Does Georgia Tax Foreign Income? Source and Residency Rules

Georgia does not tax foreign income earned by an individual. A tax resident is exempt on income that is not Georgian-source, and a non-resident is taxed only on Georgian-source income. The mistakes come from how source and residency are defined. If you apply either definition wrongly, Georgian-source income is left out of a declaration, which brings interest and a penalty, or your home country sends a tax bill you did not expect. This post explains both tests.

Foreign Income Tax Rules for Residents and Non-Residents

The general rule in the Tax Code taxes a resident individual on worldwide income. The Code then exempts a resident individual’s income that is not Georgian-source, so the practical result is territorial. The worldwide rule does not apply to non-residents, who are taxed on Georgian-source income only.

Taxpayer	Georgian-source income	Foreign-source income
Tax resident individual	Taxed at 20%, or under a special regime such as Small Business Status	Exempt
Non-resident individual	Taxed by withholding at source, at 20% through a permanent establishment, or under a special regime such as Small Business Status	Not taxed

Georgian-source income is taxed at the flat 20% income tax rate in Article 81 of the Tax Code, unless a preferential regime applies. Salary from a job done in London and rent from a flat in Spain are both outside Georgian tax for a resident.

Georgian Tax on Non-Residents

A non-resident with Georgian-source income is taxed by withholding at source, or by income tax when operating through a permanent establishment here:

• 5% on a dividend from a Georgian company
• 5% on interest, as the general rate
• 5% on royalties
• 10% on a Georgian company’s payment for services a non-resident performs in Georgia, and on other Georgian-source income
• 15% on interest, royalties and other Georgian-source income when the recipient is registered in a preferential-tax jurisdiction
• 20% income tax for a non-resident individual who operates through a permanent establishment in Georgia

Georgian-source income that was not fully covered by withholding or by a monthly declaration is reported in the annual income tax return. The return is due before 1 April.

What Counts as Georgian-Source Income

Article 104 of the Tax Code lists the categories of income treated as Georgian-source. Most foreign founders and freelancers fall under two of them: employment in Georgia and services delivered in Georgia. On employment income, the employer withholds 20% from the salary.

Article 104(2) states that the place where income is received is not taken into account when its source is determined. The client’s country, the invoice currency and the bank the transfer comes from do not change the source.

Source Rules for Services

Article 104 sets eight conditions under which a service counts as delivered in Georgia, and meeting any one of them is enough. Two apply to most freelancers, agencies and remote contractors:

• Physical performance. The service is actually rendered in Georgia.
• Residency. A Georgian tax resident serving a client in another country has Georgian-source income, except where the resident proves the service was delivered through a permanent establishment abroad.

The two tests are independent, and the residency test applies only to a Georgian tax resident. A non-resident has Georgian-source service income only for work physically performed in Georgia.

Your situation	Test met	Georgian-source
You live and work in Georgia and invoice a foreign client	Physical performance	Yes
You are a tax resident, travel briefly and have no permanent establishment abroad	Residency	Yes
You are not a tax resident and work the whole year from another country	Neither	Very likely no

A translator who lives in Kutaisi and invoices a publisher in Vienna in euros has Georgian-source income. For a resident, income from foreign clients is therefore usually not foreign income, and it is taxed in Georgia at 20% or under a special regime.

Tax Residency in Georgia: The 183-Day Test

You are a Georgian tax resident for a tax year if you were physically present in Georgia for 183 days or more in any continuous 12-month period ending in that year. The days do not have to be consecutive. The 12 months can run from any date, for instance from mid-March of one year to mid-March of the next, and do not have to match the calendar year.

Days are counted under these rules:

• Days in transit between two other countries, on diplomatic or consular duty, as staff of an international organisation under a treaty, or only for medical treatment or a holiday are not counted.
• A count already under way continues through absences for medical care, holidays, business trips and study.
• The count starts again every tax period, and days from an earlier period are not carried forward.

The Revenue Service checks border-crossing records, so add up your entry and exit stamps. A second route, for high net worth individuals, needs no days in Georgia and has its own asset and income conditions.

A Tax Residency Certificate proves the status. The Revenue Service issues it for one tax period, on an application through your rs.ge account.

Small Business Status: Foreign Clients and Work Done Abroad

Small Business Status taxes an individual entrepreneur’s turnover at 1% up to ₾500,000 a year, and it covers only turnover that is Georgian-source. The status has no residency requirement. Most holders are non-residents and can rely only on the physical performance test.

