Guide to Taxes in Georgia 2024

Original source

Taxes can be a major headache for any business owner. But Georgia aims to change that. It offers a tax system focused on simplicity and attracting foreign businesses. Yes, Georgia stands out with one of the lowest tax rates in the world and is the go-to destination for businesses to optimize their taxes .

This guide from Gegidze will break down the details of the Georgian tax landscape step by step.

Understanding Georgian tax rates

Corporate income tax

A tax charged on the profits earned by corporations, limited liability companies (LLCs), and other similar business entities.

One of the lowest corporate income tax rates (Profit Tax) in Georgia

In the country of Georgia, both resident and non-resident enterprises are subject to Corporate Income Tax (CIT) on their income at a flat rate of 15%.

For LLCs and other legal entities within Georgia, CIT applies only when profits are distributed. This means that profits reinvested into the company remain untaxed.

P.S. banks, microfinance organizations, and similar financial institutions are subject to a slightly higher 20% CIT rate.

What triggers CIT payments?

Georgia’s unique system focuses on how you use your profits rather than taxing them immediately. Here’s when the CIT typically kicks in:

• Profit Distributions: When you pay out dividends to shareholders, those amounts are generally subject to CIT (with some exceptions).
• Non-Business Expenses: Spending money on things unrelated to growing your business could trigger CIT.
• Giving Things Away: Free products, services, and even unexplained inventory shortages are treated like profit distributions.
• Excessive Spending: Those “representative expenses” (for client entertainment, etc.) have limits — exceed them, and you might get taxed on the extra.

It applies to:

1. Resident companies (those headquartered in Georgia) on their worldwide income

If your business is headquartered in Georgia, you’re considered a resident company. This means you’ll pay the corporate tax rate (CIT) in Georgia on all your income, even that earned in other countries.

Example: A Tbilisi-based software startup lands clients in Europe. Despite the international source of profits, they’ll still pay Georgia business tax rates on their entire income.

2. Non-resident companies on the income they generate within Georgia

If you operate a business outside of Georgia but make money within the country (and have a physical presence like an office or branch), you’ll pay CIT only on that Georgia-sourced income. It’s a fair approach, ensuring you contribute taxes where you’re actively doing business.

Example: A UK company establishes a manufacturing branch in Batumi. They’ll pay CIT exclusively on the profits generated by that specific Batumi operation.

Special tax statuses

• Virtual Zone Companies: Companies operating within designated “Virtual Zones” enjoy a 0% CIT rate. It applies mainly to specific IT-related activities.
• Free Industrial Zones (FIZ): Businesses established within a FIZ are also exempt from CIT, they are tax-free in Georgia. (0%).
• International Company Status: Companies holding this status benefit from a reduced 5% CIT rate upon profit distribution.

Let’s get practical

• Company A (Resident): Decides to distribute 20% of its profits as dividends. That portion gets taxed at the standard 15% CIT rate.
• Company B (Non-Resident): Incurs some expenses that aren’t directly related to its business operations in Georgia. Those costs would also be subject to the 15% CIT rate.

Special Tax Incentives

Withholding corporate taxes in Georgia

When non-residents earn certain types of income from sources within Georgia, the country withholds a portion as an upfront tax payment. Here’s a breakdown of the key areas:

Dividends

• Dividends paid to non-resident entities are typically subject to a 5% withholding tax.
• This rate might be reduced if Georgia has a double taxation with the entity’s home country.

Interest

• Interest income earned by non-residents from Georgian sources is also subject to a 5% withholding tax.
• Similar to dividends, this rate may be lowered if a tax treaty applies.

Royalties

• Royalties paid to non-residents for the use of property or rights in Georgia are taxed at a withholding rate of 5%.
• Tax treaties can potentially provide for a reduced rate.

Other withholding taxes

• Other types of payments to non-residents have specific withholding tax percentages in Georgia:
• Oil and gas subcontractor income: Generally 4%
• Income from international transportation/communication: Generally 10%
• Income from services rendered in Georgia: 10%
• Certain payments to entities in ‘blacklisted’ countries: 15%

Why is Georgia the best destination for foreign businesses?

