It is no surprise many digital nomads look at setting up their tax residency in Georgia. Although, we’ll mainly focus on the tax benefits, the country can also offer you a nice lifestyle.
Key Takeaways on Georgia Tax Residency for Digital Nomad and Expats
- To become a tax resident you need to spend 183 days in Georgia.
- However, there is an exemption on this rule for high-net-worth individuals.
- Georgia offers a flat tax rate of 20% without the need to pay social contributions.
- For entrepreneurs they even have a 1% tax rate.
- An alternative is to setup a Georgian company which is subject to a flat tax rate of 15%. However, taxes are only due when any income is distributed by the company.
- Furthermore, Georgia offers an interesting digital nomad visa.
How to Get Georgia’s Tax Residency: Rules and Requirements
Georgia applies the so-called days test. Basically, this means that they look at the amount of days you spend in the country to establish if they consider you having your tax residency in Georgian or not.
If you spend 183 days or more in the country over a twelve month period, you will obtain tax residency in Georgia. Not so difficult actually, just do the math.
However, Georgia also tries to attract high-net-worth individuals with specific rules.
As a high-net worth individual you don’t need to be present in Georgia for 183 days every year to qualify as a tax resident.
This is of course gold to us digital nomads as this wouldn’t limit your choices on where to spend your time.
Georgia considers you a high-net worth individual if your net worth exceeds GEL 3.000.000 (equivalent to around €1.100.000) or if your annual income exceeded GEL 200.000 (equivalent to around €72.000) during the last three years.
Although these numbers probably aren’t within everyone’s scope, they aren’t unattainable either.
If you read about a regime for high-net-worth individuals and you’re from a Western country, you were probably expecting some other numbers to be involved.
Please note that apart from the aforementioned requirements, there are some other formalities to take care of.
One of these is that you have a minimum of GEL 25.000 (equivalent to around €9.000) of income from within Georgia. However, there are structures to set this up.
The most important requirement is that starting from April 2023 you need to hold Georgian assets with a value of at least USD 500.000. This can be real estate, but also financial investments or just cash.
Apart from this income that qualifies as Georgian source income, any other income could be exempted from taxes in Georgia.
In this way you can definitely lower your tax burden to a great extent.
However, the fact that you now need to own Georgian assets of at least USD 500.000 puts up an additional burden.
Taxes in Georgia
You now know which requirements you need to meet to become a tax resident of Georgia. Let’s now see what this actually means from a tax perspective.
Income Tax
Georgia had a flat personal tax rate of 20%. Of every €100 you make, you will need to pay €20 in income taxes.
I can hear you thinking: “A 20% tax rate, that isn’t bad, but not really great either!” That’s true. However, I would want to take the time to make two additional comments in this respect.
First, Georgia applies a territorial tax regime. This means that if you have your tax residency in Georgia, you will not pay tax on your worldwide income but only on income you derive from Georgian source.
If you are a freelancer and you are performing your activities from Georgia, you will have to pay taxes on this income. You made the income while working from Georgia.
Unlike what some people think, it does not matter if you receive the income in a Georgian or foreign bank account.
Another example is if you have some investment portfolios overseas and passively receive income from it.
This will be income that is not from Georgian source and thus you will not pay taxes on that in Georgia.
Some example in between is where you are remotely managing a business with employees – so, no one man show – overseas.
If you are actively performing activities from within Georgia, the income could be (partially) allocated to Georgia and be taxed there.
Nevertheless, you should know that combining tax residency in Georgia together with setting up a US LLC can optimize your tax situation.
If you don’t spend too much time in Georgia and don’t manage your US LLC from within the country, this will qualify as foreign source income.
If you have an interest in setting up a US LLC, definitely check out my post about opening a US LLC as a digital nomad.
Special Tax Regime for Entrepreneurs
Georgia wants to attract entrepreneurs to let them establish their tax residency in Georgia.
