Georgia Crypto Tax Guide 2024
Country Georgia has caught the eye of the crypto world. Its low electricity prices, government openness to crypto, and special zones offering tax breaks create a buzz among miners, traders, and crypto-focused businesses.
Historically, Georgia offered a minimally regulated environment for cryptocurrency activity, including a lack of tax on trading. However, this landscape is evolving. Regulations implemented on January 1st now bring Georgia in line with Financial Action Task Force (FATF) guidelines.
Despite the regulatory updates, Georgia could maintain advantages for crypto-focused individuals and businesses. The country’s competitive energy rates attract miners, and it harbors potential tax-friendly zones that could benefit your operations. Depending on the circumstances, setting up a Georgia offshore company or an LLC in Georgia Tbilisi may provide tax advantages. Always seek guidance from a Georgian tax expert specializing in crypto tax in Georgia.
Overview of cryptocurrency regulations in Georgia
Cryptocurrency definition
Georgia’s law now defines cryptocurrency as an interchangeable digital asset intended for exchange and investment. This distinction means, that, unlike NFTs and collectibles, cryptocurrencies fall under the scope of the new regulations.
Cryptocurrency payments
While the Georgian Lari is the main currency, your payment options are still limited. Licensed Virtual Asset Service Providers (VASPs) are here to help! Think of them as the bridge between your crypto world and everyday spending, and ensure your crypto gets converted smoothly during transactions.
The purpose behind regulatory changes
Georgia’s taking crypto seriously, and that means new regulations. But don’t think of these changes as a roadblock — think of them as a roadmap for the future of cryptocurrency within the country. Let’s break down the key objectives behind these updates:
What is a Virtual Asset?
What a Virtual Asset ISN’T
Who can offer crypto services in Georgia?
Georgia’s regulations are specific about who’s permitted to provide virtual asset services:
Important Restrictions
It’s illegal to provide virtual asset services in Georgia unless you fall into one of these two categories:
Specific services allowed for financial institutions
While VASPs can potentially handle a wider range of crypto activities, financial institutions are usually limited to:
What are VASPs?
VASPs cover crypto-related activities, including exchanges, portfolio management, trading platforms, and certain initial offerings. In Georgia, they must register with the National Bank to operate legally.
Exemptions: Generally, individual miners, participants in mining pools, and individual traders do not require mandatory registration under these new regulations.
VASPs and enhanced responsibility
Georgia’s regulatory updates place VASPs front and center in the fight against illicit activities within the crypto space. Their new “Accountable Person” status comes with significant obligations.
Client Identification
VASPs must have reliable, independent methods to verify the identities of those they serve. Trusting surface-level information is no longer sufficient.
Revealing true ownership
It’s not enough for VASPs to know who’s on the paperwork. They must actively investigate to determine who ultimately benefits from or controls the crypto assets under their management.
Understanding client purpose
VASPs must grasp the reasons behind their client relationships. It’s about establishing the “why” behind the transactions, not just blindly facilitating them.
Transaction scrutiny
VASPs are expected to keep a close eye on transactions, especially those exceeding specific thresholds (currently 3,000 GEL, 1,000 USD, or 1,000 EUR). They may need to explain the origin of funds or assets if required.
The “Travel Rule”
VASPs have a role in making crypto less anonymous. To combat illicit use, they must collect and share information about senders and recipients of crypto transactions, enhancing traceability.
Existing clients
These new measures aren’t just for new clients! VASPs have until July 1st, 2024, to bring their existing client base into compliance.
VASP registration in Georgia
VASP registration in Georgia: process and cost
Applying to become a VASP in Georgia involves a few core steps. After submitting your information to the National Bank of Georgia (NBG), they generally have 60 calendar days to decide on your registration status. Occasionally, the NBG might extend this review period for another 60 days, with a clear explanation for the delay.
Registration approval
If approved, the NBG will grant you official VASP status. You’ll receive a formal document including your name, ID number, and the official registration date and number. The NBG will add this information to their VASP registry within two business days.