Georgia has emerged as a compelling destination for entrepreneurs and businesses worldwide. With a favorable tax system, a supportive business environment, and a strategic location, Georgia offers a unique opportunity for growth and success. Here’s a closer look at the key advantages:

• Tax Simplicity: Georgia boasts one of the most straightforward tax structures in the region. Its flat corporate income tax rate and zero tax on reinvested profits mean you keep more of what you earn.
• Ease of Doing Business: Georgia consistently ranks high in international “ease of doing business” indices, reflecting its streamlined regulations and minimal red tape when establishing and running a company.
• Open Economy: Enjoy unhindered access to growing regional markets and trade agreements with global economic powers, facilitating the movement of goods and services.
• Strategic Hub: Georgia’s location between Europe and Asia makes it an ideal base for businesses targeting diverse markets across these major continents.

United Kingdom (UK) businesses invested 392 million dollars in Georgia in 2023

Source: geostat.ge

Recent data reveals the United Kingdom as the frontrunner in foreign direct investment (FDI) into Georgia in 2023.

As one of the world’s most active startup regions, the UK’s leading investment underscores the potential for dynamic partnerships and innovative growth within Georgia’s business landscape.

The UK is followed by other nations contributing to Georgia’s economic growth, including the Netherlands, Turkey, the United States, Russia, Malta, Azerbaijan, China, Japan, and Kazakhstan.

This top investor list underscores the growing international interest in Georgia’s business landscape. Countries from Europe, Asia, and North America all play a role in driving investment into Georgia.

Foreign direct investment by the economic sector

Source: geostat.ge

Analysis of foreign direct investment flows in Georgia reveals their concentration within specific economic sectors.

Understanding where FDI is directed highlights both Georgia’s areas of strength and the industries that international investors perceive as offering the greatest potential for returns.

Foreign Direct Investments in Georgia (2020–2023)

Georgia’s position on the global investment stage is rapidly changing. Foreign direct investment (FDI) into the country demonstrates a significant upward trajectory. This surge in FDI signals growing international recognition of Georgia’s economic potential and its favorable business environment.

Million USD.

Source: Geostat.ge

Personal Income Tax (PIT)

What are the income tax rates in the Country of Georgia?

Georgia’s income tax system aims for a balance of fairness and growth. Individuals face a flat 20% rate, while businesses benefit from special breaks designed to help them flourish. Small and micro businesses could see income tax rates as low as 1% or 3%.

• Rental Income: If you earn money renting out residential property in Georgia, you’ll face a simple 5% tax rate.
• Property and Vehicle Sales: Selling a house, apartment, or vehicle in Georgia? The proceeds are generally taxed at a 5% rate, but specific exemptions might apply.
• Capital Gains (Foreign Investments): Selling stocks, bonds, or other non-Georgian securities usually results in a 0% tax on your gains. (Always consult a tax professional for complex situations.)
• Cryptocurrency Gains: Currently, cryptocurrency gains in Georgia are taxed at 0%. This reflects the evolving legal status of crypto in the country.
• Foreign Dividends: If you’re a passive shareholder receiving dividends from foreign companies, you typically won’t pay any Georgian tax on them (0%). However, managing a foreign company from Georgia can complicate the situation.

Lower taxes for local and international startups & small businesses

Georgia recognizes the crucial role small and medium-sized enterprises (SMEs) play in driving economic growth and creating jobs. To support these vital engines of innovation, Georgia has designed a tax system that actively encourages entrepreneurship. This welcoming approach applies to local startups and international businesses establishing a presence in the country.

Taxes in Georgia won’t cripple your growth. The focus is on competitive rates and smart incentives, including special tax breaks for small and medium-sized businesses.

Here payroll management is also simple. Georgia’s system is designed for simplicity, with straightforward income tax withholding and reasonable pension contribution requirements.

