Georgia offers highly beneficial taxation system to individuals and legal entities. The non-exhaustive list
of Georgia’s tax incentives is given below:
For natural persons (individuals):
1% taxation for individuals with an annual revenue up to 500 000 Georgian Lari (GEL) (a
certificate of “small business entrepreneur” is required, the benefit does not apply to all
0% personal income tax on non-Georgian source income;
5% taxation on renting out residential properties and/or on capital from reselling similar
No VAT on selling four apartments within 4 years;
0% personal income tax on capital received from reselling cryptocurrency (neither VAT applies
to such transaction);
Other tax benefits.
For legal entities:
A unique corporate income tax (CIT) model is applicable in Georgia, according to which a
corporate income tax is not payable annually but only after dividends’ distribution to
shareholders. Thus, no CIT is payable until the money is on company’s bank account; moreover,
If the profit is reinvested in Georgia, CIT is not due.
Georgian legal entities are not taxed by CIT on the profit received from foreign subsidiary
companies as dividends (except if the subsidiaries are registered in tax-havens);
Corporate Income Tax exemption for IT companies (Virtual Zone Persons) providing IT services
abroad from Georgia;
“Free Industrial zones” in Georgia offering tax exemptions;
“Special trade companies” involved in re-exporting goods exempt from corporate income tax on
Other tax benefits.
Many entrepreneurs (mostly foreign ones doing business in Georgia or others who plan to relocate here)
wrongly think that they cannot enjoy the above-listed tax benefits in Georgia without becoming its tax
residents. It is not true. For example, an individual can enjoy 1% taxation in Georgia even without being
a resident, but the individual must meet all other required criteria. However, Georgian tax residency is
still critical to enjoy low taxation worldwide and not only in one country (Georgia).
In this article, I briefly explain the right interpretation of Georgia’s tax residency rule and additional
benefits it can provide to legal entities and individuals. I mostly focus on individual entrepreneurs.
Why is tax residency important?
The most important benefit of becoming Georgia’s tax resident and refusing residency in other
jurisdiction is to prevent yourself from being taxed in other countries due to tax residency or
withholding taxation at source.
How it actually works:
Let us assume that a German citizen Mr. Simon, providing IT services mostly to EU-based companies,
arrives in Georgia and registers as a “small business entrepreneur (1% taxation).’’ He issues invoices as a
Georgian taxpayer and is subject to only 1% taxation rate.
Mr. Simon can enjoy as low taxation as 1% even without becoming a tax resident in Georgia, however,
to avoid being taxed also in other countries, he should make sure that he is no longer a resident in
Germany or any other country, otherwise, with 1% in Georgia, his worldwide income (including income
invoiced from Georgia) might be taxed in a country where he is a tax resident.
Besides, client companies might have to deduct a withholding tax when transferring a service fee to Mr.
Simon’s Georgian bank accounts (taxation at source).
If Mr. Simon becomes Georgia’s tax resident, he will be able to prevent himself from taxation at source
in other countries by application of international tax treaties signed by Georgia (it signed tax treaties
with 56 countries including most (if not all) EU states). In addition, if he refuses residency in any other
jurisdiction, his only personal income tax expense will be 1% of the revenue.
Note: This instance is just illustrative and assumes that remuneration of the service provided by Mr.
Simon from Georgia to other countries is taxable at source abroad, which might not always be a case.
In brief, becoming a tax resident in Georgia provides an opportunity to individuals to enjoy tax
exemptions/incentives also in other jurisdictions and save tax expenses globally.
Companies become Georgia’s tax residents automatically after registration, however they might be
considered as tax residents of another jurisdiction(s) (despite the registration in Georgia). It might be a
reason for parallel taxation in other country. This topic is given in more details below.
Tax Residency rule under the Georgian tax law
Residency of natural persons (individuals):
Georgia provides two definitions of a “tax resident” individuals and legal entities. One definition is
provided by Georgia’s tax code, while the other one is available in international tax treaties signed by
Georgia. The latter one is applied in case of dual residency. It is discussed below.
