Tax Planning for Expatriates: How to Prove Tax De-Registration from Your Home Country (Exit Tax)
- 1 day ago
- 11 min read
TL;DR – Exit Tax & Moving to Georgia
Moving to Georgia for the 1% tax Georgia regime or favorable Georgia crypto tax rules does not automatically end your tax obligations in your home country.
To avoid exit tax, double taxation, or retroactive penalties, you must formally de-register tax residency by proving physical departure, permanent home disconnection, economic center shift, and personal tie relocation.
Simply registering as an individual entrepreneur Georgia, opening the best bank in Georgia for foreigners, or applying for a digital nomad visa Georgia is not enough.
Clean relocation requires strategic timing, proper treaty positioning, banking alignment, and a correctly structured Georgian entity such as SBS Georgia, LLC, or Virtual Zone.
If you move without planning, you may trigger exit tax on shares, crypto, or IP. If you plan correctly, Georgia can become a legally defensible low-tax base.
Introduction
Moving to Georgia for tax reasons is smart.
The 1% tax Georgia regime.
Simple individual entrepreneur Georgia registration.
Low Georgia tax amount.
Crypto-friendly environment.
Fast Georgia company formation cost compared to the EU.
On paper, it looks perfect.
But here’s the uncomfortable reality:
You can move to Georgia and still owe tax in your home country.
That’s where most expatriates get into trouble.
They:
Register under SBS Georgia
Open the best bank in Georgia for foreigners
Start invoicing clients
Apply for a digital nomad visa Georgia
And then months later, they receive a letter from their former tax authority.
“Based on our records, you remain tax resident.”
This article explains:
How tax de-registration actually works
What exit tax means
How to prove you left legally
How to align your new Georgia structure correctly
How crypto, shares, and business ownership affect your exit
If you want to relocate safely, this is the roadmap.
Why Tax De-Registration Matters Before You Move to Georgia
Georgia operates on a territorial tax system.
That means:
Individuals are generally taxed on Georgian-source income
Small business owners can pay just 1%
There is no wealth tax
No capital gains tax for most individuals
Georgia crypto tax is often highly favorable compared to Europe
It sounds like freedom.
But tax freedom only works if your previous country accepts that you left.
Many countries apply aggressive exit rules. They assume:
“If you leave, you are trying to avoid tax.”
So they impose:
Exit tax on shares
Deemed capital gains
Tax on unrealized crypto gains
Ongoing worldwide taxation
Reporting obligations for foreign bank accounts
If you don’t formally break tax residency, you may face:
Double taxation
Retroactive penalties
Audit triggers
Treaty disputes
Relocation is not just physical.
It is legal and economic migration.
Tax Residency vs Business Registration in Georgia
Let’s clear up a common misunderstanding.
Registering an individual entrepreneur in Georgia does not cancel your previous tax residency.
Opening the bank account in Georgia Tbilisi for foreigners does not cancel your previous tax residency.
Even becoming a Georgian tax resident does not automatically cancel your old residency.
Tax residency is determined by specific legal tests.
The 4 Core Residency Tests Most Countries Use
1. Physical Presence
Usually based on:
183 days in a calendar year
Or 183 days in a rolling 12-month period
Georgia uses this rule.
But your old country might use:
Different counting methods
Broader interpretation
Special exceptions
2. Permanent Home Test
If you keep:
An accessible house
A long-term lease
A property available for your use
You may still be treated as resident.
3. Center of Vital Interests
This is where authorities ask:
Where is your real life?
They examine:
Family location
Business operations
Main banking relationships
Social ties
4. Economic Connection
If your main company is still abroad, or your income is tied to your home country, exit becomes harder to prove.
Even if you pay Georgia 1% tax, your old country may argue that your economic base is still there.
What Is Exit Tax?
Exit tax applies when a country treats your departure as a taxable event.
They assume:
“You are leaving permanently. We will tax your unrealized gains now.”
This often applies to:
Startup founders
Shareholders
Crypto holders
Investors
IP owners
Example: Shareholder Exit Tax
If you own shares in a company and move to Georgia, your home country may:
Calculate the market value of your shares
Compare it to original cost
Tax the unrealized gain
Even if you never sold anything.