Filing your Georgian tax return

1. Understand your filing status: Are you a resident, or non-resident, or do you have income categories requiring reporting?
2. Know your deadlines: Check the Georgian tax authorities’ website for the latest information on annual and capital gains filing deadlines.
3. Organize records: Gather documents for income, deductions, and any relevant transactions.
4. Prepare & submit a return: Use official forms and follow instructions provided by the Georgian tax authorities.
5. Make payments: Pay estimated amounts (if applicable) and any final tax due by the deadlines.

Value-Added Tax (VAT) in Georgia

VAT is a tax applied at each stage of the supply chain for most goods and services sold within Georgia

Key points about VAT in Georgia

• Standard Rate: Georgia’s VAT rate is currently 18%.
• What’s Taxed: VAT generally applies to anything sold in Georgia as part of a business activity. However, there are specific exemptions.
• Location Matters: Where goods are located, and where a service is provided or received, are crucial factors for determining what’s taxed. There are special rules for businesses operating across borders.
• Registration: If your business’s turnover (sales) exceeds 100,000 Georgian lari in 12 months, you’re generally required to register as a VAT payer. However, you can apply for a VAT payer registration right after starting the business operations.
• When VAT Applies: Typically, VAT becomes due when you supply goods or services. It also applies to advance payments you receive.

Exemptions and special cases

• Exempt Supplies: Certain goods and services, such as specific financial or medical-related items, might be VAT-exempt.
• Reverse-Charge VAT: If you’re a Georgian VAT payer receiving services from a non-resident, you may be responsible for paying the VAT.
• Digital Services: Businesses based outside Georgia, but providing digital services to Georgian consumers, likely need to register and comply with Georgian VAT rules.

VAT for digital businesses

If you provide digital services to Georgian consumers without being established in Georgia, you could have VAT obligations. These rules are relatively new, so it’s crucial to stay updated.

Here’s what triggers VAT:

• Payments for your services go through a Georgian financial institution.
• The consumer is located in Georgia.
• The purchase is made using a device with a Georgian IP address.
• The purchase uses a phone number with a Georgian country code.

Important deadlines

• Reporting: Quarterly VAT reports are typically due on the 20th of the month following the reporting period.
• Payment: VAT payments are generally due by the end of the month following the reporting period.

Property tax rates and rental Income in Georgia

Georgia offers a surprisingly affordable and straightforward process for foreign real estate investors. Let’s break down the costs:

• Stamp Duty / Purchase Taxes: No stamp duty or equivalent tax. Other costs related to property purchase are minimal, with property registration only costing ?50–200 GEL ($20–80 USD).
• Annual Property Tax: Varies by municipality, capped at 1% of appraised value. Households earning below GEL 40,000 are exempt. For incomes between GEL 40,000 and GEL 100,000, rates range from 0.05% to 0.2%. Above GEL 100,000, rates are from 0.8% to 1%.
• Capital Gains Tax (CGT): A 5% tax on profits if sold within two years; no tax thereafter. For off-plan properties, official ownership starts upon registration.
• Rental Income Tax: The standard rate is 20%, but registered landlords pay only 5% on residential rentals. Unregistered landlords also pay 20% but can deduct expenses. There is no limit on the number of properties for the reduced tax rate

Georgian Import taxes

• Variable Rates: Georgia’s import taxes generally fall into three tiers: 0%, 5%, or 12%. The exact rate depends on the specific goods imported. You can find the correct rate using the product’s classification code or by searching for its Georgian name on the relevant customs resources.
• Special Permissions: Certain products may require additional permits to be imported. These permits typically cost 30 GEL to obtain.
• Payment Deadlines: Import taxes are usually due within 5 days of your goods arriving at customs, though a different timeframe may be given at the time.
• VAT Considerations: An additional 18% VAT may apply to imported goods. This is payable at the time of importation, regardless of whether the recipient is a VAT-registered business.
• Exemptions:
• Imports from select countries, including those within the EU, may be exempt from import tax. VAT might still apply.
• Small shipments valued under 300 GEL are fully exempt from both import tax and VAT.

