Is Georgia a Tax Haven? Offshore Jurisdiction Review

Georgia, a country strategically located at the crossroads of Europe and Asia, has recently embarked on a mission to redefine itself as a tax haven. Attention has turned towards Tbilisi, Georgia's capital, as policymakers and investors alike consider the implications of Georgia's burgeoning financial landscape.

The country's appeal to investors is rooted in a combination of progressive fiscal policies and promising economic freedoms; a territorial taxation system, for instance, means foreign earnings can remain untaxed, fostering a lucrative environment for international business operations.

Notably, Georgia's tax system is structured to attract and retain investment, which has the potential to significantly bolster the nation's economic growth.

Individuals and corporations are drawn by the tax benefits that come with operating within Georgian jurisdiction. The country's increasing rank in global economic freedom indices signifies its commitment to economic liberalization and suggests a potential for growth as an attractive location for businesses and investments.

Key Takeaways

• Georgia is emerging as a tax haven with a strategic location between Europe and Asia.
• The country's tax policies create benefits for international businesses and investors.
• Georgia's economic freedom and territorial taxation system enhance its investment appeal.

Georgia Overview

Georgia is located in the Caucus region straddling the divide between Europe and Asia. It currently offers many businesses and investment opportunities and is quickly becoming a haven for many of Europes forward-thinking investors. Georgia has become popular tax haven jurisdiction for entrepreneurs, businessmen, digital nomads, and regional investors due to its business-friendly environment, low corporate taxation, friendly immigration policies, and easy residency options.

Thanks to the country’s stable political environment, burgeoning economy, and capital friendly policies, the country has seen a huge influx of entrepreneurs and international residents to the region.

Georgia is ranked 24th Best places to do business according to the World Bank, scoring higher than countries like Switzerland. It also ranked #6 for worlds best places to start a business thanks to tax exemptions for all offshore companies making under 30,000 lari, and significant reductions for SMEs under 100,00 lari as well as several free economic zones dotted throughout the country.

Though Georgia remains geographically leaning toward the Asian subcontinent, the culture has more European influences due to the many liberalized business policies that have been initiated in the country over the last twenty years.

Georgia draws nearly 6 million visitors almost twice the population size each year, many of them entrepreneurs looking for untaped foreign investment which is quickly changing the economic landscape of the country. In the last decade, the economy has expanded 6-12% each year with continued growth expected in the future. 

The simplicity of opening a Georgian company and bank account for non-residents and the government's commitment to making the country business-friendly for foreign nationals and non-residents have helped to make Georgia a very attractive option for anyone looking to globalize their set structures.

Go Deeper>> Georgia Financial Company

Benefits of Doing Business in Georgia

• Georgia has a territorial taxation system that allows foreign earnings to remain tax-free
• There is an open immigration policy allowing anyone from a list of 94 countries to enter and stay in Georgia without a visa
• There is a high degree of economic and financial freedom and is ranked 16th on world economic freedom
• The country offers high net-worth individuals programs that reduce their tax burden allowing them a faster process in becoming a tax resident.
• Offers tax breaks for certain industries and any small businesses (under 100,000 there are significant reductions) with companies making 30,000 laris can remain tax-free
• There are  tax exemptions for companies existing in several of there Free Industrial Zones (FIZs)
• There is a friendly financial environment that welcomes foreign investments 
• The huge presence of foreign capital ensures the continuation of friendly foreign business policies by the government

• Inexpensive lifestyle with housing options starting at 15,000 Euro going in the capital
• There are no Controlled Foreign Corporation laws
• Banks in Georgia offer interest rates of up to 10% with normal savings accounts and upwards of 14% for fixed deposits if the account is held in local currency
• Setting up bank accounts for non-residents are simple and cheap, though in most instances it is required that you visit the banks in person
• There are no minimum capital requirements for opening a bank account. Though if you are a non-resident you must have a local Georgian company to establish a corporate bank account
• Setting up a Private company or a LLC is a straight forward process and can be completed in a matter of days with limited paperwork and documents needed
• Companies are not subject to registration maintenance fees, though must pay an annual license fee for certain financial activities.
• There are no minimum of or maximum capital retirements for Georgian companies

Corporate Taxation 

There are six major types of taxation in Georgia. All very minimal with some of the lowest rates in Europe. There is a flat 20% income tax across the board with a 5.75% corporate tax rate.

Interest and dividends are taxed at 5%. Thre is also a VAT of 18%, as well as an import tax that ranges anywhere from 0-12% depending upon the good, though many goods have little or no taxation at all.

The country is free from inheritance and gift tax and has a low 1% tax on real estate.

