Tax returns and compliance
Tax rates
Residence rules
Termination of residence
Economic employer approach
Types of taxable compensation
Tax-exempt income
Expatriate concessions
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample tax calculation

Other assumptions

When are tax returns due? That is, what is the tax return due date?

31 March. If this date falls on a Saturday or Sunday, then the due date is the following Monday.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Georgia?

An employer shall present tax returns according to the amounts of salaries and taxes paid and withheld according to a reporting month on a monthly basis (until the 15th day of the month following the reporting month).

Within the same deadlines the employer is obliged to present to the tax agency, and also to send to the employee upon their request, a statement reflecting the registration number of that person, their name, living address, the total amount of income, and the total amount of tax withheld during the reporting period.

The employees have no obligation to file a tax return regarding their remuneration which is taxable at the source of Georgia. However, an employee may file a tax return in order to claim a refund or recalculation of the tax withheld from remuneration; this may be the case, for example, when the employee has the right on tax concessions.

Tax returns are required to be filed by a resident individual having income not taxed at the source of payment in Georgia.

Compliance requirements for tax returns of non-residents employment income are the same as for resident employees (please see above).

Tax returns are required to be filed by non-residents having income from a Georgian source that is not subject to tax at the source of payment.

What are the current income tax rates for residents and non-residents in Georgia?

For the purposes of taxation, how is an individual defined as a resident of Georgia?

Residency is defined by the tax code of Georgia as follows.

During the entire current tax year, an individual shall be recognized as a resident of Georgia if they were actually present on the territory of Georgia for 183 days or more in any continuous calendar 12-month period ending in this tax year, or was in the Georgian state service abroad during the tax year.

Actually present shall be considered as the time of actual presence on the territory of Georgia during which a person has been on the territory of Georgia, as well as the time period which they have spent outside the territory of Georgia specifically for the purposes of medical treatment, vacation, business trip, or study. Time during which a person was in Georgia is not considered as a time of actual presence on the territory of Georgia if they stayed:

1. as a person having diplomatic or consulate status or as a family member of such person

2. as a staff member of an international organization under Georgian international agreements, or as a person who is in the state service of a foreign country/jurisdiction, and/or a family member of such a person, except citizens of Georgia

3. exclusively for moving from one foreign country/jurisdiction to another through the territory of Georgia or

4. only for medical treatment or resting purposes.

A day of presence in Georgia is considered any day during which a person actually stayed on the territory of Georgia, regardless of the duration of this stay.

The status of residence or non-residence is established for each tax period. Moreover, days, according to which the person was considered a resident during the previous tax period, shall not be considered while establishing residency for the following tax period.

An individual is regarded as a non-resident of Georgia if they do not comply with the criteria established for residency.

Irrespective of the above-mentioned criteria established for residency, Georgian residency may be granted:

1. to a high net worth individual according to the rule and the conditions prescribed by the Ministers of Finance and Justice of Georgia.

2. to Georgian citizen, if it is impossible to identify the residency of this individual for any country/jurisdiction and the individual appeals to the Georgian tax authorities

3. to foreign citizen according to the rule and conditions prescribed by the Minister of Finance of Georgia

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.
 

No.

What if the assignee enters the country/jurisdiction before their assignment begins?
 

No special implications.

Are there any tax compliance requirements when leaving Georgia?

No special implications.

What if the assignee comes back for a trip after residency has terminated?

No special implications.

Do the immigration authorities in Georgia provide information to the local taxation authorities regarding when a person enters or leaves Georgia?

This does not happen automatically; the tax authorities may request to provide relevant information on a case-to-case basis.

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?
 

No, if the Georgian sourced income is taxed at the source of payment.

Do the taxation authorities in Georgia adopt the economic employer approach¹ to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Georgia considering the adoption of this interpretation of economic employer in the future?
 

No. However, the tax authorities can apply the substance over form principle.

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?²

No.

What categories are subject to income tax in general situations?
 

• income from employment (wages, salaries)
• income from economic activities, including:

1. dividends
2. interest (except of interest from deposits)
3. income earned from financial leasing, usufruct, lease, rent, or any similar activity\
4. royalties.

• other income not related to economic activities.

Will a non-resident of Georgia who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Georgia) trigger a personal tax liability in Georgia, even though no separate director's fee/remuneration is paid for their duties as a board member?

a)   Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Georgia?

b)   Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Georgia (i.e. as a general management fee where the duties rendered as a board member is included)?

c)  In the case that a tax liability is triggered, how will the taxable income be determined?

There is no established tax practice with regard to case above and the issue itself is not straightforward depending on whether the person in question can be qualified as a director for Georgian tax legislation purposes, thus detailed analysis needs to be carried out considering specific set of conditions for each case.