Crypto tax in Georgia

Georgia’s crypto-friendly tax system makes it attractive for holders. Individual tax residents generally enjoy 0% tax on crypto trading profits, thanks to Georgia’s territorial taxation and the classification of crypto as non-Georgian sourced income. The country also offers easy liquidation of Bitcoin and other cryptocurrencies into fiat currency, with some providers even facilitating direct exchange with commercial banks.

• Ownership and Trading: Holding and trading crypto is legal in Georgia. Currently, for individual traders, tax rates on gains are generally 0%.
• Crypto Mining Hub: Georgia’s cheap hydroelectric power and minimal regulation make it a popular crypto mining location.
• Legal Tender Status: While the Georgian Lari (GEL) is the only official currency, USD, GBP, and EUR accounts are easily accessible at local banks. You can even withdraw USD from ATMs.
• Barter Potential: Though not legal tender, the current lack of regulation allows crypto to be used in barter-like exchanges (for example, when buying property). However, new regulations could emerge.

Important notes

• Businesses: Crypto profits generated within a Georgian-registered business entity may be subject to corporate income tax and dividend tax rate upon distribution.
• Small Business Status (SBS): Trading crypto while holding SBS is complex. While generally taxed at 0%, future regulations could change this.
• Tax Residency: To enjoy these tax benefits, you generally need Georgian tax residency, achievable by either residing in Georgia for 183+ days per year or through the High Net Worth Individual program.
• Exiting Previous Tax Systems: Simply becoming a Georgian tax resident may not immediately end your tax obligations to your previous country. Formal processes and, in some cases like the USA, citizenship renunciation, may be required.

Crypto regulations in the country of Georgia

Georgia, previously known for its minimal cryptocurrency regulation, has implemented new rules to enhance security and compliance.

Here’s what you need to know:

• Risk Mitigation: Cryptocurrencies are considered as a high-risk asset that can be used for illegal activities like money laundering or terrorism financing. Georgia’s regulations aim to reduce these risks.
• Global Standards: The Financial Action Task Force (FATF), an international body combating financial crimes, recommended Georgia strengthen its crypto framework.

What’s New?

• Definition and Licensing: The law now defines “virtual assets” (including cryptocurrencies) and requires Virtual Asset Service Providers (VASPs) to register with Georgia’s National Bank.
• Accountability: VASPs must now implement measures to identify customers, monitor transactions, and prevent illegal activity.
• Traceability: VASPs must share specific information when transferring crypto, improving the ability to track suspicious transactions.

Who’s affected?

• Cryptocurrency exchanges (crypto-to-crypto, crypto-to-fiat, crypto-to-financial instruments)
• Crypto asset transfer, storage, or custodial services
• Cryptocurrency portfolio management services
• Cryptocurrency trading platform operation
• Cryptocurrency lending platforms
• Initial Coin Offering (ICO) facilitation

Who is not affected?

• Individual Users: For now, individual miners and casual traders are largely unaffected.

How to open an LLC in Georgia

Georgia ranks 7th in the world for ease of doing business, according to the World Bank’s ratings of 190 economies.

So, Georgia’s business-friendly approach and favorable tax structure make it an attractive destination for entrepreneurs. Setting up a Limited Liability Company (LLC) offers specific advantages, including protection of personal assets and flexible profit distribution. Let’s dive into the process, tax implications, and key considerations for foreigners establishing an LLC in Georgia.

Understanding Georgian LLCs

• Liability Protection for Owners: Unlike sole proprietorships, an LLC separates your business debts and obligations from your assets. This lowers your financial risk if the company faces difficulties.
• Minimal Upfront Cost: Georgia doesn’t require you to invest a specific amount of capital to start your LLC.
• Flexible Ownership: One or more individuals or entities can own an LLC, and there’s no residency requirement for directors.
• Global Workforce: You can hire employees from within Georgia or internationally.
• Tax Advantages: Profits retained within the company face a 0% corporate income tax. Distributions are taxed later at a competitive rate.
• Special Note: LLCs generally don’t qualify for the simplified “Small Business Status” tax regime.

Banking in Georgia: A guide for expatriates and locals

Georgia understands the needs of modern businesses. That’s why, in many cases, you can open a business bank account online without ever setting foot in the country.