There are currently (2018) 52 Double Taxation agreements with other countries that allow for more efficient tax structuring. There are significant tax benefits for wealthy individuals. There are several Free Industrial Zones which give special tax rates for companies that operate there. They are able to benefit from 0% taxation on all corporate income as well as VAT benefits. The FIZ are located in 3 areas Poti, Kutaisi and Tbilisi.

Principal Corporate Legislation

There are several pieces of corporate legislation that govern the formation of companies in Georgia.

• The civil Code 1997
• The Law on Entrepreneurs 1994
• On the assistances and guarantees for foreign investments 1996 

Company Formation in Georgia

Georgia provides an efficient environment for establishing offshore companies, especially attractive for investors looking to maximize their tax efficiencies. To register a Limited Liability Company (LLC), a popular choice among offshore entities, minimal documents are required. This typically includes the submission of incorporation documents and evidence of identity for the beneficial owners and directors.

Key Advantages for Offshore Companies in Georgia:

• Flexible Incorporation Requirements: No physical presence in Georgia is necessary, and a fully remote registration process is feasible.
• Tax Benefits: Offshore companies can take advantage of Georgia's territorial tax system, which excludes foreign-earned income from taxation.

Is Georgia a Tax Haven?

Georgia can be considered a tax haven, but that is not a bad thing,  due to several factors that also make it an attractive destination for businesses and investors seeking tax efficiency:

1. Territorial Taxation System: Georgia's territorial tax system exempts foreign-earned income from taxation, which is highly beneficial for international businesses and investors.

2. Low Tax Rates: The country offers some of the lowest tax rates in the region, including a flat 20% personal income tax rate, a 5.75% corporate tax rate, and a 5% tax on interest and dividends.

3. Tax Incentives: There are significant tax breaks and exemptions available for companies operating in Free Industrial Zones (FIZs), as well as for small businesses and certain industries.

4. No Inheritance or Wealth Taxes: Georgia does not impose inheritance or wealth taxes, making it attractive for high-net-worth individuals looking to preserve their wealth.

5. Ease of Doing Business: Georgia ranks highly in global ease of doing business indices, thanks to its streamlined processes for company formation, minimal bureaucratic hurdles, and supportive legal framework.

6. Favorable Banking Environment: Georgia offers high-interest rates on savings accounts, no Controlled Foreign Corporation (CFC) laws, and straightforward procedures for opening bank accounts, even for non-residents.

7. Stable Political and Economic Environment: The country's stable political environment and growing economy add to its appeal as a secure and attractive destination for business and investment.

While Georgia has many characteristics of a tax haven, it is also committed to transparency and compliance with international standards, which helps to maintain its reputation as a legitimate and secure business environment.

Banking and Financial Services

The banking sector in Georgia is robust and offers a range of services for both individuals and companies, including married individuals who file joint returns and those opting for married filing separately.

Banking Features:

• Account Opening: Opening a bank account for an offshore company or individual is straightforward and can often be done online.
• Insurance: Bank deposits in Georgia are insured, offering an extra layer of security for account holders.

In conjunction with these financial services, Tbilisi, Georgia's capital, is becoming a center for economic activity, partly due to the country’s open immigration policy, which allows for easy entrance and residency for entrepreneurs and investors from numerous countries. It all contributes to Georgia's reputation as a practical and business-friendly place that goes beyond the traditional image of a tax haven.

Background In-Depth Information 

Location

The country is situated in the Caucasus region of Eurasia and is located between Western Asian and Eastern Europe. It has the Black Sea to the West, Russia to the North, Turkey and Armenia to the South and Azerbaijan to the Southeast.

The capital, Tbilisi in the largest city in the country where most of the financial services, businesses and economy remains the strongest. Much of the country is dominated by agricultural products which cover parts of the 69,700 square kilometers.

Political Structure

Georgia has a representative democratic parliamentary republic with an executive branch headed by a cabinet and Prime Minister that is appointed President

The country ratified its constitution in 1995 and since then have progressively sought to establish itself with Western allies which have been formalized in a number of multilateral and international body memberships and agreements. After the break up of the USSR the country has continually sought to strengthen its Western ties and is currently looking to join the EU, while at the same time distance itself from Russia.

There is a separate judiciary that has a number of regional and local courts with the Supreme Court being the highest court in the country. The rule of law was seen to modest and ranks in the mid-50s in comparison with other countries around the world. Institutions are still developing and still have much room for improvement. The police force which was disbanded and have been re-trained in the last decade as a means to try and rid the force of systemic corruption.

Economy and Infrastructure

The country has a growing economy and infrastructure that is still not yet equal relative to other developed countries. Many industries are still infant and but have considerable room for future growth. In 2012 the country achieved a remarkable 12% rate of economic growth and has since averaged 6% over the last decade.

