ey.com/globaltaxguides
Tbilisi GMT +4
EY
Kote Abkhazi str., 44
Tbilisi 0105
Georgia
Executive and immigration contacts
Tato Chantladze
Tina Kachakhidze
A. Income tax
+995 (32) 215-8811
Fax: +995 (32) 215-8822
Email: tato.chantladze@ge.ey.com
+995 (32) 215-8811, Ext. 2112
Fax: +995 (32) 215-8822
Email: tina.kachakhidze@ge.ey.com
Who is liable. Resident individuals and nonresident individuals are subject to income tax on income received from Georgian sources.
For tax purposes, individuals are considered resident if they actually are located on the territory of Georgia for 183 or more cumulative days in any continuous 12-month period ending in the current tax year (that is, the calendar year) or if they are in Georgian state service abroad during the tax year. For purposes of the above residency test, the days considered are the days when the individual is actually located on the territory of Georgia, as well as the days spent by the individual outside the territory of Georgia for medical treatment, vacation, business trip or study purposes. The time of actual presence does not constitute time spent in Georgia by the following individuals:
• Persons with diplomatic or consular status as well as their family members
• Staff members of an international organization under Georgian international agreements, state servants of a foreign country, including their family members, but excluding citizens of Georgia
• Persons moving from one foreign country to another through the territory of Georgia
• Persons residing in Georgia for medical treatment or vacation purposes only
The status of residency is determined for each tax period. Days that were taken into account in determining the residency of an individual in the preceding tax period are not taken into account in determining residency in the current tax period.
In addition, high net-worth individuals, on their request, may become residents of Georgia for tax purposes even if under the above general rule on residency, they are not deemed to be Georgian residents. High net-worth individuals are individuals who hold property with the value in excess of GEL3 million or whose annual income for each of the preceding three years exceeded GEL200,000.
income is in Georgia. Interest received by individuals that was taxed at source is not included in the gross income of such individuals and is not subject to further taxation. If these payments are received by a person registered in a low-tax jurisdiction, the tax rate is 15%.
The following interest is not taxed at source and is not further included in the gross income of the recipient:
• Interest received from financial institutions licensed according to the Georgian legislation
• Interest received in a FIZ from a FIZ company
• Interest on free-floating securities or on debt securities issued by Georgian enterprises and listed on a recognized foreign stock exchange
Other income. Inheritances and gifts received are generally included in taxable income. However, certain exceptions apply (see Exempt income). Income received by individuals from renting out living space for living purposes is taxed at a rate of 5% if no expenses are deducted from this income. A 5% rate also applies to gains received by individuals from the supply of living space and the land attached to it, as well as from the supply of vehicles. In general, the taxable gain equals the difference between the sale price of the land or vehicle and its cost.
Nonresidents’ income. Georgian-source income of a nonresident that is not related to a PE of the nonresident in Georgia is subject to tax at the source of payment without deductions. A 4% rate applies to the income received from the oil and gas operations of nonresident subcontractors under the Law of Georgia on Oil and Gas. Other payments, not specifically mentioned above, made to nonresidents that are deemed to represent income received from a Georgian source are taxed at source at a rate of 10%.
Exempt income. The following types of income are exempt from income tax:
• Income of resident individuals received from foreign sources
• Income derived by nonresidents from employment with diplomatic or equalized organizations located in Georgia
• Grants, state pensions, state compensation, state academic scholarships, cumulative and repayable pensions from private pension schemes up to the amount of the contributions made and other specific state payments
• Financial and other awards received by persons engaged in sports-related activities and their coaches for winning and/or getting medal placing at the Olympic Games and/or the world and European championships
• Alimony
• Value of property (income) received on the basis of divorce
• Capital gains derived from the sale of vehicles that were held for more than six months after official registration
• Capital gains derived from the sale of residential apartments (houses) together with the attached land plot that were held for more than two years
• Capital gains derived from the sale of assets (other than vehicles and apartments or houses) that were held for more than two years and that were not used for economic activities (mere possession of securities or an equity interest with the purpose
Expenditures on tangible assets are deducted in the form of group depreciation charges through the application of the diminishingbalance method. The following are the rates for the depreciation groups.
Depreciation may not be claimed for land, works of art, museum items, historical objects (except for buildings), fixed assets with a value under GEL1,000 and biological assets (animals and plants). Fixed assets with a value below GEL1,000 can be fully deducted from gross income in the year in which their exploitation begins. Expenditure on biological assets may be deducted in the year when it was incurred. Taxpayers may claim accelerated depreciation norms with respect to the II and III groups. However, such accelerated depreciation may not be more than double the amount of the rates mentioned above. In addition, repair expenses on rented fixed assets (if they do not reduce the rental fee) result in the creation of a separate group of assets that is depreciated at the rate set for Group V. On the expiration or termination of the rent agreement, the remaining balance value of the group may not be deducted from gross income and the value of the group is set to zero.
Alternatively, the cost of fixed assets purchased or produced (except for non-amortized fixed assets) can be depreciated at a rate of 100% in the year in which the exploitation of such assets begins. A taxpayer selecting the full depreciation method may not change it for five years.
Expenditures on intangible assets are deducted in proportion to the useful life of the assets. If it is impossible to determine the useful life of an intangible asset, a 15% rate applies. In addition, expenditure on intangible assets with a value below GEL1,000 can be fully deducted from the gross income in the year in which the respective expenditure is incurred.
