When Is an Individual Required to Pay Taxes in Georgia?
Georgian law sets out clear residency rules. Every citizen or permanent resident is required to pay tax on their income. The tipping point for foreign nationals (including Israelis) is a stay of more than 183 days within the country during a one-year period. Once you cross this threshold, you are considered a tax resident in Georgia and the local tax laws apply to you.
The Tax Structure in Georgia: Simplicity and Uniformity
Unlike Israel, Georgia does not operate with progressive tax brackets. The system is based on flat tax rates, which makes business budget planning easier:
Personal Income Tax
The law sets a uniform tax of 20% on the gross income of the individual. This rate applies to salaries, business income, and rental income received from properties leased to local residents.
Corporate Tax
Corporate tax stands at 15%. Foreign companies operating in the country pay this tax only on income generated within Georgian territory.
Important to know: Georgia applies the “Estonian model,” under which a company may be exempt from tax as long as profits are reinvested back into the business and not distributed as dividends.
Taxation of Dividends and Interest
The tax on dividends (shareholder profits) and on interest income within Georgia stands at a fixed rate of 5% only. The tax is withheld at source, but may vary in accordance with the double taxation treaties to which Georgia is a party.
Real Estate Taxation: Significant Benefits for Apartment Buyers
One of the strongest engines for Israeli investment is the lenient taxation in the real estate field, anchored in the Georgian Tax Code:
- No purchase tax: Georgia does not impose tax on the purchase of property.
- Capital gains tax: the tax on profit from the sale of property stands at 5% only for individuals.
- Exemption for long-term holding (two years): in accordance with Section 82 of the Tax Code, the sale of a residential property held for more than two years (24 months) is exempt from capital gains tax, provided that the property was not used for economic/business activity during this period.
- Holding taxes: the taxation on land and property holding in Georgia is considered very marginal for private investors.
VAT and Social Contributions
- VAT: stands at 18%. Companies are required to register and pay VAT once their annual turnover exceeds 100,000 GEL (Georgian Lari).
- Pension contribution: the law mandates a “2+2+2” model – the employee contributes 2%, the employer adds 2%, and the government contributes an additional 2%.
Frequently Asked Questions – Taxes in Georgia
Is there double taxation between Israel and Georgia?
There is a treaty for the prevention of double taxation between the two countries. This means that taxes paid in Georgia may be credited in Israel. We recommend advance tax planning to maximize the benefits.
What is the “Estonian model” in corporate tax?
This is a model that allows a company not to pay corporate tax on profits it leaves within the business for growth purposes. Tax is paid only at the point in time when the company decides to distribute dividends to its shareholders.
Does the purchase of an apartment in Georgia require reporting in Israel?
Yes. As a general rule, Israeli residents are required to report assets and income generated abroad. Our legal services help you meet the reporting requirements in both countries.
Why Choose Vaknin Yariv Law Office for Guidance in Georgia?
Managing international taxation requires physical presence and a deep understanding of local dynamics. Vaknin Yariv Law Office operates an active branch in Tbilisi, giving our clients a major on-the-ground advantage.
Adv. Yariv Vaknin leads the comprehensive legal strategy for protecting our clients’ investments. We provide a professional and discreet service through our offices in Afula, Bnei Brak (B.S.R 4), New York, and Tbilisi.
Please note: the content on this site is for enrichment purposes only and constitutes general information. The information does not constitute legal advice and is not a substitute for binding advice.
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