Are you working remotely online from Georgia (country)? If so, you may be liable for taxation by the Georgian Revenue Service. Your tax liability involves a LOT of factors, not just whether or not you are a legal tax resident here.
Whether you just arrived with the Remotely From Georgia permit, or if you have been here for much longer, there are considerations that might be relevant to you. In this article I will quickly summarize the main issues and applicable resources.
WEBINAR REPLAY: At the bottom of this article you’ll find a live webinar with extensive Q&A discussing all of the below topics in more detail. Skip to webinar.
Summary Of Considerations
- Tax liability is different from Tax residency. Even if you do not become a tax resident, because you happen to leave before the 183 Day automatic tax residency threshold, you may still have tax liability if you earned income while being physically in Georgia.
- Having tax residency and paying taxes elsewhere does not necessarily shield you from Georgian tax liability. In cases where there’s no Double Taxation Agreement between Georgia and your other country of tax residency, such as the USA, Australia, South Africa, and some others, your taxes paid elsewhere have no impact on your Georgian tax liability.
- The Remotely from Georgia program is not a work visa. It merely provides the right to enter Georgia during COVID. Anyone arriving in Georgia using this permit (unless they are a travel partner of the principal applicant, from a country that does require a visa), is actually here on the 365 day visa free entry program, which allows you to work here without restrictions, as it has for many years. The key difference is, you announced your income to the government in your application. Those arriving without the permit did not. Either way, neither the permit nor the visa exempt you from tax liability in Georgia.
- Georgia is not unique in having tax liability for those who work remotely while visiting – this is actually true in almost all countries on Earth (including Thailand and other popular remote work destinations). It is just poorly enforced. Most digital nomads just break visa laws (by working on a tourist visa) as well as by evading local tax.
- Double taxation agreements (DTAs) may protect you in some cases, but your obligation to file a Georgian tax return likely still exists. It should be noted that DTA rules vary, and the level of protection may not be anywhere close to what you’d assume. You should check these agreements carefully, or in some cases, check if the current country where you pay tax even has one with Georgia.
- Some types of income are exempt if falling under the specific definition of foreign-source income. However, “foreign-source” almost never includes income earned through active work while on the territory of Georgia (such as working from your laptop). Read about what types of income would have zero tax liability in Georgia and which are tax liable here.
- Some countries offer tax credits or other types of programs which allow you to offset the taxes you will pay in Georgia against the taxes you will pay at home. If you are from the USA, we have a detailed guide on options for reducing your US tax burden while living in Georgia.
- Operating a foreign business (legal entity) from within Georgia without being registered can incur a number of additional tax and legal obligations and may incur fines and back taxes if you do not register it in a timely manner.
- If you are an employee of a foreign company working on the territory of Georgia, you are normally liable to declare and pay 20% tax on your income, unless a DTA protects you from this. This applies even if you do not spend 183 days in Georgia. If a DTA is in place with your other country of tax residency, in cases where you do spend more than 183 days in Georgia, often DTAs will no longer protect you against Georgian tax liability. But, those same agreements may allow you to not pay taxes, or to get a rebate on taxes paid, in your previous country of tax residency. If coming from a high tax country, you could make significant savings by becoming a Georgian tax resident.
- Setting up a Georgian business can significantly reduce your Georgian tax burden (from 20% on gross income, to as low as 0%). Freelancers and contractors can mostly get the 1% tax rate but you do have to register for it, and it does not apply retroactively, so you should seek to register immediately after arriving in most cases.
- Qualifying for Georgian tax residency can help you reduce or eliminate taxation elsewhere if the correct steps are taken.
The decisions you need to make will be determined by the length of your stay, the nature of your income, and the way it is earned:
Will you stay less than 183 days?
If you will only be in Georgia for a short time, these options can help you minimize your Georgian Taxes.
Business owners / Self Employed
You may owe taxes in Georgia but the effort to set up a business here temporarily is often more work than it is worth. It will depend on the nature of your income.
If operating a foreign business, it is advisable to:
- Avoid any actions that could cause the business to trigger Permanent Establishment (PE). See additional note below.
- Avoid setting up a fixed home office space or renting a regular office space. Stick to cafes and casual coworking spaces.
- Avoid publicly posting that you are operating your business from Georgia.
As long as you don’t trigger Permanent Establishment, which is unlikely in this time frame if you don’t set up a fixed place of business, then you’d only be liable for tax on personal income.
If possible, avoid distributing dividends from your business to your personal accounts, or paying yourself a salary while here. Then you will not be receiving income while in Georgia, and thus avoid liability. If that is not practical, see below:
Employed Persons (& Other Personal Income Considerations)
If you get paid a salary, then as an employee working from the territory of Georgia, you could be liable to pay the same 20% tax on gross salary that any other employed person working in Georgia is.