Importantly, we should always start with analyzing the definition by Georgian’s tax code. The general
rule of the tax residency provided in the article 34 of Georgia’s tax code is as follows:
“A Georgian resident for the entire current tax year shall be a natural person who has actually stayed in
the territory of Georgia for 183 or more days in any continuous 12-calendar-month period ending in
that tax year… The day of actual stay in the territory of Georgia shall be the day, during which a natural
person stayed in Georgia irrespective of the length of the stay”.
The vital aspects of this definition (highlighted above) are:
“Entire current tax year:” If for one day of a calendar year a person meets criteria provided by the
definition above, he/she is considered as a tax resident for all calendar year long. So, one-day residency
equals to residency for an entire calendar year;
“Irrespective of the length of the stay:” Spending five minutes in Georgia’ territory is equal to spending
a whole day;
“Continuous 12-calendar-month:“ We do not count 183 days within a calendar year (January-
December) but – during 12 consecutive months (5 th March-4 th February; 10 th October-9 th September,
etc…) 1 ;
“Ending in that tax year: “When we look to residency of a calendar year (e.g. 2020) we need to know
whether above-mentioned 183th or later days ended in this calendar year. Thus, a person does not need
to spend 183 or more days in a specific calendar year (e.g. 2020) but those 183-days (or more) spent in
Georgia should END in that calendar year.
Note: The law does not require the 183 days to be successive. A person can leave the country and come
back, counting 183 days within 12 months will still continue.
Mr. Adam spent a bit more than six months in Georgia. From 20 th July 2019 to 28 th January 2020. He
spent more than five months in the calendar year 2019 and just 28 days in the calendar year of 2020 but
because 183th and next day’s ends in 2020, Mr. Adam becomes a tax resident in the country only for the
year 2020 and not 2019.
As of the day- 28 th January 2020, when Mr. Adam left the country, Adam has spent more than 183 days
in last 12 consecutive calendar months (29 th January 2019-28 th January 2020. Notably, such calculation
could be done for any other day which Mr. Adam spent in the Georgian territory, any day when a person
was in Georgia can be tested in the same way).
The above criteria are not met for 31st December or any other day of the calendar year 2019. Therefore,
in this example, Mr. Adam is a tax resident of Georgia only in 2020 regardless spending only 28 days in
the country in that year.
Becoming a tax resident of Georgia without spending long time (or any time) in the country
The second way to become a Georgian resident is to be a “high net worth Individual”- a person who
owns assets at least equal to 3 million GEL (less than $1 mln) or receives annual revenue above 200 000
GEL (approx. $65000) in each of previous three years. In addition to being a “high net worth individual”,
a person also needs a residence permit in Georgia or should demonstrate a receipt of at least a 25 000-
GEL income from a Georgian source in the calendar year of submitting the application for tax residency 2 .
Besides, if a person is a Georgian citizen and not a tax resident in other country he/she can apply for a
tax residency certificate without any extra preconditions.
Please, note: It is not less important (if not more) to avoid being a tax resident in any other state than
becoming a tax resident in Georgia. The reason is explained bellow.
Definition of “tax resident” provided by international tax treaties
If an individual is a resident in Georgia and other country for a specific calendar year, the so called “tie
breaker rule” of tax treaties decides which country should be the only tax residence state for a person.
That rule is supposed to prevent an individual from double residency, thus, double taxation, however it
is not easily workable in practice (please do not rely only on application of that rule for avoidance of
The “tie-breaker” rule provided by the tax treaties is as following: (notably, the list has a hierarchical
character; e.g. first is the most important criterion and next criterion is applied only if the first one is
met by both countries, and other):
1. Permanent home;
2. Personal and Economic Relations;
3. In which country most time was spent in the calendar year (not 12 months – “habitual abode”;
5. Mutual Agreement Procedure (MAP).
As I already noted, in practice it is difficult to benefit from the tie-breaker rule. Each country’s tax
administration usually has unilateral effort to meet all the criteria and no one can tell them opposite
until the Mutual Agreement Procedure (MAP 3 ) and/or arbitration takes place between the two tax
administrations. Besides, the MAP initiation is technically hard, especially for small and medium
businesses and even if Mutual Agreement Procedure is initiated, it could take several years. There is still
no guaranty of successful results.
