Taxation of international executives
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
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?
Type of income |
Tax rate (Percent) |
Taxable through withholding (W)/Filing tax return (R) |
Employment |
20 |
W |
Interest from Georgian source |
5 |
W |
Dividends from Georgian source |
5 |
W |
Taxable income of entrepreneur individuals |
20 / 1 |
R |
Royalty |
20 |
W |
Capital gains |
20 / 5 |
R |
Rent |
20 / 5 |
W/R |
Type of income |
Tax rate (Percent) |
Taxable through withholding (W)/Filing tax return (R) |
Employment |
20 |
W |
Dividends |
5 |
W |
Interest |
5 |
W |
Royalty |
5 |
W |
International traffic, international telecommunication |
10 |
W |
Rent |
20/ 5 |
W |
Other payments (except of sale of property) |
10 |
W |
Capital gains |
20/ 5 |
R |
Service payments (including interest and royalty) to a nonresident in the list of offshore countries/jurisdictions |
15 |
W |
Taxable income of individuals through their permanent establishment |
20 |
R |
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
No.
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.
No, if the Georgian sourced income is taxed at the source of payment.
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.
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.
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,
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?
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.
Residency status | Taxable at: | ||
Grant | Vest | Exercise | |
Resident | N | Y | Y |
Non-resident | N | Y | Y |
Other (if applicable) | N/A | N/A | N/A |
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.
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.
|
2018 USD |
2019 USD |
2020 USD |
Salary |
100,000 |
100,000 |
100,000 |
Bonus |
20,000 |
20,000 |
20,000 |
Cost-of-living allowance |
10,000 |
10,000 |
10,000 |
Housing allowance |
12,000 |
12,000 |
12,000 |
Company car |
6,000 |
6,000 |
6,000 |
Moving expense reimbursement |
20,000 |
0 |
20,000 |
Home leave |
0 |
5,000 |
0 |
Education allowance |
3,000 |
3,000 |
3,000 |
Interest income from non-local sources |
6,000 |
6,000 |
6,000 |
Exchange rate used for calculation: USD1.00 = GEL2.895
Calculation of taxable income
Year ended |
2018 |
2019 |
2020 |
Days in Georgia during year |
365 |
365 |
366 |
Earned income subject to income tax |
|
|
|
Salary |
289,000 |
289,000 |
289,000 |
Bonus |
57,800 |
57,800 |
57,800 |
Cost-of-living allowance |
28,900 |
28,900 |
28,900 |
Net housing allowance |
34,680 |
34,680 |
34,680 |
Company car6 |
52,743 |
35,114 |
- |
Moving expense reimbursement |
57,800 |
- |
57,800 |
Home leave |
- |
14,450 |
- |
Education allowance |
8,670 |
8,670 |
8,670 |
Total earned income |
529,593 |
468,614 |
476,850 |
Other income/interest |
17,340 |
17,340 |
17,340 |
Total income |
546,933 |
485,954 |
494,190 |
Deductions |
- |
- |
- |
Total taxable income |
546,933 |
485,954 |
494,190 |
Calculation of tax liability
|
2018 GEL |
2019 GEL |
2020 GEL |
Taxable income as above |
546,933 |
485,954 |
494,190 |
Exempted income (interest) |
17,340 |
17,340 |
17,340 |
Georgian tax thereon |
529,593 |
468,614 |
476,850 |
Less: |
- |
- |
- |
Income tax applicable to Company Car |
|
1200 |
3600 |
Foreign tax credits |
- |
- |
- |
Total Georgian tax |
105,918.50 |
94,922.70 |
98,970.00 |
Starting from 1 September 2019 the benefit received by the employee from the private use of the employer’s car will be subject to individual income tax on monthly basis based on the engine volume of such car, namely:
Volume of the car’s engine |
Individual Income Tax (GEL) |
More than 3500 cubic meter |
300 |
From 2500 to 3500 cubic meter |
200 |
Less than 2500 cubic meter |
100 |
Hybrid cars – any volume of the engine |
60 |
The private use of the employer’s electric car is exempt from individual income tax.
Disclaimer
All information contained in this publication is summarized by KPMG Georgia LLC, the company incorporated under the laws of Georgia, member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Tax Code of Georgia of 2010 and subsequent amendments.
Copyright
© 2020 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.