An entrepreneur who works in Georgia and invoices ₾100,000 to foreign clients owes ₾1,000. The same entrepreneur, not a tax resident and working the whole year from another country, very likely has no Georgian-source income, and the 1% does not cover it. In that case it is doubtful that Georgia can tax the income. The stronger claim likely belongs to the country where the work was done or where the person is resident.

Work on the prohibited activities list, such as consulting, is excluded from the status even when it is performed in Georgia. That income is reassessed at 20%.

Tax on Foreign Income for Georgian Companies

The exemption for foreign-source income is stated for resident individuals. A company formed under Georgian law is a Georgian tax resident, and the place it is managed from does not change that. It is taxed on a different basis: 15% corporate tax when profit is distributed, and 0% on profit kept in the company.

For a foreign owner, these rules apply:

• A dividend has 5% withheld at source. The rate is the same for individual shareholders, Georgian or foreign, and for foreign companies.
• A dividend the company receives from its own foreign subsidiary is generally not taxed again, unless the subsidiary sits in a preferential-tax jurisdiction.
• Moving from an individual entrepreneur to an LLC does not remove the Article 104 source test, and LLC accounting means full accounts from the day of incorporation.

The country you manage the company from can apply its own test. A place-of-effective-management test is common across Europe, and controlled foreign company rules let a number of countries tax a resident’s share of a foreign company’s profit before it is distributed. Without a treaty, both countries can claim the company as resident.

Double Taxation Treaties With Georgia

Georgia has double taxation treaties in force with 58 countries, according to the Ministry of Finance treaty list. There is no treaty with the United States, Canada, Australia or Brazil, and the treaty signed with Russia in 1999 never entered into force.

A treaty allocates taxing rights between the two countries, caps the withholding tax one country charges on payments to a resident of the other, and decides which country counts as your residence when both claim you. The residence tie-breaker runs in a fixed order: permanent home, centre of vital interests, habitual abode, nationality, and then a mutual agreement procedure between the two tax authorities.

A treaty benefit has to be claimed, and the route depends on your position:

• A Georgian tax resident presents a Georgian Tax Residency Certificate to the foreign tax authority.
• To have Georgian withholding reduced, a non-resident applies under the Minister of Finance’s Order No. 633 and attaches a home-country residency certificate, legalised or apostilled, with a certified Georgian translation. Once the application is complete, the Revenue Service must answer within 30 calendar days.

A tie-breaker settles a conflict between two residency claims, so an entrepreneur who registered in Georgia and never passed 183 days generally has no Georgian residency to claim under it. Georgia’s treaties also include a principal purpose test. A claim can be refused if getting the benefit was one of the main reasons the arrangement was set up.

Documents That Prove the Source of Income

A contract or an invoice documents the source of income and cannot change it, and these documents are what the Revenue Service sees. Keep the records that match the position you rely on:

• Physical performance in Georgia: records of your travel, a rental agreement or utility bills, and emails or messages that place you in Georgia on the days you worked.
• Residency test: your day count and a Tax Residency Certificate.
• Exempt foreign-source income: a record of where each amount came from.

Contracts and invoices should describe the work as it was performed, and a services agreement that states delivery from Georgia is evidence only when the statement is accurate. In our accounting for individual entrepreneurs, clients upload contracts with the month’s invoices and bank statements, and tax residency proof where a treaty applies.

What Your Home Country May Still Tax

The exemption for foreign-source income is Georgia’s rule only. Most countries tax their residents on worldwide income, and registering a business in Georgia or becoming a Georgian tax resident does not end residence in another country. That is decided under the other country’s own law, and some countries keep taxing former residents for years after they leave.

Examples from other countries:

• Germany. Under extended limited tax liability, Germany can keep taxing certain German-source income for up to ten years after a German citizen leaves. It applies to a citizen who was fully tax liable in Germany for at least 5 of the previous 10 years, keeps substantial economic interests there and moves to a country whose tax burden is below two thirds of the German level.
• United States. Citizens are taxed on worldwide income wherever they live. With no tax treaty and no totalization agreement, Georgian tax is paid in addition to US tax and US self-employment tax.
• The country you work from. Profit from work you personally perform there can be taxed there as a permanent establishment, and a sole proprietorship has no legal separation between you and the business.

Tax paid in Georgia does not offset a home-country bill unless a treaty provides for it. A person who owes 35% at home and pays 1% in Georgia owes both. Settle your home country’s exit requirements first, and choose the Georgian structure after that.