They do this by providing a specific tax regime for entrepreneurs who fall within the scope of the micro or small business status.
If you have a turnover of less than GEL 30.000 (equivalent to around €11.000) you qualify for the micro business status and don’t pay any income taxes at all.
If your turnover is above GEL 30.000 but below GEL 500.000 (equivalent to around €180.000), you qualify for the small business status. Your tax liability will be equal to 1% of your turnover/revenue (so not profit).
Apart from the limited turnover, there are some other conditions that apply. The most important one is that some activities are excluded.
Unfortunately, consulting activities are on the list of prohibited activities and therefore they do not qualify for the regime.
However, if you would be running an ecommerce for example, that activity will qualify. The regime is also only open to people performing their activities in personal name and not through a corporation.
In order to benefit from these regimes, it is key to first assess if you fit the criteria.
Second, you will also need to apply for them upfront.
Tax Regime for High-Net-Worth Individuals
High-net-worth individuals are subject to the income tax rates.
That means the normal income tax rate of 20% apply on local income. Also, they can qualify for the 1% tax on revenue as an entrepreneur.
However, what is really important for digital nomads is that HNWI don’t need to spend a minimum amount of time in the country. Just a yearly visit to Georgia is sufficient to keep their tax residency effective. Yet, you do of course need to make sure that you don’t become a tax resident in another country. This could lead to double taxation and various issues in this respect.
Social security and pension contributions
A second positive note is that Georgia doesn’t levy social security contributions. Contributing to a pension scheme is obligatory, though, but only for employees. So if you are self-employed this doesn’t apply.
When we compare countries, you should always take into account these contributions as well as they could have a major impact.
Procedure to Get Tax Resident Status in Georgia
If you stay longer than 183 days in Georgia. You will automatically become a tax resident of Georgia. You won’t need to take any specific action. Nevertheless, this might be recommended in some cases.
However, if you want to become a tax resident as a high-net-worth individual you need to go through some steps.
The first step to obtain tax residency in Georgia is to get legal residency in Georgia. There are different residency permits available in order to become a resident of Georgia.
After obtaining residency, you can actually become a tax resident of Georgia. You can apply for it with the Revenue Service office.
You will need to provide proof that you meet the necessary requirements to qualify as a HNWI. Furthermore, you will need to renew your application each year and show you still meet the conditions.
The process to obtain tax residency in Georgia normally only takes around one week if you provide all necessary information. If the Georgian authorities need additional information to process your request, you will have 30 days to do so.
Digital Nomad Visa in Georgia
During Covid-19 Georgia launched their own version of a digital nomad visa. The program named ‘Remotely from Georgia’ offered a visa up to one year. However, after the pandemic Georgia ended this digital nomad visa. So, be carefull because you will still find a lot of outdated information on this.
Nevertheless, Georgia offers the opportunity to stay in the country visa free up to one year. People of up to 94 countries can take advantage of this option (1).
Setting up a company in Georgia
Another way to make the most of the beneficial tax rates in Georgia is to set up your company there.
Any corporate income from a Georgian company will be taxed at a 15% flat tax rate. This is a good rate compared to many other countries around Europe.
The best thing is that since 2017 Georgia changed its corporate tax system to the liking of that from Estonia in order to become even more competitive. Since then corporate taxes are only due when you distribute income from your company. This system enables you to defer your taxes.
So as long as you keep your profits within the company, you can reinvest them and you will not incur a corporate tax bill.
This could of course massively enhance the snowball effect of the earnings of your company as it enables you to reinvest your gross proceeds, before taxes.
Upon distribution, also withholding tax at a flat rate of 5% will be due. This will bring your total tax rate on 19,25%.
What Georgia Offers to Digital Nomads
Georgia offers some nice tax schemes for different kind of digital nomads.
Therefore, it can be worth considering to obtain tax residency in Georgia.
Apart from the taxes, Georgia also offers a nice lifestyle at an affordable cost of living.