Below answer is based on the assumption that the individual in questions (hereafter - statutory director) is a Georgian non-resident and no remuneration is paid by the Georgian company

According to Georgian Tax Legislation holding a position/performing duties of a director (director as defined by the Georgian law on entrepreneurs of an entity is considered to be an employment.

In case the duties performed by the statutory director is qualified as service (rather than employment) it seems that no personal tax liability will be triggered in Georgia in the absence of a physical presence of the individual on the territory of Georgia. However, if the statutory director is physically present at the board meetings in Georgia it will be considered that service was performed on the territory of Georgia and thus they have received Georgian sourced income which is taxable in Georgia irrespective of the fact whether the cost was allocated to Georgian company or not. The amount of the taxable income might be determined based on the costs allocated to the Georgian company or otherwise calculated on pro-rata basis considering the individual’s working timesheet.

In case the duties performed by the statutory director is qualified as an employment, the income received for the work performed by them on the territory of Georgia and also in relation to their role at Georgian company (Both in and outside of Georgia) may be taxable in Georgia irrespective of the fact whether the cost was allocated to Georgian resident company or not. The amount of the taxable income might be determined based on the costs allocated to the Georgian resident company and/or calculated on pro-rata basis considering the individual’s working timesheet.

Are there any areas of income that are exempt from taxation in Georgia? If so, please provide a general definition of these areas.

Overseas income of resident individuals (that is income derived not from the source of Georgia) is exempt from income tax.

Furthermore, several types of income are exempt from income tax, including the following.

• Income from employment of a non-resident employee of diplomatic or equalized organizations located on the territory of Georgia.
• Income from employment of a non-resident employee provided that the employee spends less than 31 days in a calendar year in Georgia and the expenses on salaries are not attributable to the permanent establishment in Georgia.
• Grant, state pension, state compensation, state academic stipends, cumulative, and repayable pension from non-state pension scheme equal to payments made, state scholarship, and assistance assigned by the state budget, autonomous republic, or local budgets.
• Monetary and other type of rewards, received by sportsmen, their trainers and medical personnel for being a prize winner in the Olympic Games, Chess Championships, European Games and World Youth Olympic Games World and European Championships.
• Alimony.
• The value of property received on the basis of divorce.
• The value of property received gratuitously or by inheritance in the course of a tax year by I and II level legatee.
• The value of property up to GEL150,000 received gratuitously or by inheritance in the course of a tax year by III and IV level legatee.
• The value of property received gratuitously up to GEL1,000 in the course of a tax year.
• The surplus (that is the excess of revenue above cost) received by an individual from the sale of a dwelling belonging to them for more than a 2-year period (in the case of a sale of a car, Tax Code of Georgia (TCG) establishes more than a 6-month period).
• The surplus (that is the excess of revenue above cost) received by an individual from the sale of asset belonging to them for more than a 2-year period, to the extent that it was not used in economic activity (mere holding of shares/securities for the purposes to receive dividends/interest is not considered as they were used in economic activity).
• Starting from 1 January 2018 gains realized on the disposition of shares/loan securities issued by a Georgian resident through public offering in Georgia for trading on stock market recognized by National Bank of Georgia.
• Starting from 1 January 2018 interest income received on loan securities issued prior to 1 January 2023 by a Georgian resident through public offering in Georgia for trading on stock market recognized by National Bank of Georgia.

Besides, for certain individuals the TCG provides some exemptions/allowances for income tax, for example a taxable income of the following individuals shall not be subject to income tax,

• Up to GEL3,000 in the course of a calendar year.
• Single mothers.
• A person who adopted a child, within 1 year from adoption.
• A person who has obtained a guardianship for bringing up a child.
• Up to GEL6,000 in the course of a calendar year.
• An individual with a micro business status is exempt from income tax.

There is a special regulation regarding business travel expenses for employees residing (with the working place) in Georgia; the remuneration for these expenses is not considered as salary up to the certain threshold and accordingly is not taxed. Particularly, the compensation consists of a daily allowance³, remuneration for actual cost of transportation, and hotel expenses⁴.

Are there any concessions made for expatriates in Georgia?

There are no specific concessions for expatriates in Georgia.

Is salary earned from working abroad taxed in Georgia? If so, how?

Residents are taxed on worldwide income. However, overseas income of resident individuals is exempt from the income tax. Non-residents are taxed only on Georgian-sourced employment income.

Are investment income and capital gains taxed in Georgia? If so, how?