Since the fall of the USSR in 1991, the economy has moved toward stronger relations with the US and EU member states and attempted to design its economy around a liberalized free-market system replicating the West.

The government's desire to increase economic investment and growth has created several Free Industrial Zones (FIZs) together with tax exemptions for business and those involved in international trade.

There are currently three FIZ sin the cities of Poti, Kutaisi, and Tbilisi. These zones give companies the possibility of being exempt from taxes on all income, import and property taxes as well as a minimal VAT.

Investors and foreign entrepreneurs, due to the progressive policies have made FDI reach nearly 10% of the GDP.

The economy in the last two decades has been transitioning from an agricultural to a services-based industry.

There is significant a divide between city and rural populations in terms of economic well being and standard of living, as most of the industries are centrally located in the few main cities.

There is a moderately established infrastructure with roads and trains crossing throughout the country. The trains being the central means in which goods are transported throughout the country and are considered the lifeline of the country's transportation system.

Population, Language and Culture

Georgian culture has its foundation stemming from Iberia, and has many cultural distinctions that were influenced by the Roman Greek and Byzantine Empire while Georgian modern culture is heavily influenced by Western and Russian influences.

The population is 3.7 million, with a large portion of it, 1.1 million located in the capital Tbilisi. Nearly two-thirds of the country's population live in the main three cities while the rest is spread throughout the countryside.

The Georgian language comes from the Kartvelian root and is distinct from other languages in the region.

The official languages in Georgia are Georgian with Abkhaz having regional official status, with Georgian spoken by nearly 90% of inhabitants, followed by Azerbajani at 6% and Russian together with many other regional dialects.

Starting in 2010 English was taught to all children as a means of creating it the second national language replacing Russian.

Ethnic Georgians account fro nearly 87% of the population of just under 4 million. There are many smaller ethnic and tribal groups such as the Assyrians, Lists, Jews, Yezidis, and Russians.

A majority of the people are practicing Eastern Orthodox Christianity, with the Georgian Orthodox Church being one of the world's oldest Christian churches. There are many minority cultures and religious groups that all enjoy freedom of worship including Muslim, Jews and Catholics.

Exchange Control

There are no exchange controls in Georgia. The legal tender is the lari (GEL) and is a floating currency. Currency is easily exchangeable into USD or EUR. Banks can deal with multiple currencies though lari currencies give better exchange and interest rates.

Type of Law

The country is founded on Civil Law 

Frequently Asked Questions

This section addresses common inquiries regarding Georgia's approach to taxation for individuals seeking tax residency, the impact of its territorial tax system, and details regarding tax compliance and benefits.

What are the requirements for obtaining tax residency in Georgia?

Individuals seeking tax residency in Georgia must spend at least 183 days within a consecutive 12-month period in the country or demonstrate a vital interest through permanent residence, employment, or business activities within Georgian territory.

How does Georgia's territorial tax system impact foreign income?

Georgia's territorial tax system only taxes income that is sourced within Georgia. Income earned outside of its borders by tax residents is typically not subject to Georgian income tax, subject to specific regulatory requirements and international treaties.

What are the implications of Georgia's citizenship by investment program for personal taxation?

Georgia's citizenship by investment program offers individuals the opportunity for tax residency, which may lead to favorable tax treatment on foreign-earned income but also requires compliance with Georgian tax laws, including the declaration of worldwide income.

What is considered tax evasion and its consequences under Georgian law?

Tax evasion in Georgia includes any illegal activities aimed at avoiding payment of taxes due. Consequences range from financial penalties to imprisonment, reflecting the severity of the offense and adhering to strict enforcement of tax codes.

How does Georgia compare to other low-tax countries for expatriates and nomad capitalists?

Georgia is competitive as a low-tax jurisdiction with its territorial tax policy, simplified tax code, and absence of wealth and inheritance taxes, making it appealing for expatriates and nomad capitalists in comparison with other countries offering similar tax benefits.

What steps should one take to establish themselves as a non-resident for tax purposes in Georgia?

To establish oneself as a non-resident for tax purposes in Georgia, one should ensure they do not meet the physical presence requirement of 183 days in a year, maintain tax residency in another country, and possibly formalize their non-residency status with the Georgian Revenue Service.

Georgia as a Tax Haven: Offshore Formation Structures From Offshore Protection

Ready to take advantage of Georgia's business-friendly environment and tax benefits? Discover how you can optimize your business operations and investment strategies by establishing a presence in Georgia. With streamlined company formation processes, favorable tax policies, and a supportive legal framework, Georgia offers unparalleled opportunities for entrepreneurs and investors.

Take the first step towards globalizing your business – explore the benefits of setting up in Georgia today!

Click below for more information on a Georgia Financial Company:

• Georgia International Financial Company Licence