Tax resident status of Georgia for a foreigner: attractiveness and procedure for obtaining

Tax and corporate practice JUST Advisors continues to find and implement optimal tax structures for its clients within the framework of international tax legislation and the legislation of Georgia.

In July 2021, JA’s tax practice successfully completed the case of obtaining tax resident status for a citizen of the Russian Federation who does not reside in Georgia. The basis for obtaining the status was the residence permit of Georgia and the client’s high income received abroad and documented. The status of a tax resident in Georgia is attractive because it allows you not to pay income tax on earnings received from a source abroad. Georgia is one of the few countries where tax resident status can be obtained WITHOUT the need to reside in the country for a certain period of time. Read more about obtaining the status of a tax resident of Georgia in our article

We have already written that earnings received by a tax resident of Georgia from a source abroad is exempt from income tax in Georgia. Thus, the tax residency status becomes very attractive.

As a general rule, the status of a tax resident can be obtained on condition of residence in the country for more than six months (more than 183 days) within 12 consecutive calendar months. Moreover, tax residence arises in the year of the end of this period (if the 183-day period ends on December 31, 2021, you are a tax resident of Georgia for 2021, if the 183-day period ends on January 1, 2022, you are a tax resident of Georgia for 2022)

The time during which an individual was in Georgia does not apply to the time of his actual stay on the territory of Georgia:

a) as a person with diplomatic or consular status, or a family member of such a person;

b) as an employee of an international organization acting in accordance with an international treaty of Georgia, or as a person in the civil service of a foreign state in Georgia, or as a family member of such a person, with the exception of citizens of Georgia;

c) when moving from one foreign state to another through the territory of Georgia;

d) on treatment or rest.

The Tax Code of Georgia provides for exceptions to the general rule (for wealthy lovers of frequent travel).

Grounds for obtaining the status of a tax resident of Georgia in a special order:

An individual can apply for the status of a tax resident if at least ONE of the criteria of solvency and at least ONE of the criteria for connection with Georgia are met.

Opulence criteria.

1. the total value of the property of which is not less than 3,000,000 GEL, or
2. whose total income for the last 3 years has exceeded GEL 200,000,

Criteria for connection with Georgia:

1. the presence of citizenship or residence permit of Georgia, or
2. the presence of an annual income from a source in Georgia from 25,000 GEL (8,000 USD at the dollar to lari exchange rate at the time of this writing)

You can read about the forms of doing business by foreign citizens in Georgia in a series of articles.

Important:

1) Property worth 3,000,000 GEL may be located all over the world and not be in Georgia at all

2) The type of property does not matter – houses, apartments, yachts, expensive cars, stocks

3) The value of the property must be confirmed by an independent appraiser

4) Income from a source in Georgia can be proved by declarations if you are registered as an entrepreneur and pay taxes in Georgia.

Procedure for obtaining status:

The documents on the grounds for obtaining the status of a tax resident are submitted and reviewed by the Revenue Service of Georgia. The decision on granting the status of a tax resident of Georgia is made by the Minister of Finance of Georgia. JA’s practice shows that the average time for consideration of an application is 1.5 months.

Note:

1) The status of a tax resident is valid in the year it is received. The procedure must be repeated next year.

2) The presence of the status of a tax resident of Georgia does not simultaneously exclude the existence of the status of a tax resident of another state, from which its tax obligations arise.

3) Income from a source abroad is defined in Article 104 of the Tax Code of Georgia. Such income does NOT include remuneration that you received from a foreign Customer for the provision of services from Georgia.

Just Advisors offers a business tax planning service for legal entities and citizens.
Read more about the service at the link.