Living in a pandemic and uncertainty, many began to think about moving to another country, transferring their business to more profitable jurisdictions, and competently planning their finances. There are several fairly obvious reasons for this – the massive transition to remote work, the unstable situation in most areas of business, the lack of the possibility of long-term travel due to closed borders.
This is what drives entrepreneurs who are thinking about the possibility of changing citizenship in order to reduce taxes. But obtaining citizenship is not a tax optimization tool. This is a long and complicated process, and in a crisis, it is necessary to resolve issues as quickly as possible. Therefore, it is better to consider the possibilities and benefits of changing tax residency. Much low tax and offshore jurisdictions offer affordable options to help with proper tax and financial planning.
Georgia is just such a place where, in addition to a comfortable climate, there are extremely attractive tax conditions and the best environment for business development. In this article, we will analyze the issues of obtaining tax residency in Georgia and its benefits in 2021.
How to obtain tax residency in Georgia?
On a general basis, you become a tax resident of Georgia after you have lived in the country for more than 183 days continuously for one year.
It is important to understand that this rule only works if you really lived in the territory, and were not located for the reason:
- A diplomatic mission with consul status or were a family member of such person;
- Worked for an international organization or were a family member of such person;
- Work on the territory of Georgia in the status of a civil servant of another state or were a family member of such a person;
- Transit movement through the territory of the country to other states.
- Vacation or treatment.
Among other things, obtaining tax residency in Georgia in this way is a rather long process and it is not suitable for promptly solving business problems related to tax optimization. In this regard, you can consider other methods of obtaining. If you are a person who owns the significant property and can confirm this with documents, then the period is reduced to one month. To do this, you need to provide confirmation:
- On the condition of your assets, which must exceed 3 million GEL ($ 909,090);
- Your income for the last 3 years, which must exceed 200 thousand GEL (about $ 65,040);
- If you have a temporary residence permit in Georgia;
- Your income from a Georgian source is more than 25 thousand GEL ($ 8 130);
The Georgian law regarding companies registered in the country or managed from it states that such companies are automatically considered tax residents. Therefore, you can consider options for registering your business on preferential terms, which we talked about in more detail here in this article.
Documents required for obtaining tax residency in Georgia
To obtain tax residency in Georgia, you need to submit an application and the following documents to the Service Agency of the Ministry of Finance:
- Passport and residence permit;
- Documents confirming your capital that meets the above requirements;
- The statement itself.
All documents submitted by you are checked by the Revenue Service. If no errors and inaccuracies were found, then within 7 working days your application is sent to the Ministry of Finance. If errors are found, you are given 30 calendar days to correct them.
A nine-digit taxpayer identification number is provided for foreigners and stateless persons. Further tax accounting is carried out at the place of residence indicated in the application.
Main advantages of Georgia tax residency
- According to Article 82 of the Tax Code of Georgia, income that is received from sources outside the territory of the country is not taxed. That is why foreign entrepreneurs are interested in Georgia’s tax residency.
- A Georgian tax resident who does not have a residence permit pays only income tax of 20% and only on income received from a source in Georgia. There are no pension or any other social contributions.
- If you have a residence permit, permanent residence or Georgian citizenship, you are required to pay an additional 2% of the specified income to the pension fund. Such income includes a salary, a bonus from a Georgian source, and, for example, when leasing Georgian real estate, a tax resident of Georgia does not pay a pension contribution. By the way, when concluding such a contract with a lessor company, it is the company that is obliged to pay income tax for you.
- Thanks to the double taxation agreement, you can be exempted from paying taxes on income received from a source in Georgia, in the country of which you are a citizen. At the moment, Georgia has signed agreements with 56 countries, including Ukraine, Belarus, Kazakhstan, the United Arab Emirates and Cyprus.
If you are considering options for obtaining tax residency in Georgia in order to optimize taxes or options for registering your business in the country, it is better to consult in advance with Jara Accounting tax specialists who will help you develop a tax plan for years to come and explain all the advantages and disadvantages. Having received advice, you will be sure of the correctness of your actions and can legally save on taxes.