Everything you need to know about Income Tax in Georgia

Income tax is the principal type of tax obligation towards the state budget, incurred by resident and non-resident individuals in Georgia. Therefore, it is particularly important to understand how and in what cases it is imposed, as well as how its reported. This article aims to cover the practical aspects of calculation and payment of tax on income of individuals resident and non-resident in Georgia.

Income tax in Georgia: features and rates

A tax on personal income in Georgia is a general state tax paid by residents and non-residents receiving income from a source in Georgia. To correctly determine the tax obligations, one should take into account the fact  an individual who has been continuously on its territory for more than 183 calendar days for a continuous 12 months is considered a resident of the country.

Object of taxation is the difference between the total income of the resident and deductions (in particular, contribution to the Pension Fund). In the case of the sale of assets the object of taxation would be the difference between:

• the purchase and sale price of the asset;
• the market price of the asset at the time of purchase and the selling price (if the asset was received free of charge).

In accordance with the current legislation of Georgia, income tax is withheld at the source of payment. This means that when submitting a payroll statement to the bank, it is also necessary to provide payment orders for paying taxes or a documentary evidence on fulfillment of obligations towards the state budget.

The standard personal income tax rate is 20%.

Attention!!! Income received by a resident of Georgia from sources outside the country is exempt from income tax.

Learn all about the tax and other benefits that a company registered in the Free Industrial Zone of Georgia receives

Varieties of taxable income in Georgia

In addition to obligations incurred by a person in relation to income from salary, the following types of income in Georgia are also taxed:

• dividends;
• interest;
• royalties;
• income from supplies of scrap and waste of ferrous and / or non-ferrous metals;
• free transfer of property worth more than 1,000 GEL;
• income received by an individual from the provision of various services.

It should be noted that depending on the type of income received, tax rates may vary.

Gift and Inheritance Tax in Georgia

During the calendar year the following is exempted from calculation of tax obligations:

• Property received as a gift or inheritance by the heirs of I and II sucession;
• Gifts worth up to 1,000 GEL, with the exception of gifts from the employer to the employee;
• Gifts and inheritance in the amount of up to GEL 150,000 received by the heirs of the 3rd and 4th succession.

Individual income tax rates in Georgia

The amount of tax obligations of an individual to the state depends on the type of income received:

• salary – 20%;
• interest – 5%;
• dividends – 5%;
• royalties – 20%;
• income from the sale of scrap of ferrous and / or non-ferrous metals – 3%;
• rental income from residential real estate – 5%;
• rental income from commercial real estate – 20%;
• the difference between the purchase price from the sale of movable and immovable property is 5% (if the tenure is less than 2 years in case of real estate and less than 6 months in case of cars).

Rules for paying and filing income tax report in Georgia

An individual whose income is not withheld at the source of payment is required to file a tax return, as well as to pay tax before April 1 of the following reporting year. This particularly refers  to individuals receiving regular payments from the rental of property.

Also, special rules for reporting and tax payment are provided for individuals working:

• in international organizations with diplomatic status;
• in enterprises of Free industrial zones.

In these cases, employers are not tax agents, the responsibility for reporting and paying taxes lies entirely with the employees of the above companies. They are required to pay personal income taxes monthly until the 15th day of the month.

Private entrepreneurs are required to pay taxes in the following periods and rates:

• not later than May 15 – 25%;
• no later than July 15 – 25%;
• not later than September 15 – 25%;
• not later than December 15 – 25%.

Relief from personal income tax in Georgia

Georgian legislation exempts the following categories of people from income tax:

• individuals with an annual income of 3,000 GEL (about 1,000 USD);
• women who have received the status of “Single mothers”;
• veterans of World War II;
• war veterans for the territorial integrity of Georgia;
• women who received the title of “Mother of Georgia”;
• persons who have adopted children.

In addition, income tax is not withheld until January 1, 2023 from persons engaged in agriculture, namely:

• on profit received from the primary supply of agricultural products of Georgian origin, if the total annual revenue from this activity does not exceed 200,000 GEL;
• on wages received by employees of the above-mentioned enterprises, if the annual income from this activity does not exceed 200,000 GEL.

Also, persons with three or more children permanently residing in highland settlements are exempted from tax obligations. For persons with two children, the tax obligation is reduced by half. Georgian legislation also provides for a number of tax benefits for persons with disabilities and limited capacities.

How to avoid paying income tax in Georgia

Non-residents who would like to register a company or become a private entrepreneur in Georgia should consider the following features for tax optimization:

• Income received by non-residents from sources outside Georgia is not subject to income tax (interest, dividends, royalties, etc.);
• Dividends paid by companies registered in the Free Industrial Zones are not taxed.

In addition, Georgia is not a participant in the automatic exchange of financial information, which makes it possible to maintain a high level of confidentiality of cash flows that pass through local banks.

If you have any questions regarding taxation in Georgia, or if you want to register a company in order to take full advantage of the local jurisdiction, you need to contact us at [email protected] and we will get back to you as soon as possible.