With relaxed laws and 0% tax on income from trading cryptocurrency, Georgia (the country) is an ideal place to get legal residency and tax residency so that you can easily liquidate your Bitcoin or other crypto into fiat money (i.e., cash and direct to your bank account).
With straight forward services which will help you exchange your crypto in Georgia, in some instances directly into a commercial bank, the options to legally get your money out of crypto, tax free, are worth jumping on immediately.
The law could change at any time, so it’s best to take action as soon as possible.
For both residents and non-residents, there are also options to directly purchase real estate using crypto in Georgia.
In this article we cover the legal and tax implications for cryptocurrency in Georgia, as well as how to exchange it to USD or GEL and qualify for 0% tax on those gains.
Legality Of Cryptocurrency In Georgia
This section deals with the primary legal considerations for crypto activity in Georgia.
Is It Legal To Hold And Trade Crypto In Georgia?
Owning crypto is legal. Trading is also legal, and tax rates on gains for individual traders are 0% in many cases, barring specific exceptions. More info below.
Georgia is a center for crypto mining, due to cheap and available hydroelectric power and a lack of government regulation.
So, all in all, it’s a pretty favorable country for crypto right now.
Is Crypto Legal Tender In Georgia?
The only legal currency for transactions in Georgia is the Georgian Lari (GEL).
However, you can still relatively easily get a personal bank account at a local Georgian bank with USD, GBP, and EUR balances. You can also easily withdraw USD from regular ATMs in Georgia – even though it is not legal tender.
Although crypto is not legal tender, there is currently no regulation by The National Bank of Georgia preventing it being used in the form of a barter exchange. Using crypto for real estate purchases is a good example. (More on that below.) The main takeaway is, right now you can use it, but regulation could be enacted at any time.
Tax & Capital Gains On Crypto In Georgia
The good news headline here is… 0% tax on crypto trading as an individual, because based on the public decision issued by the Georgian Ministry of Finance in 2019, crypto, by its very nature, is not “sourced” in any specific geographical location, meaning that it is not considered “Georgian sourced”. This type of income would come under the 0% tax on capital gains derived from crypto trading laws.
Crypto inside a legal entity: If your trading activity is performed by a legal entity which owns the crypto, any profit in relation to activity within a Georgian registered legal entity (LLCs, for example) would be taxed with 15% Corporate Income Tax and 5% personal Dividend Tax, at the time of distribution. There is no annual profit tax in Georgia. Tax is only applied when profits are distributed. (Georgian Tax Code Articles 97(1)(a) and 130(1).)
Crypto for those with Small Business Status (SBS): Trading activities, especially involving crypto, while holding Small Business Status (1% tax rate) is a complex matter. In general, it would be taxed at 0% as defined above. However, the National Bank of Georgia has yet to decide if crypto trading will be considered a “currency operation”, which would be prohibited for those with SBS (GTC Article 90(3)). So, if in the future, crypto trading becomes regulated as a currency operation, that could lead to a revocation of your SBS if performing crypto trading. In the worst case, there is a small possibility that crypto trading could become regulated as a currency operation and that back taxes may even be applied. This is another reason why trading as a natural person, not with SBS, is recommended.
Of course, the only reason to have SBS in the first place is if you carry on business activities other than crypto trading, which qualify to be taxed at the 1% rate. If crypto is your only income, then you should probably remain as a natural person instead of registering for SBS.
But the most important thing to note is that if you do intend to register for SBS, that income from your crypto trading activity (i.e., supply of crypto assets in exchange for money), while being tax free, will still count towards the 500,000 GEL (~$160,000 USD) annual turnover threshold. Once exceeded, you could lose your 1% tax status entirely.
The summary is: if your crypto trading is not performed through a business, then you most likely will have 0% Personal Income Tax to pay on profit and when liquidating your crypto- provided you are a tax resident of Georgia, and no other country has a claim to tax you on that income.
To get tax residency in Georgia, you have two options:
- 183 days present on the territory of Georgia in any 12 month period.
- High Net Worth Individual tax residency program.
It should be noted that, simply gaining tax residency in Georgia does not always instantly cancel tax residency in your previous country. There is often a formal process to go through, and with countries like the USA, renouncing citizenship is the only way to exit the tax system.
In some countries, capital gains taxes may still be applied even after exiting your previous tax system, as they are aware that people could otherwise move abroad for a year in order to avoid a large tax bill, then return home with a pile of untaxed gains. So, it’s essential to check the laws on this in your current country of tax residency.
How To Exchange Cryptocurrency For Georgian Lari
If you are a legal resident of Georgia, you can exchange your crypto directly to Georgian Lari (GEL) and have it deposited by the exchange service into a bank account at any of the Georgian commercial banks, often on the same day. Cryptal has arrangements with the two largest banks (Bank of Georgia and TBC) which can make the transfer of funds almost instant in some cases.
From there, you can also send the money internationally, if you choose.
For non-residents of Georgia, you can exchange crypto and have it deposited directly to any international bank account that accepts SWIFT transfers, in USD or GEL. Your identity must be verified using your passport.
Currency exchange, in the case of non-residents, has a number of other factors to bear in mind. You should consider the following important points:
- If you are not a tax resident of Georgia, the income you withdraw will almost certainly be taxable somewhere else. This could be a huge tax bill compared to the current 0% tax on gains from crypto as described above.
- Even if you are a tax resident, some countries continue to enforce capital gains tax on their citizens even after they exit the tax system there, in order to prevent citizens from leaving temporarily just to avoid taxation.
- Citizens of the USA potentially cannot be fully verified to use this type of service in Georgia, in some cases, unless they are legal residents of Georgia, though some options to transact only in GEL may be possible with some exchanges. Also, you may still owe tax in the USA even if they are a legal tax resident in Georgia. A few other countries also typically cannot be fully verified; check with the specific exchange service to learn if your country can be verified or not.
- You may have to go through a complex process of exiting the tax system in your current country of domicile/citizenship before you can become exempt from taxes there, regardless of being a tax resident of Georgia. Australia and South Africa are good examples of this issue.
So, if you plan to exchange a large amount, not only should you acquire tax residency in order to benefit from the 0% tax rate, but you should also consider going through the legal residency process.
Becoming a legal resident will also add weight to your case by showing that you really do live in Georgia and are not just here temporarily to evade capital gains tax. For some countries, like Australia, for example, proving you live abroad is actually an essential part of exiting their tax system.
You can also use one of more than 20 crypto ATMs in Tbilisi for converting smaller amounts. The fees for this sort of service are much higher, of course, and this method of exchange has a poor reputation for those who wish to do everything legally.
If you need assistance with legal or tax residency in Georgia, you can book a free consultation.
How To Purchase Real Estate With Crypto In Georgia
Though the average seller has no desire to sell you real estate for cryptocurrency, some development companies, and the occasional independent seller, are certainly interested in doing so.
Because of the nature of the law, the purchase would be considered a barter exchange. In this way, the transaction is legal.
Once you have owned the property for more than 2 years, you can sell it without paying capital gains tax in Georgia. However, if you sell in under 2 years, then 20% capital gains tax will be owed in Georgia.
The list of options for purchasing property with cryptocurrency in Georgia is relatively short and certainly not something that is well advertised online. If you would like to be connected with developers/sellers who will accept crypto, ExpatHub can facilitate the sale as well as assist with legal matters.