Jun 3, 2022Remote taxes13 min read
How to set up your taxes in Georgia
Table of Contents
I.How to set up your taxes in Georgia
1. 1.How it works
1. 1. 1.Pros & Cons
1. 1. 2.How to apply for a visa-free entry?
1. 1. 3.How to apply for the work residence permit
1. 1. 4.Fees
1. 1. 5.How does Georgia benefit from this system?
1. 2.What the nomads say
Who will this be the most beneficial for? Visa-free entry: This fits the needs of digital nomads and location-independent workers aiming to live 183 days or less in Georgia, who do not plan to extend their stay. Work residence permit: Good for remote workers and location-independent workers who plan on living more than 183 days per year in Georgia and would like to make it their long-term residency base.
Difficulty of applying from 1-5: Visa-free entry: 1 Work residence permit: 3
Are there any citizens of specific countries that can’t apply? Visa-free entry: This visa is open to anyone as long as they are from one of the 95 countries that can enter Georgia Visa-free. Work residence permit: This permit has no restrictions on who can apply, but the process might be slightly more complex if you don't come from one of the counties mentioned above.
What % of the process can be done online? Visa-free entry: 100%
Work residence permit: 50% (100% of the registrations can be done online by going through an agent; however, the residency permit must be obtained at an Embassy in person).
How to set up your taxes in Georgia
With both visa-free entry and the work residency program, you can apply to reside in Georgia on a temporary residence work permit. These permits are valid for up to one year and can be extended further for at least another five years and up to a maximum period of twelve years. Each extension is not guaranteed. After your sixth year of residing in Georgia, you can apply to become a permanent resident. The requirement for both residency and tax residency status is that an individual needs to stay in the country for at least six months of the year. The standard Public Income Tax (PIT) for Employees and Self-Employed in Georgia is set at a flat rate of 20%. However, once you've registered as a business and obtained your Work residency visa, this will switch to 15% corporate income tax (CIT) and 5% Public Income Tax (PIT) for dividends. You may be able to bypass this 20% tax rate by applying for small business status, which would put you under a ‘special tax regime’ that hosts much more agreeable rates. To apply for small business status, you will need to set up a business owned and run by a single individual. This requirement is very important, and you should be aware that you will not be able to hire employees or shareholders once set up. Your work will also need to fit within a specific list of categories that the Government appears to be quite vague about; this seems to be so that they can assess applicants on a case-by-case basis. Once set up, you will not be obligated to pay the standard 15% Corporate Income Tax (CIT) and 5% Personal Income Tax (PIT). Instead, you will pay 0% - 3% tax on your company profits depending on your annual turnover. This tax seems to be a mixture of both Personal and Corporate Income tax, although it is hard to define where the boundaries cross between the two.
Once given Small Business Status, you can go on to pay tax at this lower, preferential rate and will not be subject to ordinary income or dividends tax. The company that you have set up will exist as a legal entity through which you will be able to receive a salary or the proceeds from self-employment or small-scale entrepreneurial activity. Importantly, this preferential tax-paying status can be revoked if your business shifts from what was initially agreed.
How it works
If you successfully manage to obtain the preferential tax rates, you will be subject to the following:
- Individual entrepreneurs with an annual turnover of less than 30,000 Georgian lari (GEL) or 9,740.61 USD pay 0% tax
- Individual entrepreneurs with an annual turnover of less than GEL 500,000 or 162,344.09 USD 1% tax
- Individual entrepreneurs with an annual turnover of more than GEL 500,000 or 162,344.09 USD pay a 3% tax
Conversion taken at 1.00 GEL = 0.32468778 USD
Pros & Cons
- Under both these schemes, no foreign source income, such as dividends, rental income, pensions, etc., is taxed.
- There's a lower minimal income band than other programs of a similar nature.
- Georgia has a track record of progressive and evolving policies relating to Digital Nomadism.
- These visas can act as a pathway to permanent residency.
- The personal income tax on cryptocurrency gains is currently 0% due to the status of crypto as a currency being currently undetermined by Georgian law.
- Rent prices are on the rise, with some costs even doubling.
- You can lose your preferential tax status if the type of work you do pivots from what it was when you first applied.
- The kind of work that qualifies for preferential tax status is exceptionally vague.
- The preferential tax system is not progressive. The bands are based on turnover and not profits meaning that if you operate a business with high revenue and expenses, the system may not apply or be preferential.
How to apply for a visa-free entry?
Certain international travelers may be eligible to enter Georgia without a visa. The visa policy for Georgia is relatively liberal. It grants the 98 countries and their territories listed below the ability to enter, reside, work and study in Georgia without the necessity to obtain either a visa or residency permit for one full year. After that point they would need to apply for a work visa to extend their stay and the year spent in the country visa-free would likely not count towards the six years of residence required to be able to apply for permanent residence.
In addition, the Georgian Government approved a list of 50 countries whose visa or residence permit holders may enter Georgia without a visa for an appropriate period and under proper conditions.
Other conditions for exempting people from acquiring the Georgian Visa:
- International travelers who are holders of valid visas or/and residence permits determined by the Ordinance No. 256 of the Government of Georgia may enter and stay in the country for 90 days within any period of 180 days.