Georgia has not developed the MAP procedures thus far; so legally it works here, technically – not.
So, based on my 7-8-year experience as a Georgian tax inspector, I would advise you not to completely
rely on the “tie-breaker rule” to avoid the double residency. It is more reliable to first try to avoid being
resident in other jurisdictions. For example, if another country also has the 183-day criterion for
becoming a tax resident, avoid spending so long there. In this way, you are a tax resident only in Georgia
and application of “tie-breaker rule” is not needed.
Residency of legal entities:
The Georgian tax code provides the definition of a “resident company” which is the same as the
“Article 22 – Georgian enterprises and foreign enterprises
1. A Georgian enterprise – an enterprise whose place of business and/or management is based in
2. A foreign enterprise – an enterprise that is not a Georgian enterprise under this article.”
“Article 8. (20) (definition of terms)
Resident – a resident natural or legal person (a Georgian enterprise or a Georgian organization)”.
Therefore, a legal entity is a Georgian tax resident, if it is registered OR has a place of management in
Georgia. Meeting any of those two criteria qualifies a company as a Georgian resident.
Note that if you live in Georgia and own and manage the so called “letter box” company registered
abroad, under the Georgian tax law, this company can be qualified as a Georgian resident and be taxed
accordingly. On the contrary, if a company registered in Georgia is a “letter box” firm and is managed
from abroad, this company is still a Georgian tax resident (registration criteria). Besides, the company
can also be qualified a resident in another jurisdiction (management criteria) simultaneously. In this
case, tax treaties usually give priority to the country where the place of effective management is
located. However, tax treaty is not fully reliable also in this case, similarly to application of “tie-breaker
rule” for individuals.
Have in mind that the above-mentioned issue (dual residency of a company) is a problem but should not
be an obstacle for doing business in Georgia smoothly if you are consulted by a qualified Georgian tax
professional before setting up a business structure.
Application of tax treaties:
As I have noted above, you will hardly be protected from double residency by tax treaty if the tax laws of
two (or more) countries say that you are a dual tax resident. Too many procedures and less chance of
having an acceptable result in time. More efficient way is to avoid being a tax resident of another
Tax treaties are not highly effective for avoiding dual residency, however, they effectively protect
Georgian tax residents from taxation at source in other jurisdictions and vice versa.
To continue the given example of Mr. Simon, if he becomes a resident of Georgia, he can request a
residency certificate via www.RS.GE and provide it to the non-resident clients.
As a result, the clients should apply Article 7 (business profit) of a tax treaty, according to which no
taxation at source should take place and the income/profit shall be taxed only in a country of residence
As we see, the application of a tax treaty shall exempt the foreigner clients from any withholding tax on
payments to Mr. Simon. Thus, Mr. Simon will receive full amount of his service fee (without deductions)
and pay only 1% tax in Georgia.
Note: The example has only illustrative purposes. The proper application of a tax treaty needs individual
analysis by Georgian and international tax expert for potential misinterpretation to be avoided.
Georgia’s tax residency is not as simple to be defined as it seems at first sight. Even if you properly
understand this rule, you should know why being a tax resident in Georgia is important and what
procedures need to be performed to minimize taxes globally by becoming a Georgian tax resident.
The article provided a brief explanation of Georgia’s tax residency and its importance. It can provide the
readers with general understanding of the issue. When it comes to the practice, individual analyzes are
required as each case might include tricky details.
About the author: Gela Barshovi is international and Georgian tax adviser and managing partner of an
audit/consulting firm TPsolution. For the tax consultation and/or questions regarding the article, you can
contact him at firstname.lastname@example.org
1 That approach is adapted at Georgia Revenue Service as of today.
2 The rule is applicable as of today but might be the subject of the amendments in the near future.
3 Process when 2 or more tax administration interact with each other (via mail or personal meeting) to decide a
problem of double taxation of their residents