Selected Questions and Answers on Tax Residency in Georgia
As a general rule (Article 82 of the Tax Code of Georgia, hereinafter "the Georgian TC"), income received by Georgian tax residents from sources located outside the territory of Georgia is not subject to taxation. We answer the most common questions related to this rule concerning Georgian tax residents.
1. If I, as a Georgian tax resident, am located in Georgia and receive a salary from, for example, a company based in Cyprus, what is the procedure for paying personal income tax if I have already paid tax on that salary in Cyprus?
| Answer: Since the service/work was performed within the territory of Georgia, such income is subject to taxation in Georgia. According to Article 14 of the Double Taxation Avoidance Agreement (DTAA) between Cyprus and Georgia, taxes paid on this salary in Cyprus are not taken into account in this case. |
2. If an individual is located in Georgia and is engaged in employment, what tax obligations arise in connection with this?
| Answer: You are required to file a tax return and have an obligation to pay tax on the income received. |
3. How are dividends received from the USA, Canada, the UK, and France taxed? Will the DTAA be taken into account in this case?
| Answer: Income considered to be from a Georgian source includes, among other things, income received as dividends or from the sale of shares in Georgian companies (Art. 104, Georgian TC). Accordingly, income in the form of dividends or from the sale of shares in companies that are not residents of Georgia is considered income from a source located outside Georgia and, therefore, is not subject to taxation under Article 82 of the Georgian TC. |
4. When tax is payable upon the disposal of shares or stakes in foreign companies, what obligations arise, and what tax rate applies in Georgia?
| Answer: Income from the sale of such shares is not taxable, as it is derived from a source located outside Georgia and is not related to the provision of works/services. However, when filing a tax return, a Georgian tax resident must declare all their income, including that which is not subject to taxation. |
5. If an individual acquires shares in foreign companies (USA, Canada, UK, France) and sells them at a profit a year later, will there be an obligation to pay tax on the profit in Georgia?
| Answer: Similar to the previous point, such income will be considered as derived from sources outside Georgia and is not subject to taxation. |
6. How does the capital gains tax (profit tax) apply to cryptocurrency or other assets in the case of a sale of digital assets by a Georgian tax resident?
| Answer: Income from the sale of a crypto-asset is not considered income from a Georgian source, as its physical location cannot be determined; therefore, it is not subject to taxation. |
7. What is the procedure for declaring income received outside Georgia? Specifically, for tax residents who obtained residency based on substantial means? Must such individuals file an annual tax return in Georgia even if all their income is received abroad?
| Answer: Yes, a tax resident, regardless of the grounds for obtaining residency, must submit a tax return by April 1 of the year following the reporting year, declaring all income, including that which is exempt from taxation. |
Author: Molchanov Aleksei
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