Undoubtedly, Georgia is a great country to live in; it’s open to immigration, it’s a few hours flight from Europe, it has a pleasant climate and it also has many tax advantages for its residents.
In Tax Free Today, we have already spoken about the different jurisdictions with territorial taxation. Instead of taxing the individuals global income, these countries only tax income that comes from the country itself, i.e. not foreign income, so these jurisdictions can be very attractive places to establish tax residence if you are a digital nomad or you run an online business.
Georgia is one of the 40 States in the world that apply territorial taxation and unlike what happens in Panama, Costa Rica, Paraguay, Thailand or the Philippines among many others, it has the advantage of being in Europe, a few hours flight from most European countries.
Undoubtedly, for those who have to or choose to stay in Europe, Georgia offers a great alternative to the non-dom systems in Malta, Ireland or the UK, to the special program found in Cyprus, and to jurisdictions that offer low taxation rates with fiscal residence, like Bulgaria, the Czech Republic or Romania.
Although the majority would classify Georgia as an Asian country, due to its geographical location, it is in fact a very culturally European country that has experienced a great economic boom in recent years.
The reason for its evolution is quite simple: They have created an attractive tax system and facilitated immigration.
As we previously mentioned, Georgia is a 3-4 hour flight from Central Europe, with flights costing around 200 euros. Its not only worth going there for its great cuisine, wine and nature, but there are also many other great characteristics of this country that attract people to visit.
More than one person has arrived there and fell in love with the country, causing them to miss their flight back and stay there without a return date.
This is how the capital, Tbilisi, an interesting mixture of ruinous Soviet architecture and modern construction, has been increasing its popularity among digital nomads and travelers.
You can currently live in this city with all the Western comforts, but at a much lower price.
Living in Georgia: requirements for immigration and tax obligations
Emigrating to Georgia is easy. Unlike in most other countries, it’s not necessary to make Visa-Runs. This is because Georgia is one of the most open countries in the world and has greatly benefited from this. For years, it has been the only country in the world that grants almost all nationalities an initial residence right of 365 days upon arrival in the country.
Its openness doesn’t mean that illegal entry is tolerated however, unlike what happens in some European countries.
For those who legally enter Georgia, register and wish to visit the country or do business there, can do so as they wish. The 365 days of residence also includes a work permit.
What makes Georgia interesting in this regard is the foundation of tax obligation. Tax obligation is also linked to a 183 day residence, but there are some advantages of this.
These 183 days in Georgia also includes stays for reasons of business, medical, study or even tourism purposes.
Thus, an occasional stay in Georgia even if it were for less than 183 days, would still be enough for you to obtain tax residency there.
However, Georgia is not the best option for nomadic businessmen for example, who are only looking to be in the country once a year (for these people it is preferable to live in Panama or, if they are citizens of the EU, Cyprus or Bulgaria). This is because you have to visit the country at least two or three times a year in order to obtain fical residency there.
Georgia also offers a high net-worth individuals (HNWI) programme for people with money, which doesn’t impose a minimum time to be a tax resident.
In order to be accepted into this programme you must own a property worth more than 3 million Georgian laris (at the time of this articles publication 3.13 laris equaled 1 euro), or if you have earned more than 200,000 lari annually in the last three years. The latter option may be relatively easy for entrepreneurs who have been doing business for some time.
Besides, all you have to have in order to apply for this programme is a normal residence permit.
People who want to remain in the country after one year of residence, can simply apply for a residence and work permit up to 40 days before the end of their first year. Based on the experiences of various sources this permit is not difficult to obtain and is renewed yearly, even if your income comes from outside of Georgia.
But these are not your only options, there are a lot of different visas there. For example, you could opt for the visa for investors for 300,000 lari. Also genuine “stateless people”, those without a passport or nationality, victims of human trafficking and students can remain in Georgia without problems.
You can obtain Georgian nationality after living there for 5 years. The 99 States that you can travel to and move around in without problems (also in the European Union and the Schengen area) are definitely an added value.
However, since double nationality is only permitted in exceptional cases, it’s not the best option for the nationality flag.
On the other hand, the alphabet itself doesn’t much help the learning of the countries difficult language, a language you would have to take an exam on if you wanted to obtain nationality.
Anyway, after living in Georgia for 6 years you can acquire permanent residence in the country.
Taxation in Georgia
Once you have acquired Georgian residency and obtained tax liability there, you have the advantage of paying hardly any taxes.
As we mentioned at the beginning, Georgia is the only European country that has territorial taxation, because it only claims taxes on income obtained there, at national level. However, the taxes there are more than reasonable, even if you obtain your income from local businesses.
Georgia largely draws its inspiration from the country that is currently pioneering the former Eastern Bloc; Estonia. The Estonian system of deferred taxation allowed the country to develop and achieve a long-standing reputation, something that Georgia is now trying to imitate.