Georgian banks

The Bank of Georgia and TBC dominate the Georgian banking sector, offering an extensive range of services with little to no distinction between them regarding product offerings, customer service, and national coverage. Their operational similarities extend to the account opening process, which is streamlined and accommodating for both local and international clients.

Bank of Georgia & Solo

The Bank of Georgia is a ubiquitous presence, offering a plethora of banking products including a variety of card services under the Mastercard, Visa, and American Express brands. The “Solo” premium service caters to high-net-worth individuals, providing enhanced banking features, personalized service, and access to luxury benefits such as VIP lounge access at airports globally.

TBC & TBC Concept

TBC mirrors the Bank of Georgia in its comprehensive service portfolio, including the innovative “TBC Subscription” card program and the “TBC Concept” for premium customers, offering tailored banking solutions and luxury perks akin to those provided by the Bank of Georgia’s Solo service.

Alternative banking options

Beyond the big two, Georgia’s banking landscape features several institutions catering to diverse needs:

• Liberty Bank: Stands as the third largest bank, known for its extensive branch network and government payroll services.
• ProCredit Bank: Focuses on small and medium-sized enterprises with a range of business account options.
• Basisbank: Appeals to those with ties to China, offering both Visa and Mastercard options alongside UnionPay cards.
• Cartu Bank: Established by Georgian billionaire Bidzina Ivanishvili, Cartu Bank targets the elite with high-end financial services and exclusive card offerings.
• Ziraat Bank Georgia: Facilitates transactions with Turkey, offering accounts in Turkish Lira and a streamlined Internet banking system.
• Tera Bank: Partly owned by The Dhabi Group, focusing on retail banking with a variety of card options.

Key tax facts

The registration process

Setting up your LLC can be done in person at a Georgian Justice Hall or remotely with a Power of Attorney (POA). Here’s what you’ll need:

• Business Activity: Clearly define your company’s primary activities.
• Company Charter / Founders agreement: A bilingual (Georgian and a language understood by the directors) document outlining company structure, management bodies and responsibilities, and other key details as to how the company will be managed.
• Owners’ Passports: Identification for all directors is required.
• Georgian Address: You’ll need an owned (not rented) property address for registration purposes. The property owner must be present or represented via POA.
• Georgian Phone Number and Email: For contact and official communication.

Important Note: Opening a Georgian bank account for your LLC while abroad can be challenging. Banks are increasingly cautious. If you don’t need a Georgian bank account, services like Wise.com offer alternatives.

Timeframe and fees

• Expedited Registration: Possible in under 6 hours with express service (additional fee).
• Standard Registration: Typically 24–36 hours.
• Tax Registration: This must be completed separately after LLC registration.
• Ongoing Costs: No annual fees, but monthly accounting is required (even with no activity).

Georgia: An easy country to migrate to

Georgia welcomes foreigners with streamlined residency procedures. Here’s an overview of your options:

• Visa-Free Travel (for Many): Citizens of 95 countries can enjoy Georgia’s rich culture and business opportunities for up to a year without a special visa. This is perfect for digital nomads or those exploring a longer-term move.
• Investment Residency: Flexibility for Growth
• Invest directly in Georgian real estate (minimum: USD 300,000 equivalent). This path is ideal if you’re drawn to Georgia’s real estate market.
• Invest through a Georgian company (minimum: USD 300,000), with specific annual turnover requirements. This offers greater business flexibility.
• Work Residence Permit: Build Your Career in Georgia
• Secure at least a 6-month employment contract within Georgia (for LLCs or Individual Entrepreneur positions).
• Demonstrate financial self-sufficiency during your stay.
• Initial permits are 6–12 months, with potential extensions up to 11 years. This is excellent for those committed to establishing themselves in Georgia long-term.
• High net worth individual residency

There are two main ways to qualify as an HNWI:

• Asset-Based: Demonstrate ownership of assets exceeding three million Georgian Lari (approx. $1,075,000). Various assets accepted (real estate, stocks, etc.). Valuation reports may be needed.
• Income-Based: Show income exceeding 200,000 GEL (approx. $71,500) in each of the last three years. The income source can be global.