What if registration is denied?
If the NBG rejects your application, they provide a written explanation outlining the reasons behind the decision.
The cost of registration
Be prepared for a 5,000 GEL fee for the NBG to consider your VASP registration application. This fee is payable regardless of whether your application is approved or not.
Cryptocurrency Taxation and Financial Regulations
0% Capital gains tax
This is the sweet spot for most individual crypto traders in Georgia. They generally pay no tax on their crypto profits.
15% corporate income tax + 5% dividend tax
This applies if your crypto trading happens through a registered Georgian business (like an LLC). You’ll face a 15% corporate income tax on profits, plus an additional 5% tax when those profits are distributed to the owners.
Potentially 0% with small business status (SBS)
The National Bank of Georgia hasn’t yet decided whether they’ll classify crypto trading as a “currency operation.” If they do, it becomes a prohibited activity for those with SBS.
If crypto trading gets labeled a “currency operation” in the future, you could lose your SBS status. In the worst-case scenario, there might be retroactive back taxes to deal with. Unless you have other business income that qualifies for the 1% SBS tax rate, it’s simpler and safer to trade crypto as an individual without SBS.
Even if your crypto gains are tax-free, they still count towards the 500,000 GEL annual turnover limit for SBS. Exceed that, and you’ll lose your 1% tax status entirely. If you’re a crypto trader in Georgia, the safest bet is generally to avoid using SBS. This minimizes the risk of complications and potential future tax headaches.
Additional Considerations:
Achieving tax residency in Georgia
The 183-day rule
For those open to spending significant time in Georgia, the 183-Day Rule offers a straightforward path to tax residency. Simply residing within the country for at least half of 12 months is often enough to qualify.
Qualifying through the High Net Worth Individual (HNWI) Program
Georgia’s HNWI program is tailored to wealthy investors, including those with substantial crypto holdings. To be eligible, you must:
High-net-worth individuals
Start a Georgian company
Establish a Georgian company (often an LLC) and open a corresponding bank account . This lets you fulfill the requirement of earning at least GEL 25,000 (about EUR 8,000) annually from Georgian sources.
Options for HNWI tax residency
Georgia offers two avenues for achieving HNWI tax residency:
The Remote (Without physical presence in Georgia)
Become a Georgian tax resident without setting foot in the country. Through a Power of Attorney, representatives handle the process — from submitting certified documents to securing your tax residency certificate (often within 7 days).
Relocating to Georgia
Choosing to live in Georgia can simplify the HNWI tax residency process. Obtaining a Georgian work visa and ID card often helps expedite the fulfillment of program requirements. Plus, you’ll experience Georgia’s vibrant culture firsthand.
Using Georgian banks for cryptocurrency transactions
Georgian banks can be a strategic tool for international crypto investors. Here’s a breakdown of the primary advantages and considerations when leveraging Georgian banking:
Why use Georgian banks for Crypto
Choosing the right Georgian Bank
How to register a crypto company in Georgia?
What are the benefits of starting the crypto business in Georgia?
Tailored Services for Cryptocurrency and Tax Residency
At Gegidze , we understand the complexities and opportunities within Georgia’s evolving cryptocurrency landscape. We offer a range of services to guide you through the process, maximizing the potential of your investment:
Buy, Sell & Exchange Crypto
Our expertise helps you navigate crypto exchanges, secure storage solutions, and develop strategies tailored to your goals within the Georgian market.
Tax Residency Consulting
We’ll clarify the pathways to Georgian tax residency, outline the tax advantages, and assist with the application process to optimize your financial returns.
Banking and Financial Services
We’ll help you select the right Georgian banking partners, streamline opening bank account process and offer insights for secure and efficient crypto transactions.
Explore Opportunities in Both Georgia and Armenia
We also proudly offer our services in Armenia, where cryptocurrency regulations are continuously evolving. Our specialists can help you navigate this dynamic environment, mitigating risks and identifying potential opportunities.