Example: Crypto Exit Exposure
If you hold significant crypto and move to Georgia for Georgia crypto tax advantages, your home country may:
Treat your relocation as a deemed disposal
Calculate gains at the date of exit
Tax unrealized appreciation
This is especially sensitive if you:
Operate under a crypto license Georgia
Plan to obtain a VASP license Georgia
Previously used a VASP license in SVG
Hold governance tokens or DAO allocations
Crypto makes exit tax planning more complex.
Why Many Expats Moving to Georgia Get This Wrong
The mistake is usually timing.
People:
Move to Georgia
Register under SBS Georgia
Start invoicing under 1% tax
Open Georgian bank accounts
Forget to formally notify home tax authorities
Or worse.
They:
Keep their main property
Keep family abroad
Maintain foreign bank accounts
Continue acting as director of home-country companies
From the tax authority’s perspective, nothing changed.
You just added another country.
How to Properly Prove Tax De-Registration
To prove exit, you must show clean separation across four dimensions.
1. Physical Departure
You need evidence:
Flight tickets
Entry stamps
Georgian residency records
Lease agreements in Georgia
Applying for a digital nomad visa Georgia strengthens your position.
Spending 183+ days in Georgia helps establish local tax residency.
But leaving physically is not enough.
2. Permanent Home Disconnection
Strong exit signals include:
Selling your primary residence
Terminating your lease
Renting the property at market rate
Removing personal belongings
Weak exit signals include:
Keeping the property vacant
Allowing family to stay
Retaining full access
Tax authorities look at availability, not ownership alone.
3. Economic Center Shift
This is where Georgia setup becomes critical.
You should:
Register as individual entrepreneur Georgia or LLC
Obtain SBS Georgia status if eligible
Move client contracts to your Georgian entity
Open the best banks in Georgia for operational use
Close or downgrade old-country bank accounts
If your financial life still runs through your home country, exit is weak.
If your financial life moves to Georgia, exit is strong.
4. Personal and Social Ties
Authorities evaluate:
Where your spouse lives
Where children attend school
Where you are medically insured
Where your social memberships remain
Full family relocation strengthens your position significantly.
Structuring Your New Life in Georgia Correctly
Once exit planning is underway, your Georgian structure must be coherent.
Option 1:1% Small Business Status (SBS Georgia)
Best for:
Consultants
Freelancers
Remote service providers
Requirements:
Annual turnover under 500,000 GEL
Register as individual entrepreneur Georgia
Apply for small business status
Tax rate:
1% on turnover
This is the core reason many move.
But only safe when your previous tax residency is properly terminated.
Option 2: LLC in Georgia
Useful when:
You exceed 500,000 GEL
You need corporate credibility
You plan to scale
Georgia corporate tax system:
15% only on distributed profits
5% dividend tax
This structure often works well for SaaS and agency founders.
Option 3: Virtual Zone or International Company
For IT and software companies:
Reduced payroll and dividend tax (International Company)
If you plan to expand under crypto license Georgia or regulated fintech activity, structure must align with compliance requirements.
Banking as Evidence of Real Relocation
Your banking pattern tells your tax story.
Opening an account with:
The best bank in Georgia for foreigners
Or one of the recognized best banks in Georgia
Demonstrates financial migration.
You should:
Receive client payments in Georgia
Pay expenses locally
Reduce reliance on foreign accounts
You can even open bank account in Georgia remotely before moving, but real usage must follow.
If your main wealth remains abroad, tax authorities may argue your center of interests remains there.
Georgia VAT and Compliance Considerations
Even under the 1% tax regime, compliance matters.
You may need:
Georgia VAT registration
Reverse VAT declarations on foreign services
Georgian VAT reporting if domestic sales exist
Ignoring VAT can trigger audits.
Understanding Georgian VAT ensures your relocation is clean and sustainable.
Exit Tax Scenarios: What Really Happens When You Leave
Once you understand that tax residency does not disappear automatically, the next question becomes more serious.
What exactly can your home country tax when you leave?