Important note: HNWI status alone doesn’t grant tax residency; the additional requirement is essential. Meeting one of the four combinations (asset+permit, asset+income, etc.) is sufficient.

Procedures for relocating to Georgia

Georgia tax residency and residency requirements for Tax Purposes

Georgia’s tax system offers attractive benefits for foreigners, including a territorial approach where you’re generally not taxed on income earned outside of Georgia. However, understanding what qualifies as “foreign-sourced” income is crucial.

It’s also important to distinguish between two types of residency in Georgia:

• Legal Residency: Grants the right to live and work in Georgia.
• Tax Residency: Determines where you are liable to pay taxes.

You can have one without the other, or have both. To enjoy the tax advantages Georgia offers, you generally need to be a Georgian tax resident.

How to get tax residency in Gorgia?

The 183-day rule

If you physically spend at least 183 days (that’s roughly half the year) within Georgia’s borders during any consecutive 12-month period, you automatically qualify as a tax resident. There’s no complicated application process or stacks of paperwork. Once you meet the time requirement, you’ll enjoy the tax benefits for that entire year.

P.S. You don’t have to stay the entire 183 days in one stretch. You could spread your time out over several visits throughout the year.

High net worth individual (HNWI) program

• Meet the HNWI wealth threshold:
• Own assets exceeding 3,000,000 Georgian Lari (approx. $1,300,000).
• OR have had an annual income above 200,000 GEL (approx. $77,000) for each of the past three years.
• Additional Requirement:
• Hold Georgian legal residency or citizenship.
• OR demonstrate at least 25,000 GEL (approx. $7,500) in annual income from a Georgian source.

Benefits of Georgian tax residency

• Competitive Tax Rates: Georgia boasts some of the world’s lowest personal and business tax rates.
• Double Taxation Agreements: Georgia has agreements with over 55 countries, potentially preventing you from being taxed twice on the same income.
• Foreign Income Advantage: The territorial system means income earned outside Georgia is often tax-free, but it’s vital to understand the specific rules.
• Banking Access: Tax residency can make opening and managing Georgian bank accounts easier.

Georgia occupies a unique position at the crossroads of Eastern Europe and Western Asia. Bordered by the Black Sea, Azerbaijan, Armenia, and Turkey, its strategic location has shaped its history and made it a hub for trade and cultural exchange. Georgia’s diverse terrain, from the Caucasus Mountains to its coastline, offers a wide range of experiences for residents and visitors.

Georgia welcomes foreigners with a streamlined residency process. Popular pathways include:

• The 183-Day Rule: Spending at least half the year in Georgia automatically grants you tax residency.
• High Net Worth Individual (HNWI) Program: A fast-track option for those with significant assets or income.
• Other Residency Paths: Explore options for investors, entrepreneurs, and those seeking long-term relocation.

Discovering Georgia: Location, Residency, and Lifestyle

Georgia occupies a unique position at the crossroads of Eastern Europe and Western Asia. Bordered by the Black Sea, Azerbaijan, Armenia, and Turkey, its strategic location has shaped its history and made it a hub for trade and cultural exchange. Georgia’s diverse terrain, from the Caucasus Mountains to its coastline, offers a wide range of experiences for residents and visitors.

• Welcome Home: Georgians are known for their incredible hospitality. You’ll likely find yourself invited to feasts, learning about traditions, and feeling part of the community.
• Budget-Friendly Living: Daily life in Georgia is quite affordable compared to many European countries.
• Delicious Food: Explore fresh flavors, unique spices, and, of course, Georgia’s famous wines.
• Natural Beauty: From beaches to mountains, Georgia offers endless opportunities for outdoor adventures.
• Rich History: Ancient monasteries, fortresses, and bustling cities showcase Georgia’s fascinating past.

Georgia: A land of opportunities

Georgia consistently ranks high for ease of doing business. Government initiatives reduce bureaucracy, provide financial incentives, and facilitate market access. This makes it ideal for startups, tech companies, and international businesses.