The Tax Frame for Declaring Foreign Income
Declaring income received from abroad stands on three questions: who the taxpayer is, what the object of taxation is, and when the declaration is filed. Article 79 of the Tax Code establishes directly: the taxpayer of income tax is a resident natural person, and a non-resident natural person who receives income from a source existing in Georgia. Article 80 defines the object: for a resident natural person the object is taxable income, determined as the difference between the aggregate income received during the calendar year and the deductions provided for by the Code for that period — and for a resident this aggregate income includes foreign income, because no carve-out exists. For a non-resident acting through a permanent establishment in Georgia, the object is calculated by the same logic within the income connected with the establishment; and the Georgian-source income of a non-resident without a permanent establishment is taxed at the source of payment, without deductions, in the manner established by the Code.
Relief from Double Taxation and the Credit
The principal practical question of foreign income is double taxation, and the Code defines its relief mechanism in the form of a credit: an enterprise is entitled to credit profit tax paid outside Georgia for the corresponding tax year, upon payment of the tax on that profit in Georgia, against income not received from a source existing in Georgia; an enterprise taxed on distributed profit applies an analogous credit in respect of the dividend paid. The law also sets a boundary: the credited amounts must not exceed the amounts of tax that would have been charged on that profit in Georgia under the Georgian rules and rates. This means the credit caps the foreign tax at the Georgian tax, not beyond it; for natural persons, other reliefs are settled by other norms of the Code and by international treaties, so the precise classification of each case — who the taxpayer is and which income enters the base — must be made before the declaration.
Deadlines and the Manner of Declaration
The deadline for the declaration is settled by Article 153: the income-tax declaration is submitted to the tax organ by the first of April of the year following the reporting year by resident natural persons whose income is not taxed at the source in Georgia — precisely the category touched by foreign income — as well as by enterprises and, under defined conditions, non-residents. Taking the deadline seriously is critical, because collecting the documentation of amounts received from abroad takes time. The law adds further rules: an entrepreneur natural person who ceases economic activity in Georgia submits a declaration of aggregate incomes and deductions within thirty working days; and the special case of inheritance by third- and fourth-line heirs — receipt during a tax year of property worth one hundred fifty thousand lari or more — spreads the tax over two calendar years, with detailed deadlines set by law. In addition, a natural person not obliged to file may nonetheless submit the declaration with a request for recalculation and refund of tax — a right that frequently serves as the instrument for recovering overpaid amounts.
In the end, the quality of a foreign-income declaration stands on documentary discipline. Amounts withdrawn from the source, documents confirming taxes paid in the foreign state, the trace of currency-exchange operations and the classification of correspondence — this list must be assembled before the declaration, because the tax organ examines exactly these documents as confirmation of the composition of the aggregate income. Experience shows that collection begun in the last weeks before the deadline breeds both errors and delay; the declaration calendar should therefore be built from the beginning of the year.
Frequently Asked Questions
Below we answer the most common questions about declaring foreign income.
Who is the taxpayer of income tax?
A resident natural person, and a non-resident natural person receiving income from a source existing in Georgia; for a resident, taxable income is the difference between aggregate income and deductions for the calendar year.
When is the annual declaration filed?
By the first of April of the year following the reporting year — for resident natural persons whose income is not taxed at the source.
Can foreign tax be credited?
Yes — for enterprises, in the form of profit tax, up to the amount that would have been charged in Georgia; reliefs for natural persons are settled by separate norms and treaties.
What happens when activity ceases?
An entrepreneur natural person submits a declaration of aggregate incomes and deductions within thirty working days.
How We Help on Legal.ge
Declaring foreign income requires precise determination of residence, classification of income and deadlines, and early preparation of documentation. On Legal.ge you can consult an experienced tax lawyer who will assess your situation, help you prepare the declaration and apply the credits. Fill in the request form on the site and receive qualified advice.