By the 1st of January 2017, a similar system was introduced in Georgia, in which all companies profits are taxed at a fixed rate of 15%, and only if their members distribute dividends.
From that date, companies accounting was to be presented monthly, and the bureaucratic and administrative arrangement that previously characterized Georgian companies was considerably reduced.
The 15% tax rate also applies to transactions with partner companies in tax-free countries, as long as they do not include the market value of regular services, which complicates the exportation of income so as not to pay taxes in Georgia.
As well as the new deferred taxation model, there are also other available schemes for small entrepreneurs. Those who have a turnover of up to 30,000 laris and don’t have any employees, they are considered as a micro-entrepreneur and they don’t have to pay any kind of tax.
And then, with a turnover of up to 100,000 laris you qualify as a small entrepreneur where you pay tax rates of 3-5%, depending on the possible deductions available.
In any case, chances are that being a reader of the Tax Free Today blog you don’t own any businesses or companies in Georgia, which you sell from in other parts of the world. In this case, don’t forget that thanks to territorial taxation CFC rules are not applied either, so, with Georgian residence you can manage companies anywhere in the world (including in tax havens) and then receive the tax-free profits.
A fixed rate of 20% would also be applied to income obtained in the country, such as salaries for example. On the other hand, dividends, interest and licensing revenue in the country are only taxed at 5%.
Taxes on capital income only apply to the capital gains obtained within the country, and territorial tax is less than 1%. There are no inheritance, donation or property taxes. The VAT in Georgia is currently 18%.
The Georgian system also has another important feature. Unlike what happens in almost any other European country, in Georgia you don’t pay any kind of social security contributions. In this way, non-wage costs are maintained within very reduced limits for Georgian workers, who by the way have excellent levels of training. Payroll tax is also eliminated, Georgian workers income is taxed at a fixed rate of 20%.
Despite the reduced tax burden Georgia has entered into a double taxation agreement with more than 52 States, which may have some advantages for tax structuring.
Thus, taxes at the source (withholdings) on dividends from German, French and Spanish companies can also be reduced (most agreements have been signed with European or Asian countries, and there have yet to be any agreements made with Latin American countries).
Challenges and problems in Georgia
Of course, not everything is perfect in Georgia. Despite the economic boom of recent years, Georgia also has its problems. Its geographical location brings with it some inherent instability, as it is in the middle of the Caucasus powder keg.
The Russians invaded Georgia for a short period in 2008, causing the country to rely more on the EU and NATO ever since. Likewise, neighboring countries such as Turkey, Armenia and Azerbaijan, are also not what are considered model democratic states.
This is without focusing on neighbouring dissident states, such as Abkhazia and South Ossetia, or the long border with Chechnya.
If we look carefully on the map we can see that they are at least lucky enough to have the Caucasus Mountains, which are up to 5,000 meters high. These moutains create a natural border.
Despite the economic boom, Georgia remains a relatively poor country with major differences between its rural and urban population. Many of the countries citizens live at minimum levels of subsistence. There is a great predominance of agriculture there.
Georgia is known as the homeland of wine, already famous by the time of the Soviets and not only for the taste of its wine, but also for its fresh fruit and vegetables.
Undoubtedly, Geoarbitrage makes Georgia the perfect country for those whose income comes from outside the country, since the price of life there is minimal. You can buy your own home in the middle of the capital of Georgia, Tbilisi, for only €15,000.
Reasons to open a bank account in Georgia
Georgia also offers many possibilities with regard to the banking sector. While we may well be soon experiencing negative interests in Europe (i.e losing money by having it in the bank), in Georgia you can get interest rates of up to 10% with normal savings accounts.
In 2016, a one-year fixed term deposit in laris could also have had an interest of 14%. Despite the 4% inflation there, this investment is still worth it.
It is also possible in most banks to make deposits in euros and dollars, which generates 4 to 5% interest per year.
If you want to open a bank account in Georgia as a foreigner, you won’t need more than your passport. Of course, you will have to go in person. Large banks such as TBC Bank or Bank of Georgia offer modern online banking in English and a Visa card at your disposal.
By having a standard IBAN, payments to and from Georgia are relatively easy to process. Since it combines reduced taxation with high interest, the country is becoming increasingly valued in terms of carrying out banking business and transactions.
Business accounts for offshore companies can often also be opened in Georgia. The fact that you can use Private Banking if you own at least €10,000 does the rest.
In addition to the exciting possibilities that Georgia offers as a place of residence, a business headquarters and place to do business, don’t forget that the country is, thanks to its geographical variety, a really incredible place to travel and work.
It doesn’t matter if you prefer to ski in the Caucasus, or go swimming in the Black Sea, Georgia and its people will convince with their kindness and openness. Without a doubt, it is a country in which you can comfortably spend a long time in and is definitely worth visiting.