Retirement tax planning in Georgia is a relatively new but rapidly growing issue, especially following the implementation of the cumulative pension system in 2019. Besides the state scheme, many citizens and resident foreigners participate in private pension funds or hold investment portfolios designated for retirement age. From a tax perspective, it is important to know that pension contributions are not taxed with income tax in certain cases, while withdrawal of funds at retirement age may be subject to taxation. The situation is confusing for expats who have pension savings in their home country and in Georgia; here, the analysis of Double Taxation Avoidance Treaties is crucial to ensure the pension is not taxed twice. Proper planning allows you to maximize your savings and minimize tax losses upon retirement.
What Does Retirement Planning Service Cover?
Specialists on Legal.ge offer a comprehensive approach to protecting your retirement assets. The service includes:
- State Scheme Analysis: Verifying the correctness of cumulative pension contributions (2%+2%+2%) and assessing the tax consequences of exiting the system (if permitted by law, e.g., for foreigners leaving permanently).
- Private Pension Funds: Analyzing tax incentives for participating in private schemes (upon contributing and withdrawing).
- International Pensions: Determining the taxation rules in Georgia for pensions received from abroad (mostly exempt, but requires confirmation).
- Investment Taxation: Optimizing taxes on income (dividends, interest) derived from investments made for retirement purposes.
- Pension Withdrawal: Planning liabilities arising when withdrawing funds from a pension fund as a lump sum or in installments.
Common Situations and Scenarios
A common case is a foreigner working in Georgia who is automatically enrolled in the pension scheme. They want to know what happens to their savings when they leave Georgia. Legislation provides certain procedures for refunding or transferring funds, which triggers tax consequences. A second scenario involves a Georgian citizen receiving a pension from abroad (e.g., Germany). It is important to determine if they must pay income tax in Georgia. Typically, the Tax Code exempts state pensions, but funds from a private pension fund might be treated as other income. A third scenario is private insurance: an employer contributes to a private pension fund for an employee. This amount is a benefit for the employee and is taxed like salary unless a special exemption applies.
Georgian Legal Framework
Pension taxation is regulated by the Tax Code of Georgia and the Law of Georgia on Cumulative Pensions. Article 82 of the Tax Code establishes income tax exemptions, including for state pensions. International aspects are regulated by Double Taxation Avoidance Treaties (Article 18 - Pensions), which determine which state has the primary right to tax the pension.
Step-by-Step Service Process
Working with a consultant on Legal.ge begins with an audit of your pension portfolio. In the first stage, information on all assets (state, private, foreign) is gathered. In the second stage, the expert analyzes the tax status of each source under current legislation. In the third stage, a long-term strategy is developed—how to allocate funds so that at retirement age you receive maximum benefit with minimum tax.
Why Choose Legal.ge?
Retirement planning is caring for your future. Legal.ge gives you access to experts who understand both the local pension system and international treaties. They will help ensure your pension savings are secure and efficient, allowing you to face your well-deserved retirement with peace of mind.
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