If you already pay tax elsewhere, a Double Taxation Agreement (DTA) may protect you from paying any tax at all, but it depends, and you must read the conditions carefully to be sure.
If no DTA exists for you (such as in the case of the USA, Australia, NZ, and many others), investigating foreign tax credits might be your best option to offset the tax you pay elsewhere.
When it comes to individuals who:
- Will be in Georgia less than 183 days
- And have no plans to return to Georgia in future
- And have/will pay taxes in full in another country for the relevant year
- And are on a moderate or low income
The likelihood of enforcement is very low. But it’s good to be aware that it is still technically tax evasion in some cases, and it’s important to understand your options.
If, however, you own a large company, and/or have a high income, and will actively work remotely while in Georgia, enforcement is economically viable for the Revenue Service and hence more likely to happen, and you should consult a Georgian tax adviser before arriving.
Will you stay 183 to 365 days?
If you’ll be staying for most of the year, you will definitely become a tax resident automatically after 183 days. You are required to register with the RS and file a declaration before March 31st of the year following when you became a tax resident.
By becoming a tax resident you open some possibilities of using that status to reduce or eliminate your tax liabilities elsewhere. As taxes in Georgia are as low as 0% and rarely higher than 20% flat on gross income, for many people coming here, their tax situation will be improved.
Your options depend entirely on the tax laws of the country in which you are currently paying tax. From some countries it’s relatively easy to exit the tax system. Others like the UK and Australia are trickier, and some, like the USA, you can only exit by renouncing your citizenship. However, the USA offers a number of programs like FEIE (Foreign-Earned Income Exclusion) and FTC (Foreign Tax Credits) that can offer relief. If staying more than a year, this relief can be improved – see below.
In some cases, double taxation agreements may mean that the country where you are actually a tax resident (Georgia in this case), is the one that taxes you first, or possibly the only one that taxes you. Once again, this varies a lot and you should speak to both a Georgian adviser and an adviser from your home country.
If you think you are not a tax resident anywhere right now, you’ll want to read this article.
If you plan to stay in Georgia more than 183 days, you should explore your tax options immediately (preferably before even arriving) as you can apply for additional benefits, such as the 0% or 1% tax regime. However, these programs cannot be applied retroactively, so the longer you stay here without registering, the higher your taxes for the year will likely be.
Get a free consultation with us about getting the lower tax rates and advice on your best options.
Will you want to make Georgia your tax home long term? (Stays of more than 365 Days)
If you are looking to stay in Georgia long-term, then you will be much more likely to be able to revoke tax residency status elsewhere (aside from the USA, of course, where you’ll still want to investigate FEIE, tax credits, etc.). The process differs for every country.
The sooner you get started on the process, the sooner you’ll be able to minimize your taxes.
If you’d like to bypass the legwork and get a free tax consultation that can get you the answers you need, book one with us now.
We delve deeper into the above topics as well as answering a total of 59 questions by attendees.
What about income I earned at the start of the tax year, before I first came to Georgia?
Typically, even if the income was earned while you were physically outside the borders of Georgia, it could still be taxable. It depends on if:
- In the relevant year you were considered a tax resident of Georgia. If yes, then liability is much more likely. If no, then it is highly unlikely.
- And, if the income earned before arriving has not been taxed elsewhere (if not already taxed, more likely to have liability in Georgia, but it could still have liability even if already taxed elsewhere).
There are a lot of factors, so it’s best to get legal advice for your unique case.
What about income I earned after coming to Georgia but before registering my business?
If your personal income was generated through active work (remote or not) while physically in Georgia (regardless of the original source of the income or where it was remitted), or is in any other way considered Georgian source income, it would be liable under the flat 20% gross personal income tax and you would be considered a “natural person” by the RS.
If the legal entity you own/manage/represent etc. had profits during the time you actively worked on it while in Georgia, those profits could be subject to a corporate tax of 15%.
What legal trouble could I face if I leave Georgia without filing a tax return?
If you earned zero taxable income while in Georgia, it’s no problem at all, and you don’t have to file.
If you did earn income, you may be liable to file and you must choose how to proceed. Opening an RS account remotely can be tricky, so it’s best to do that before you leave. If you already left, you’d need to get a power of attorney and apostilled passport sent to a representative in Georgia in order to open the account. Then you can file online, as long as you have a Georgian phone number which can receive SMS messages from the RS login system.
Will Georgia stop you at the airport and try to tax you when you depart?
Being that tax declarations are due by March 31st of the year following the tax year in which you have tax liability, it seems unlikely, unless you were here for more than 1 year. There has been no history of this happening, but there was also no remote work permit until August 2020, and the government was not previously in a financial crisis caused by a pandemic.
So, all we can comment on is the tax law, not on if and how it will be enforced.
If, after filing and leaving Georgia, your RS account remains and you don’t file again in future, as long as your Georgian Tax liability is zero, then the maximum fine for not filing is… zero.