The question of Tax Residency vs. Legal Residency in Georgia (country) seems to cause a lot of confusion. In this brief article I hope to finally clarify this topic.
Simply put, Tax Residency & Legal Residency are mutually exclusive.
You can be a legal resident without being a tax resident. You can be a tax resident without being a legal resident. You can be both simultaneously.
A Common Confusion
- When documents simply say “residency” rather than being specific as to which type of residency is under discussion.
To decide, context is normally the most important thing to consider. If you are reading the Georgian tax code and it uses the terms resident or non-resident it is exclusively referring to tax residents & non-residents.
If you are reading a document about rules for work permits, then residency would typically refer to legal residency.
If you are still not sure on the context, contact a professional.
What Is Tax Residency
Tax Residency is where you are deemed a tax resident by Georgian law and hence required to pay tax in Georgia.
Personal tax residency applies on a personal level. It is typically determined by any one of the following criteria:
- After 183 total days (consecutive or non-consecutive) physically present in Georgia in any rolling 12 month period you are automatically a tax resident of Georgia for the whole year in which the 183rd day occurred. This is not a choice or an application process. It is a legal fact. It doesn’t matter if you are here on the tourist visa waiver stamp, or any other type of visa. This rule applies to any person within the borders of Georgia.
- You get tax residency via a special process that bypasses the 183 day physical presence rule. Such as the High Net Worth Individual program.
- You are domiciled to Georgia. If you do not trigger tax residency in any other country but you are a citizen of Georgia OR have stronger ties to Georgia (family, property, etc.) than to any other country, you may be considered a tax resident via domicile even if you don’t spend time in Georgia.
If you own a Georgian business, or a foreign business that is managed from Georgia, that business may also be liable for tax as an entity, by Georgia. This is a separate matter from personal tax residency. Read about how your foreign business may be taxed even if you are not a personal tax resident of Georgia.
NOTE: Gaining automatic tax residency does not afford you legal residency. Legal residency MUST be applied for independently.
Your responsibility as a tax resident
At the very minimum, if you have any taxable income, within the tax year you are a tax resident, that was not already taxed at source in Georgia, you must register and file an annual declaration with the Revenue Service and pay whatever taxes are necessary.
Paying tax on that income in another country in the same tax year is not always sufficient and you may also owe tax in Georgia. Learn if you owe taxes in Georgia, and the best way to minimize those taxes.
What Is Legal Residency
Legal Residency refers to having the right to physically remain in Georgia for as long as your residency permit allows. Legal residents receive a Georgian ID card affording them additional rights beyond those who arrive on a visa or visa waiver.
Those entering Georgia on the visa waiver program or other visas do not have legal residency.
If you’d like to get Legal Residency in Georgia so you can stay here long term, you can read about all the options here.
EXAMPLE 1: Legal Residency Without Tax Residency
John applies for legal residency through the family reunification program. He gets a resident ID card but only spends 3 months in Georgia per year. He has a French passport and lives and works in France the other 9 months of the year. He will most likely not be a tax resident in Georgia and will pay tax in France.
EXAMPLE 2: Tax Residency Without Legal Residency
Mary arrives to Georgia on the 365 day visa waiver stamp. She stays in Georgia for 7 months. She automatically becomes a Georgian Tax Resident after 183 days, which fell on march 3rd 2020. She then leaves Georgia with no intention to return. Mary IS a Georgian Tax resident for all of 2020 and legally liable to file a declaration by March 31st 2021 and pay taxes where appropriate. Mary has NOT become a legal resident simply due to becoming tax resident.
Are You A Tax Resident Of Georgia?
Hopefully the above information has helped you decide. If you still need help, contact us.
If you are a Georgian tax resident, or would like to become one, and need help with organizing your taxes or business in Georgia, book a free consultation with us to explore your options. Appointments online via zoom, or in-person in Tbilisi.