materials: To support education and learning.


These goods are generally exempt from import tax to encourage their availability and reduce costs for businesses and consumers.


5% Import Tax


The 5% rate usually applies to goods that are important but not necessarily essential. These might include:


  • Consumer Goods: Items such as clothing, basic electronics, and household products.

  • Certain Food Products: Specific processed or semi-processed food items.

  • Intermediate Goods: Parts and materials used in the production of other goods, such as components for manufacturing .


This moderate rate helps maintain a balance between revenue generation for the government and affordability for businesses and consumers.


12% Import Tax


Goods that are considered less essential or have luxury connotations often attract the highest import tax rate of 12%. This category includes:


  • Luxury Items: High-end electronics, luxury vehicles, and designer goods.

  • Non-essential Consumer Goods: Items like premium appliances or certain high-value consumer products.

  • Finished Goods: Products ready for consumption that are not classified as essential.


The higher tax rate on these items serves to regulate their import and generate higher revenue for the government.


Special Permissions for Certain Products


Some products require special permission to be imported into Georgia. The cost for this import permit is 30 GEL.


Payment Deadlines for Import Taxes


Once your goods arrive at the customs office, you typically have 5 days to pay the import taxes. However, customs may provide a different deadline depending on the situation.


VAT on Imported Goods


In addition to import tax, Value Added Tax (VAT) at 18% may apply to imported goods. The deadline for VAT payment is set by customs. VAT is levied regardless of whether the recipient is a registered VAT payer or not.


Exemptions from Import Tax


  • Country Exemptions: Certain countries, like those in the EU, are exempt from paying import tax on their goods in Georgia. However, VAT might still be applicable.

  • Low-Value Imports: Imports valued at less than 300 GEL are completely exempt from both import tax and VAT.

  • Special Projects: Goods related to large-scale projects, such as pipelines regulated by international treaties, are exempt from VAT. For a comprehensive list of VAT-exempt goods on import, refer to Article 173 of the new VAT provisions.



Georgian Tax Residency: Benefits & Opportunities


Tax residency determines where you live and pay taxes. It’s different from citizenship. You can be a citizen of one country but a tax resident in another. Essentially, the country where you are considered a tax resident claims a portion of your income, affecting how much tax you pay and where that money goes..


Low Tax Rates


Georgia offers some of the most competitive tax rates globally:


  • Corporate Tax: 15% on distributed profits.

  • Personal Income Tax: Flat rate of 20%.

  • Dividend Tax: Only 5%.


Special statuses like the Virtual Zone or International Company can reduce these rates even further.


Favorable Treatment for Foreign Income


Most passive income earned outside Georgia is tax-exempt, making Georgia an attractive option for those with international income streams.


Crypto-Friendly Environment


Georgia’s tax code currently does not explicitly tax crypto gains if the source is outside Georgia. Here’s how it works for different scenarios:


  • Trading Through a Georgian Business: A 15% corporate tax applies to crypto profits, plus a 5% dividend tax on distributions.

  • Small Business Status (SBS): While qualifying small businesses enjoy a 1% tax rate, there's ambiguity about crypto trading under SBS rules, potentially affecting your status or leading to back taxes.


Understanding the 183-Day Rule for Tax Residency in Georgia



Residency in Georgia


The 183-Day Rule is a key factor in determining whether you are considered a tax resident in Georgia. This rule is straightforward yet crucial, especially for individuals and businesses operating in or considering a move to Georgia. Here’s a clear explanation of what the 183-Day Rule entails and how it affects your tax obligations.


What is the 183-Day Rule?


The 183-Day Rule is a standard used by many countries, including Georgia, to establish tax residency based on the number of days you spend in the country. According to this rule:


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

  • Counting Days: These days do not need to be consecutive. Any day or part of a day spent in Georgia counts towards the 183 days.


Why Does the 183-Day Rule Matter?


Becoming a tax resident in Georgia under the 183-Day Rule has significant implications for your tax obligations:


  1. Global Income Taxation:

    1. Residents: As a tax resident, you must report and pay taxes on your worldwide income to Georgia. This means any income earned both inside and outside of Georgia is subject to Georgian tax laws.

    2. Non-Residents: If you don’t meet the 183-day threshold, you are only required to pay taxes on the income you earn within Georgia.

  2. Access to Tax Benefits:

    1. Being a tax resident might allow you to benefit from Georgia’s favorable tax policies, such as flat income tax rates and special statuses (e.g., Virtual Zone, Free Industrial Zone).

    2. It can also impact how you benefit from Double Taxation Agreements (DTAs) between Georgia and other countries, potentially reducing your tax burden on international income.


What is HNWI Status?


High-Net-Worth Individual (HNWI) Status in Georgia is designed for individuals with substantial financial resources. This special status provides a path to tax residency with significant perks, tailored for those who meet specific wealth criteria.


Why Choose HNWI Status in Georgia?


  1. Incredible Tax Savings:

    1. Flat Income Tax: Benefit from a straightforward 20% tax rate on Georgian-sourced income.

    2. Low Dividend Tax: Enjoy just 5% tax on dividends, perfect for preserving your investment returns.

    3. No Wealth Tax: Unlike many other countries, Georgia doesn’t tax your wealth, allowing you to keep more of what you earn.

  2. Seamless Residency Process:

    1. Easy Qualification: With multiple paths to qualify, obtaining HNWI status is streamlined for those who meet the financial criteria.

    2. Minimal Bureaucracy: Georgia’s process is designed to minimize red tape, making it easier to establish and maintain residency.

