Income tax planning for individuals in Georgia is becoming increasingly relevant, especially for high-income individuals, freelancers, and individual entrepreneurs. The standard income tax rate is 20%, but the Tax Code of Georgia provides numerous exemptions and special taxation regimes that, if used correctly, significantly reduce the tax burden. For example, an entrepreneur with "Small Business" status is taxed at only 1%, while certain categories of income (e.g., inheritance, gifts between 1st and 2nd class heirs) are completely exempt. Planning is particularly important for those with income from foreign sources, as the issue of residency and determining the source of income (Georgia vs. foreign) plays a decisive role in taxation. Incorrect declaration or failure to utilize exemptions can lead to overpayment of taxes or, conversely, penalties for concealing income.
What Does Income Tax Planning Cover?
Specialists on Legal.ge offer a personalized tax strategy that saves your finances to the maximum extent within the law. The service includes:
- Status Optimization: Analyzing whether you meet the requirements for "Small Business" (1%) or "Micro Business" (0%) status and assisting with registration.
- Foreign Income Analysis: Determining the source of income received from abroad and whether it is subject to taxation in Georgia (territorial taxation principle).
- Residency Management: Planning to obtain or avoid tax residency (183-day rule, High Net Worth Individual status).
- Deduction Utilization: Documenting and deducting expenses permitted by law to reduce the taxable base (rent, services).
- Asset Disposal Planning: Managing timelines when selling real estate or vehicles (e.g., the 2-year rule) to achieve tax exemption.
Common Situations and Scenarios
The most frequent scenario involves freelancers: an IT specialist works for a foreign company under contract and receives a salary. If they register as an Individual Entrepreneur and obtain Small Business status, they pay 1% instead of 20%. A second scenario involves selling an apartment: an individual sells an apartment 1.5 years after purchase. They are taxed 20% on the capital gain. If they had waited another 6 months (total 2 years), the tax would have been 0%. A third scenario involves "Digital Nomads": a foreigner lives in Georgia, works remotely for a US company, and assumes they pay no tax. After 183 days, they become a resident, and their income (if considered Georgian-sourced) may be taxed, requiring advance planning.
Georgian Legal Framework
Income tax is regulated by Article 79 and subsequent articles of the Tax Code of Georgia. The Code establishes residency rules (Article 34), income tax rates (Article 81), and exemptions (Article 82). Special taxation regimes (Small/Micro Business) are regulated by separate chapters. Regarding foreign income, the principle applies that income received by a resident individual from a foreign source is exempt, though the definition of "foreign source" is complex and depends on the place where services are rendered.
Step-by-Step Service Process
Working with a specialist on Legal.ge begins with an audit of the income structure. In the first stage, all income sources are identified. In the second stage, the expert prepares a "Tax Plan"—selecting the optimal status (e.g., Individual Entrepreneur) and preparing recommendations for expense documentation. The third stage involves preparing and filing the annual declaration by March 31 or November 1 to ensure compliance with legal deadlines.
Why Choose Legal.ge?
Saving on income tax legally is entirely realistic. Legal.ge gives you access to experts who know every "nook and cranny" and exemption of the Tax Code. Specialists on our platform will help ensure that the maximum part of your hard-earned money stays with you and not the budget, without any legal risk.
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