Rates. The personal income tax rate is set at a flat 20%.
Credits. Because the income of resident individuals received from foreign sources is exempt from personal income tax, no foreign tax credits are allowed.
Relief for losses. Individual entrepreneurs may carry forward losses for up to five years to offset future profits. The offsetting of loss carryforwards against the salary income of individual entrepreneurs is not allowed.
Losses may also be carried forward for up to 10 years. However, the statute of limitations is 11 years for a 10-year carryforward period, and six years for a five-year carryforward period. A 10-year carryforward period may be changed back to a five-year carryforward period if the losses carried forward are used up. No loss carrybacks are allowed.
• They maintain an inventory balance up to GEL45,000.
• They are not registered VAT payers.
The government determines the prohibited activities for individuals with the status of micro business, as well as the types of income that are not taxed under the special tax regime and that are not included in the calculation of the above gross income threshold.
Individuals with the status of micro business are exempt from personal income tax. However, they must maintain all primary tax documentation. In addition, such individuals must file a tax return annually.
The status of micro business is canceled for the current tax year if any of the above requirements for micro business are violated or if an individual with the status of micro business applies to the GTA for cancellation of the status or obtains the status of small business. On cancellation of the status, the income of an individual is taxed either according to the rules for small business if such status is obtained or according to the standard personal income tax rules.
Small business. A small business is liable for personal income tax at a 1% rate. The applicable personal income tax rate increases to 3% if gross income of a small business received from economic activities exceeds GEL500,000. A 3% rate applies from the beginning of the month in which a small business exceeded the GEL500,000 threshold until the end of a calendar year. Taxable income of a small business consists of Georgian-source income except employment income and certain other types of income determined by the government of Georgia that is not taxed under the special status and is not included in the gross income of a small business.
A small business is not required to withhold tax at source on payment of salaries to its employees up to GEL6,000 during the calendar year if either of the following conditions is met:
• He or she has been registered as an individual entrepreneur and has been granted a small business status within the same calendar year.
• Gross income received during the preceding calendar year did not exceed GEL50,000.
The status of a small business will be canceled if one of the following conditions is met:
• Annual income from business activities exceeds GEL500,000 for two consecutive calendar years.
• The individual applies for status cancelation voluntarily.
• The individual is engaged in activities that are prohibited by the government of Georgia under the status of a small business.
• The individual is fined at least three times during the calendar year for the violation of rules for using a cash register.
Individuals with the status of a small business must file a tax return and pay the respective taxes no later than the 15th day of the month following the reporting month.
Fixed taxpayer. Income from certain activities may be taxed at a fixed rate if performed by an individual having the status of a
Brunei Darussalam Malaysia Turkmenistan
Bulgaria Malta Ukraine (a)
Canada Mauritius Uzbekistan
China Mainlnd (b) Mexico United Arab
Colombia Moldova Emirates
Costa Rica
Monaco
Croatia Montenegro
United Kingdom
United Kingdom
Cyprus Netherlands Crown
Czech Republic territories Dependencies
Denmark (Aruba and (Guernsey, the Denmark successor Isle of Man territories jurisdictions and Jersey) (Faroe Islands of the United Kingdom and Greenland) Netherlands overseas territories
Dominican Republic Antilles) (Bermuda, Ecuador New Zealand Cayman Islands, El Salvador Norway British Virgin
Estonia Oman Islands, Falkland
Finland Panama Islands, Gibraltar, France Poland and Turks
France Portugal and Caicos territories Qatar Islands) (French Romania United States Polynesia and Vatican City New Caledonia)
(a) The nationals of Ukraine can enter and stay in Georgia without a visa for three years.
(b) The nationals of China Mainland can enter and stay in Georgia without a visa for purposes of tourism for 30 days.
The nationals of European Union (EU) Member States and Switzerland can enter Georgia with a travel document, as well as with an identity card issued by an EU Member State or Switzerland, respectively. The identity card must contain the name, surname, date of birth and a photo of the person.
H. Residence permits
The Legal Entity of Public Law Civil Registry Agency under the Ministry of Justice of Georgia issues residence permits.
The Law on Legal Status of Foreigners and Stateless Persons provides for the following residence permits:
• A work residence permit, which is issued for the carrying out of entrepreneurial or labor activities in Georgia to a foreign person who provides documentation proving the carrying out of such activities, as well as a certificate proving that income from such activities is not less than five times the amount of the substance minimum (approximately GEL250) and that the employer or established company (except for educational or medical establishments) of such person has a turnover of more than GEL50,000 per each individual applying for a work residence permit. For medical establishments, the abovementioned threshold is GEL35,000.
• A study residence permit, which is issued for the purpose of study at an authorized educational institution in Georgia.
• A residence permit for the purpose of family reunification, which is issued to family members of an alien holding a residence permit.
year, they must apply for the work residence permit 40 days before the expiration of the visa-free period.
I. Driver’s permits
A foreign national with an international driver’s license may drive legally using this license if information is indicated in Latin letters or if it is translated into Georgian and certified by a notary. A foreign national who wishes to drive in Georgia but does not have an international driver’s license must legalize his or her home-country license in the country where the license was issued and have it translated into Georgian. This translation needs to be notarized in Georgia.