The World Bank report has highlighted that Georgia boasts one of the lowest tax burdens globally. The significance of tax residency determination cannot be overstated, particularly in light of the growing trend of global migration. This is due to the fact that individuals who earn income in one country while residing in another are confronted with tax obligations.
To this end, it is imperative to comprehend the concept of tax residency, as it pertains to the conditions that dictate which types of income are subject to taxation in a given country. It is worth noting that Georgia has entered into double taxation avoidance agreements with 57 countries, which should be taken into account when addressing this issue. However, it is important to recognize that each case necessitates a customized approach, as the subsections of double taxation avoidance agreements vary significantly from country to country.
Acquiring tax residency in Georgia can potentially lead to a reduction in an individual’s tax obligations due to the country’s comparatively low tax burden, with taxes seldom exceeding 20% of income. Consequently, many individuals who choose to reside in Georgia may experience significantly reduced taxation.
To obtain tax residency, there are two methods available
1. Spending 183 days in the country within 12 calendar months.
An individual is considered a tax resident of Georgia if they reside in the country for 183 days or more during a 12-month calendar period. If you are in Georgia for less than 183 days, you will not be considered a resident, but not only the duration of your stay but also the reason for your stay is important. If you can prove that your stay in Georgia is temporary, you will not be considered a resident even if you stay here for more than 183 days.
According to Article 34.4 of the Tax Code of Georgia, the time during which an individual was in Georgia is not included in the actual stay on the territory of Georgia:
a) as a person with diplomatic or consular status or a member of such a person’s family;
b) as an employee of an international organization operating under an international treaty of Georgia, or as a person serving in the public service of a foreign state in Georgia, or a member of such a person’s family, except for Georgian citizens;
c) when moving from one foreign state to another through the territory of Georgia;
d) for treatment or rest.
It is also important to note that the time of actual stay on the territory of Georgia includes the time during which an individual was in Georgia as well as the time during which they left Georgia specifically for treatment, rest, business trips, or studies.
2. High-net-worth individual
To obtain tax residency based on individual’s wealth and income, one must meet the following criteria:
a) ID/residence permit and documents confirming that the individual’s property exceeds 3 million GEL OR their annual income for the last three years exceeds 200,000 GEL; OR
ID/Residence Permit and documents confirming that their assets exceeds 3 million GEL; OR that their annual income for the last three years exceeds 200,000 GEL.
As of April 15, 2023, a legal modification has been introduced mandating the confirmation of financial status for individuals possessing assets amounting to no less than $500,000 in dollar equivalent within the confines of Georgia. A plethora of methods may be employed to substantiate financial status, such as possession of real estate in Georgia, shares in Georgian companies, deposits held in Georgian banks, cash held in accounts or other forms of ownership. Prior to this juncture, demonstrating the possession of a fortune totaling 3,000,000 lari anywhere across the globe sufficed.
Alternatively
b) they may provide documents confirming that their property exceeds 3 million GEL or their annual income for the last three years exceeds 200,000 GEL and that they receive income from a source in Georgia of 25,000 GEL or more during one calendar year..
People who want to become tax residents of Georgia and have significant assets but do not have a residence permit in the country can apply without any obstacles. The application will be reviewed by the Revenue Service, and if it is approved, an application for residency will be submitted to the applicant within 7 working days. Residency is issued for each tax period, and when reapplying, relevant documents must be provided.
Tax residency in Georgia can be an important factor for high-net-worth individuals who travel frequently and do not stay in one country for an extended period. It can also be useful for those who are already tax residents of another country but want to obtain tax residency in Georgia to avoid double taxation. However, it is crucial to note that obtaining tax residency in Georgia does not exempt individuals from the obligation to pay taxes in other countries where they reside or frequently visit. This obligation depends on the legislation of each specific country and may arise for various reasons, not just based on an individual’s stay there.
For those who travel frequently and do not stay in one country for a long time, tax residency in Georgia can be an important factor in protecting their assets. It can also be useful for those who are already tax residents of another country but want to obtain tax residency in Georgia to avoid double taxation. If you can comply with HWI, we can help you obtain tax residency. Contact us for more information. If necessary, we can also help you obtain a taxpayer identification number in Georgia.
However, it is crucial to note that obtaining tax residency in Georgia does not exempt individuals from the obligation to pay taxes in other countries where they reside or frequently visit. This obligation depends on the legislation of each specific country and may arise for various reasons, not just based on an individual’s stay there.