This is where exit tax becomes real.
Many expatriates moving to Georgia for the 1% tax Georgia regime or favorable Georgia crypto tax rules assume that once they stop living there, they stop being taxable there.
That assumption can be expensive.
Deemed Disposal of Shares
If you own shares in:
A startup
A holding company
A family business
A tech company
A structure holding a crypto license Georgia or other regulated activity
Your home country may treat your departure as if you sold those shares on the day you leave.
They calculate:
Market value on departure dateMinus original acquisition costEquals taxable capital gain
Even if you did not sell anything.
This is especially common in European jurisdictions where lawmakers want to prevent founders from relocating just before a liquidity event.
If you are planning to move to Georgia before an exit, IPO, or token launch, timing becomes critical.
Crypto Portfolio Exit Risk
Crypto adds another layer of complexity.
Let’s say you hold:
BTC
ETH
Long-term DeFi positions
Governance tokens
Pre-TGE allocations
Your home country may classify these as financial assets. Upon exit, they may calculate unrealized gains at market value on the date you cease tax residency.
If the market is high at that moment, your exit tax bill could be significant.
Many individuals move to Georgia because of the more flexible Georgia crypto tax environment, but without pre-move planning, the relocation itself may trigger taxation abroad.
This becomes even more sensitive if you are involved in:
Running a VASP
Applying for a VASP license Georgia
Operating a regulated exchange structure
Authorities may scrutinize crypto founders more closely than freelancers.
Intellectual Property and SaaS Businesses
If you built:
A SaaS platform
A proprietary software solution
A digital subscription product
And you move to Georgia before monetization scales, your home country may attempt to tax embedded IP value.
Some countries treat intellectual property relocation as taxable migration of assets.
This is why many founders underestimate the risk of moving too late.
If your product already has significant valuation, exit tax exposure increases.
If you move early, before valuation spikes, exposure may be lower.
Timing matters.
Double Tax Treaties: Protection, But Not Automatic Protection
Georgia has signed double taxation treatieswith many countries.
These treaties determine:
Which country has taxing rights
How residency conflicts are resolved
How dividends and business profits are taxed
But a treaty only helps if you properly establish residency in Georgia.
You need:
183 days presence
Georgian tax residency certificate
Clear economic shift
Proper de-registration in former country
If you claim residency in both countries at the same time, treaty tie-breaker rules apply.
Tie-breakers examine:
Permanent homeCenter of vital interestsHabitual abodeNationality
If you fail one of these tests, your home country may retain taxing rights.
Treaties are protective tools. They are not shortcuts.
Strategic Timing of Relocation
One of the most overlooked aspects of tax migration is calendar timing.
Consider two scenarios.
Early-Year Relocation
You arrive in Georgia in March.You stay 183 days.You become tax resident in September.
You are now Georgian tax resident for that calendar year.
Your home country may argue you were resident there at the beginning of the year.
This creates dual-residency complexity.
Late-Year Relocation
You arrive in August.You reach 183 days in January of the following year.
Now your Georgian tax residency clearly begins in the next tax year.
This sometimes reduces overlap risk.
Each jurisdiction handles split-year residency differently.
Before moving to benefit from the Georgia 1% tax, your departure date should be modeled carefully.
High Net Worth Individuals and Controlled Foreign Company Rules
For individuals with substantial assets, exit tax planning becomes more technical.
If you own foreign entities, your home country may apply Controlled Foreign Company rules even after you relocate.
This means:
Even if your company is now registered in Georgia and you pay a low Georgia tax amount, your former country may attempt to tax retained profits through anti-avoidance rules.
This is particularly relevant for:
Holding companiesInvestment portfoliosReal estate structuresInternational operating groups
Relocation must address:
Ownership structure
Management control location
Board decision jurisdiction
Banking footprint
Superficial relocation is not enough.
Building a Clean Tax Position in Georgia
Once exit exposure is addressed, the focus shifts to building a strong Georgian tax base.
Georgia offers several routes.
Individual Entrepreneur with 1% Tax
The individual entrepreneur Georgia model remains one of the most attractive in Europe.