• The surplus (that is the excess of revenue above cost) received by an individual from the sale of residence belonging to them for more than a 2-year period (in the case of a sale of a car, TCG establishes more than a 6-month period) is exempted from income tax.
• The surplus (that is the excess of revenue above cost) received by an individual from the sale of asset belonging to them for more than a 2-year period, to the extent that it was not used in economic activity is exempt from income tax.

In cases when the above-mentioned assets are sold within a 2-year (6-month) period, the income tax rate of 20 percent should be applied unless the surplus income is derived from the sale of motor vehicle or a residential building along with the attached land, where the surplus is taxed at the rate of 5 percent. Tax should be paid and a tax return presented until 1 April of the following year.

Dividends

Dividends arising from a Georgian source and paid to the individual are taxed at the source of payment at the rate of 5 percent. Interest payments to a non-resident in the list of offshore countries/jurisdictions is subject to tax at the rate of 15 percent at the source of payment. The payer as a tax agent is obliged to withhold the tax and pay it to the state budget at the moment of payment of the income; dividends so taxed are not subject to further taxation, provided that this income is not related to the permanent establishment of a non-resident on the territory of Georgia.

Interest

Interest arising from a Georgian source and paid to the individual is taxed at the source of payment at the rate of 5 percent. Interest payments to a non-resident in the list of offshore countries/jurisdictions is subject to tax at the rate of 15 percent at the source of payment. The payer as a tax agent is obliged to withhold the tax and pay it to the state budget at the moment of payment of the income; interest so taxed is not subject to further taxation. It should be noted that interest paid by licensed financial institutions to individuals is not subject to neither withholding tax nor further taxation.

Rental income

The income is subject to income tax at the rate of 20 percent, unless the rental income is received by a natural person for renting residential space to natural or legal person in which case the rental income is taxed at the rate of 5 percent.

Generally, any compensation or in-kind benefit of an individual received as a result of an employment is considered as employment income. The value of in-kind benefits in the majority of cases (including abovementioned) is determined as the market value of the benefit less any amount paid by the employee.

Since the taxable income of an individual in the majority of cases is calculated on a cash basis, it is not applicable.

See Capital Gains.

Losses arising upon the sale of property by individual are compensated from proceeds received upon the sale of such property. If the losses cannot be compensated in the year in which they took place, they cannot be carried forward, unless the individual is an entrepreneur and the asset has been used in its business activities, in this case the loss carried forward period is normally 5 years.

Not applicable.

Are there additional capital gains tax (CGT) issues in Georgia? If so, please discuss?

Not applicable.

Are there capital gains tax exceptions in Georgia? If so, please discuss?

See capital gains

Not applicable.

Not applicable.

What are the general deductions from income allowed in Georgia?

Generally, all expenses related to the receipt of gross income are allowed to be deducted from the gross income. However, there are some exceptions, which set a certain limit or do not permit at all deductibility for particular expenses. Exceptions include the following.

• Some kinds of limitations are imposed on the deductions of representation expenses, interest charges, losses of previous years, capital expenditures, and so on.
• The following are not deductible from the gross income:

1. the expenses related to the receipt of income exempt from income tax

2. entertainment expenses

3. income tax paid on the territory of Georgia and other countries/jurisdictions

4. penalties paid or payable to the budget

5. expenses related to receipt of wages.

Furthermore as a rule, expenses not related to economic activity are not deductible from the gross income.

What are the tax reimbursement methods generally used by employers in Georgia?

Current year reimbursement (cash basis) is the normal method of recognizing tax reimbursements paid by the employer.

How are estimates/prepayments/withholding of tax handled in Georgia? For example, Pay- As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

PAYE withholding system is applied to employment income with no deductions for employee expenses.

When are estimates/prepayments/withholding of tax due in Georgia? For example: monthly, annually, both, and so on.

The employer is obliged to transfer the tax withheld to the budget upon making the payment to the employee; in case of payment in-kind, the deadline is the last day of the appropriate month.

Is there any Relief for Foreign Taxes in Georgia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

According to the domestic tax legislation, there is no relief for foreign taxes in Georgia. In specific cases the DDT’s respective provisions may be applied.

What are the general tax credits that may be claimed in Georgia? Please list below.

Not applicable.

This calculation assumes a married taxpayer resident in Georgia with two children whose 3- year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

Exchange rate used for calculation: USD1.00 = GEL2.895

• All earned income is attributable to local sources.
• Bonuses are paid at the end of each tax year, and accrue evenly throughout the year. Interest income is not remitted to Georgia.
• The company car is used for business and private purposes and originally cost USD50,000. The engine volume of company car is more than 3,500 cm³.
• The employee is deemed resident throughout the assignment.
• Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Calculation of tax liability