- Foreign nationals who are holders of the UNO's (United Nations Organisation) or its specialized agency's travel documents (Laissez-Passer) can enter or stay on the territory of Georgia without a visa for an entire year.
If you are not exempted from acquiring a Georgian visa and seek to enter the country must first obtain an appropriate category visa. This process can all be completed online. The easiest way is to submit your documents through this E-Visa Portal. Depending on the purpose of your travel, the documentation you need to supply will differ.
How to apply for the work residence permit
There's a lot of paperwork involved in applying for a work residence permit; your first steps should be to make sure that you can provide the following documents relating to your entrepreneurial or labor activities:
- Proof of sufficient funds (1,300 GEL Per Month) to support oneself for the duration of the residence permit (the period will be 6 to 12 months for the first permit and up to 11 years for future permits).
- If you're being sponsored by a Limited Liability Company (LLC) or Individual Entrepreneur (IE), you need to have proof that their turnover exceeded 50,000 GEL for each foreigner (director or employee) in the business, regardless of if those foreigners are residence permit holders.
- Proof of turnover (in the last 12 months) of the sponsoring LLC or IE that should exceed 50,000 GEL for each foreigner (director or employee) in the business – even if those foreigners already have a residence permit.
- If you are employed at an educational institution or a medical facility instead, their total turnover will need to exceed 35,000 GEL for each foreigner (director or employee) in the institution/facility.
You can prove turnover by doing one of the following:
- Put forward a copy of your VAT turnover statement issued by the Revenue Service.
- Submit a bank statement from your Georgian Business Account, with amounts listed in the local currency.
- Hand in a report from a licensed auditor verifying revenue paid into your foreign bank accounts.
Important note: All documents should include a Georgian language version. A legal translation should be included if the original documents are not in Georgian.
With those figures and documents gathered, it's time to submit your documents. Submissions for residency need to be done within Georgia at a Public Service Hall. Once there, you'll be asked to provide:
- An extract of your sponsoring Limited Liability Company (LLC) or Independent Entrepreneur (IE) from the Registry of Entrepreneurs and Non-Entrepreneurial (Non-Commercial) Legal Entities. This provides proof of existence for the company you are applying for the residency through.
- A passport. Note that a translated version of this document is often required for the first application.
- A copy of a document certifying that your stay in Georgia is legal (with at least 40 days validity for most residence permits).
- A labor contract, employment certificate or any other document certifying employment that proves you reach the required amount of sufficient funds.
- If you're working for a Limited Liability Company (LLC) or an Independent Entrepreneur (IE), you must submit a document stating how many foreigners are working there. This needs to be signed by a company director or the company accountant.
- A document proving the Limited Liability Company (LLC) or Independent Entrepreneur (IE) meets the turnover requirements detailed above.
- A photo 3×4 in size.
- A receipt certifying the payment of service fees.
If your submission is approved, you will need to apply for a ‘residence card’ within the first 30 days of receiving your permit. This card can be acquired with any territorial office of the Public Service Development Agency, branch of the Public Service Hall or Community Center.
When it comes to your permit renewal, you should do so between 40-90 days of its expiry date.
You can expect to pay between $70-$150 for a work residency permit, although these prices are likely to fluctuate over time. Processing usually takes between 20-40 days. Agents are available to help you navigate the bureaucracy and, due to the fact that all your documents will need to be handed over translated, are advised. The general cost for an agent to help you apply for a Work Residency permit is around $350 +VAT / 1,100 GEL.
How does Georgia benefit from this system?
Georgia's Government has said that by luring in digital nomads, they hope to bolster the country's real estate and hospitality sectors whilst appealing to professionals whose healthcare systems have been lacking throughout the pandemic.
What the nomads say
"Don't expect to find in Tbilisi as many fellow digital nomads as you would find in Chiang Mai or Canggu. Tbilisi is still in the early stages of developing a strong digital nomad community; however, it's definitely a growing community, also thanks to the (now-defunct) Remotely from Georgia program and a few previous efforts to attract digital nomads to the country. Moving to Georgia might also have great fiscal implications for digital nomads. When you combine this with very little bureaucracy (maybe surprisingly, but Georgia ranks 7th in the world for Ease of Doing Business), then things get even more interesting.” -Stefania Guglielmi - Travel Blogger
Disclaimer: SafetyWing and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own independent tax, legal and accounting advisors before making any decisions or engaging in any transaction.
About the author
Researcher & Writer
Luke has been traveling around the globe for the last decade and is currently based in Chiang Mai, Thailand. He's been working remotely on everything from directing music festivals, to online ESL coaching, to writing and contributing as a researcher for Borderless. He is a passionate advocate for the modern nomadic way of life and enjoys getting others started on their journey towards remote living.
Founder | Business Strategy Consultant
The Consulting Company & Pnyca
Nick is a business strategy consultant, currently based in London but traveling the world. He is the founder of The Consulting Company, which specializes in startup and SME growth, finance, operations and tax optimization. Coming from a Mechanical Engineering background but with extensive knowledge in finance, tax law and project management, Nick is a problem solver at heart. He is also building Pnyca - an app reinventing democracy and citizen engagement.