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Tax Minimization in Georgia

Tax Minimization in Georgia

Tax minimization in Georgia refers to the legal measures through which an individual or a company uses the country’s tax system in such a way that it can reduce its overall tax burden. This can be done with the assistance of tax specialists, who have an in-depth knowledge of the tax system and who can offer tax consultancy services.

Our team of lawyers in Georgia can provide tailored assistance to those interested in reducing their tax liability and can offer information on the current laws, tax treaties and other regulations in force that can be used for tax minimization.

What are the characteristics of tax minimization in Georgia?

Tax minimization must have a set of characteristics and it must fulfill all of them at the same time. In the list below, our Georgian lawyers have prepared a short presentation on the characteristics of tax minimization:

  1. tax minimization in Georgia is used as a way to reduce tax liability;
  2. the procedure is legal, and stays within the boundaries of the Georgian tax laws;
  3. it is carried out prior to incurring the tax liability;
  4. it is developed following tax deduction methods;
  5. it uses various tax strategies.

What are the best pathways to tax minimization in Georgia?

They can vary based on the nature of the taxpayer, who can be an individual or a company, a resident or nonresident or a foreigner who wants to expand a business or relocate it to Georgia. If we refer to a foreigner relocating here for personal or business purposes, one of the best ways to reduce overall taxation is by investing in real estate.

Real estate taxes in Georgia are very low, as they are imposed to rates of up to 1% from the value of the property, therefore foreigners can end paying less tax than in their own country if they opt to buy a house in Georgia.

Another way to reduce taxation is by starting a business in this country. Georgia has one of the lowest taxation systems in its region and one of the main advantages is that the registration of a legal entity is a straightforward procedure, with very simple registration steps.

Therefore, operating through a Georgian resident company or through a branch office can reduce the tax burden of a foreign company, simply by operating here. It must be noted that a foreign company activating in Georgia can benefit from the tax incentives available here, as well as of the tax exemptions granted to businesses.

There are tax minimization opportunities deriving from the double tax treaties signed by Georgia with its partner countries (there are 58 double tax treaties currently in force, according to the Ministry of Finance of Georgia), which can be detailed by our Georgian lawyers.

Businessmen who operate as individual entrepreneurs (sole traders) can benefit from significant tax reductions as well. Sole traders are taxed differently than corporate entities, as the first are taxed following the personal income tax. Our law firm in Georgia can present the current tax system applicable to natural persons.

What is the tax system applied to sole traders in Georgia?

Sole traders in Georgia are natural persons who conduct a business activity in their own name. The main distinction between a corporate entity and a sole trader is that in the case of the latter, there isn’t any legal difference between the business and the owner. Because the company and the owner are the same, the personal income tax system applies. However, the following apply:

  • individuals become liable for personal taxation in Georgia after 183 days of stay in the country;
  • the personal income tax is charged at a rate of 20%;
  • however, those who apply for the Small Business Status are charged with 1% for revenue up to GEL 500,000 per year;
  • turnover above GEL 500,000 is taxed with a tax of 3%;
  • low-income earners registered for the Small Business Status can pay 0% if their income is maximum GEL 30,000 per year.

However, in order to benefit from these low taxes, this category of business owners must register for this status, otherwise they can be taxed with the 20% tax. Therefore, the registration can be seen as a procedure towards tax minimization in Georgia. We invite you to contact our attorneys in Georgia for more details on other ways to reduce the level of taxation.