If your turnover remains below 500,000 GEL, you can apply for SBS Georgia and pay 1% on revenue.
This works well for:
ConsultantsDevelopersMarketing agenciesRemote professionals
However, it requires discipline.
You must:
File monthly declarations
Track turnover accurately
Understand Georgian VAT obligations
Monitor reverse VAT exposure
The system is simple. It is not careless.
LLC Structure for Scaling Businesses
If you exceed the threshold or want stronger corporate optics, forming an LLC may be better.
Georgia’s corporate tax system is unique.
You pay 15% corporate tax only when distributing profits.Dividends are taxed at 5%.
This allows reinvestment without immediate corporate tax leakage.
The Georgia company formation cost is relatively low compared to EU jurisdictions, which makes transitioning from individual entrepreneur to LLC accessible.
Virtual Zone and IT-Focused Structures
If you operate in software or digital services, Virtual Zone status may reduce corporate tax to 0% on foreign-sourced income.
For tech founders planning long-term scaling, this structure may be more powerful than 1% turnover tax.
Each structure must align with your exit strategy from your former country.
Banking as Proof of Economic Migration
Tax authorities follow money.
If you:
Earn income in Georgia
Pay expenses in Georgia
Hold savings in Georgia
Your case for economic relocation strengthens.
Opening accounts with one of the best banks in Georgia is not about convenience. It is about evidence.
You can open bank account in Georgia remotely, but once relocated, usage must reflect reality.
If your main liquidity remains in your home country and Georgia is only an invoicing address, your exit becomes vulnerable.
If you’re planning to relocate to Georgia and want to avoid exit tax surprises, double taxation, or compliance mistakes, Gegidze can structure the entire process correctly from day one.
We analyze your home-country exit exposure, assess crypto and shareholding risks, design the right individual entrepreneur Georgia or LLC setup, assist with SBS Georgia registration, guide you through Georgian VAT and banking alignment, and ensure your new tax position is defensible under treaty rules.
Whether you’re moving for the 1% tax Georgia regime, launching a tech company, or restructuring international assets, our team builds a clean, compliant, and strategic relocation plan tailored to your situation.
Book a free consultation with Gegidze and relocate with clarity, not uncertainty.
Frequently Asked Questions (FAQs)
Does registering as an individual entrepreneur in Georgia cancel my tax residency in my home country?
No. Registering as an individual entrepreneur Georgia or applying for SBS Georgia does not automatically cancel your previous tax residency. Most countries determine tax residency based on physical presence, permanent home, center of vital interests, and economic ties. You must formally de-register and prove relocation to avoid exit tax or ongoing worldwide taxation.
What is exit tax when moving to Georgia?
Exit tax is a tax imposed by your home country when you cease tax residency. Some countries treat your departure as a “deemed sale” of assets, including shares, crypto holdings, or intellectual property. Even if you move to Georgia for the 1% tax Georgia regime or better Georgia crypto tax treatment, you may still owe tax on unrealized gains at the time of exit.
Can crypto holdings trigger exit tax when relocating to Georgia?
Yes. If you hold significant crypto assets and move to Georgia, your home country may tax unrealized gains at the date you stop being tax resident. This is particularly relevant if you operate under a crypto license Georgia, plan to apply for a VASP license Georgia, or hold governance tokens and long-term digital assets. Crypto relocation requires careful pre-move planning.
How do I prove tax de-registration when moving to Georgia?
To prove tax de-registration, you must demonstrate physical departure, permanent home disconnection, economic center shift, and relocation of personal ties. This often includes selling or renting property, closing foreign bank accounts, shifting business contracts to Georgia, and obtaining a Georgian tax residency certificate. Opening accounts with the best banks in Georgia and actively using them strengthens your case.
Is Georgia really tax-free for expatriates?
Georgia is not tax-free, but it is tax-efficient. Under SBS Georgia, qualifying individuals can pay 1% turnover tax. Corporate profits are taxed only when distributed, and the country applies a territorial tax system. However, these benefits only work if your former country accepts your tax de-registration. Without proper exit planning, you risk double taxation.
