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Georgia is an emerging country in the Caucasus, mainly known for its good wine and beautiful mountain scenery in the north. However, the country, especially the capital Tbilisi, is increasingly attracting digital nomads and online service providers. But why is that?
Georgia has a tax system that can be quite interesting for some individuals. This comprehensive article covers all the important taxes and tax advantages of Georgia for expats.
Taxes at a Glance
Georgia has a tax system that is quite attractive by European comparison, offering interesting advantages and special regulations for certain individuals and service providers. Here is an overview of the most important taxes and their benefits.
Income tax
In general, Georgia has an income tax rate of 20%, which is below the European average. Furthermore, this is a flat rate and is not subject to progressive increases. However, income tax applies only to domestic income, as Georgia has a territorial tax system.
Foreign income, for example from the rental of a purchased apartment in Dubai or corporate dividend distributions, are tax-free. This rule is particularly interesting for international investors.
However, whoever believes that a Offshore company, such as a US LLC, to set up and pay oneself dividends or tax-free salary from one's own company, is mistaken. Because here, as often discussed, the principle of the Effective Place of Management applies. You pay taxes where the company management is located. If you live in Georgia yourself, this remains Georgia and the aforementioned US LLC is subject to corporate tax in Georgia.
Sole proprietor
However, certain sole proprietors (not all service providers) are subject to a preferential income tax rate, which is just 1 % of annual revenue for businesses with revenue of up to 500,000 GEL (approximately 175,000 €) per year. That is, 1,750 € per year.
Capital Gains Tax
Another interesting aspect is the lack of capital gains tax. Consequently, no taxes are levied on capital gains such as cryptocurrencies, stock profits, interest, or the like. Here, too, investors and traders benefit once again.
Corporate Income Tax
The corporate income tax rate is 15 %, which is again below the European average. However, similar to Estonia, this tax is only levied when profits are distributed. Any profits that remain within the company remain tax-exempt or are not taxed.
Virtual Zone Person
Companies under this special legal form are IT companies that provide software development for foreign companies. This is purely about software development, not consulting. Under this legal form, there is complete tax exemption.
International Company (IT & Shipping)
Another special form is the so-called International Company. Under this legal form, companies can benefit from further reduced tax rates, which include the following advantages, among others:
- 5 % Corporate Income Tax
- 0 % Withholding Tax on Dividends
- 0 % Payroll Tax
Free industrial zone
In the so-called free industrial zones, similar to free trade zones, companies of various kinds enjoy tax exemption. Only an annual license fee is charged.
Tax calculator
Easily calculate all Georgian taxes for expats using the tax calculator below.
Global Setup · Georgia
Estimate your tax burden as a tax resident in Georgia - based on the territorial principle and current Georgian tax laws.
Small Business Status: 1% for annual revenue up to 500,000 ₾. If this threshold is exceeded, the status may be revoked (in which case the rates are 3% or 20%).
Georgia taxes corporate profits only when they are distributed (15%, Estonian model). Reinvested profits remain tax-free. Upon distribution, an additional 5% is levied on the dividend (enter below).
Domestic dividends: 5% withholding tax (final). Foreign dividends are tax-exempt in Georgia under the territorial principle (withholding tax levied abroad is not taken into account).
For individuals (0%): Cryptocurrency is considered a non-Georgian source of income and is exempt from income tax. Commercial trading or mining may be considered a business activity (1% / 15%).
Foreign and long-term gains (over 2 years, held passively) are tax-free.
Effective tax rate
Note: Non-binding estimate based on current Georgian tax laws (Territorial principle: 0% on foreign income for residents; flat income tax rate of 20%; small business owners 1% on revenue up to 500,000 ₾; corporate income tax 15% only on distributions; local dividends 5%; cryptocurrency for individuals 0%; Capital gains are tax-free if held for more than 2 years; residential real estate held for less than 2 years is taxed at 5%; other assets held for less than 2 years are taxed at 20%). This calculation replaces no individual tax advice. Tax residency (183 days or HNWI program), pension contributions, foreign withholding taxes, DTA crediting, and special cases are not covered or are only covered in a simplified manner. For a binding assessment, please book a consultation.
Summary
Under certain circumstances, Georgia can indeed be for certain people a tax haven be. Depending on the source of income and the nature of the activity, one can live tax-free or with heavy tax advantages in the country in the Caucasus. Above all, the lack of capital gains tax and the tax exemption on software services abroad are interesting.