  3. Exclusive Access to Economic Zones:

    1. Virtual Zones: For IT-related businesses, operate tax-free within Georgia’s Virtual Zones.

    2. Free Industrial Zones (FIZ): Establish your business in a FIZ and enjoy complete CIT exemptions.

    3. International Company Status: Pay just 5% CIT on profit distributions if your company qualifies.


How to Qualify for HNWI Status?


Qualifying for HNWI status in Georgia is achievable through various financial benchmarks. Here’s how you can make it happen:


  1. Showcase Your Wealth:

    1. Net Assets Over 3,000,000 GEL: Demonstrate substantial assets through audited documents or those with an apostille.

  2. Prove Consistent High Income:

    1. Annual Income of 200,000 GEL: Provide evidence of earning a high income over the past three years from employment, investments, or business activities.

  3. Engage in Georgian Business:

    1. Earn 25,000 GEL Annually: From a Georgian source, hold a Georgian residence permit, and participate in the local economy.

  4. Hold Significant Georgian Assets:

    1. 500,000 USD in Georgian Assets: Own valuable assets like real estate, vehicles, or shares within Georgia to qualify under the new 2023 criteria.


Simplified Banking for Residents


Tax residency simplifies the process of opening bank accounts in Georgia, providing easier access to financial services.


Protection from Information Exchange


Georgia has not joined the Common Reporting Standard (CRS) yet. Becoming a resident now could shield you from future information exchanges between countries.



Tax Reporting Periods in Georgia


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: Mark Your Calendar


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.


Avoiding Penalties: What Happens If You Miss a Deadline?


Missing tax filing deadlines in Georgia can have serious consequences. Here’s what you need to know to stay out of trouble:


  • Late Submissions: Failing to file a return for a taxable event can lead to penalties up to 50% of the unpaid tax amount, plus 0.05% interest per day on the overdue payment.

  • No Activity Reporting: Even if there’s no taxable activity in a given month, not submitting a return can still result in fines.

  • Incorrect Information: Not updating your taxpayer information or failing to submit a zero tax declaration can incur a 100 GEL penalty for each month you’re late.



How to Comply with Georgian Tax Regulations


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. Check out these effective tips for staying on track with Georgian tax regulations.



Registering Your Business in Georgia


Registering Your Business in Georgia


  • Step 1: Choose the Right Business Structure

    • Sole Proprietorship: Simplest form, suitable for small businesses and freelancers.

    • Limited Liability Company (LLC): Offers flexibility and limits personal liability.

    • Corporation: More formal structure, often used by larger businesses.

  • Step 2: Register Your Business

    • National Agency of Public Registry: All businesses must register here to obtain a business identification number (BIN). This is essential for all tax-related activities.

  • Step 3: Register for Taxes

    • Revenue Service of Georgia: Register for VAT, corporate tax, and other applicable taxes through the Revenue Service’s online portal. Make sure you have your BIN and relevant documents ready.


Understanding Tax Obligations


  • Income Tax

  • Corporate Income Tax: Standard rate is 15% on distributed profits.

  • Personal Income Tax: Flat rate of 20% for individuals.

  • Dividend Tax: 5% on distributed dividends, with certain exemptions for FIZ and ICS entities.

  • VAT (Value Added Tax)

  • Standard Rate: 18% on most goods and services.

  • Registration Threshold: Businesses must register for VAT if their annual VAT-able transactions exceed 100,000 GEL.

  • Social Security Contributions

  • Employer and Employee Contributions: Both parties contribute to the social security system, with specific rates determined by the government.


Maintaining Accurate Records


  • Keep Detailed Financial Records

  • Invoices and Receipts: Record all business transactions, expenses, and income accurately.

  • Payroll Records: Maintain detailed records of salaries, bonuses, and tax withholdings for all employees.

  • Use Accounting Software

  • Automate: Utilize accounting software to manage your finances and ensure accuracy.

  • Compliance: Ensure the software aligns with Georgian accounting standards and tax regulations.


Filing Taxes and Reports


  • Monthly and Annual Filings

  • VAT Returns: File monthly VAT returns by the 15th of the following month.

  • Income Tax Returns: File annual income tax returns by March 31st of the following year.

  • Social Security Contributions: Pay and report these contributions monthly.

  • Regular Updates

  • Stay Informed: Regularly check for updates from the Revenue Service of Georgia to ensure compliance with any changes in tax laws or rates.


Managing Payroll Taxes


  • Withhold Correct Taxes

  • Employee Income Tax: Deduct 20% income tax from employees' paychecks.

  • Social Security: Withhold the employee’s portion and add the employer’s contribution.

  • Timely Payments

  • Pay on Time: Ensure that payroll taxes and social security contributions are paid on schedule to avoid penalties.


Dealing with International Transactions


  • Understand DTAs (Double Taxation Agreements)

  • Tax Relief: Georgia has DTAs with many countries to prevent double taxation. Ensure you know the agreements applicable to your international transactions.

  • Withholding Taxes: Apply the correct withholding tax rates on payments to non-residents based on DTAs.

  • Report Foreign Income

  • Transparency: Report all foreign income accurately and comply with Georgia's tax regulations regarding international earnings.



Gegidze: Your Partner in Georgian Tax Navigation


Navigating the complexities of 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.


Don’t let tax complexities hold you back. Take the next step towards financial success and ensure your property investments are in safe hands.



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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?

What exemptions, special statuses, or lower tax rates are available for different types of income or businesses in Georgia?

How do Georgia's tax policies benefit individuals and businesses, especially for those considering relocating or operating in Georgia?

What practical steps should be taken to comply with Georgian tax regulations?


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