Foreign Company Owner Living in Georgia: What You Owe

You own a company registered in Estonia, Delaware or the United Kingdom, and you run it from a flat in Tbilisi. Two tax questions follow, and they have different answers: what you owe Georgia as an individual, and whether Georgia treats the company itself as its own. A day count settles the first. Where the company is actually managed settles the second.

Your tax and your company's tax are separate questions

You are taxed as a resident individual once the day count catches you, and a resident's income that is not Georgian-source is exempt. Your company is not an individual at all: it is either a Georgian enterprise or a foreign one, and incorporation abroad answers only half of that test.

Merging the two gets both wrong. A company registered elsewhere does not keep your own invoices out of Georgian tax, and your own residency does not by itself pull the company in.

When you become a Georgian tax resident

You are a Georgian tax resident for the whole tax year once you have actually been in the country for 183 days or more within any continuous 12 calendar month period that ends in that year, under Art 34(2) of the Tax Code. Residency turns on days of physical presence, not on a residence permit, a registered address or a registration as an individual entrepreneur, none of which appears in Art 34 at all.

Some days here are struck out of the total: time you spend in the country in diplomatic or consular service, on the staff of an international organisation covered by a Georgian treaty, in a foreign state's service, in transit, or for treatment or leisure. Status is set period by period, so days that already made you resident for one tax year are not counted a second time for the next one.

What Georgia taxes once you are resident

A resident individual's income that is not Georgian-source is exempt, which is why what counts as foreign income decides the size of your personal bill rather than your nationality or where you keep an account.

Art 104 has 2 clauses that decide this: a service is delivered in Georgia where it is physically performed inside the country, and where a Georgian resident supplies it to a recipient sitting in another state. The carve-out on the second of them is a service supplied through a permanent establishment the provider has abroad. Where the money is received is expressly left out of the test, so invoicing into an account in another country changes nothing.

So work you do from Georgia for clients abroad is Georgian-source income, not foreign income. The resident-provider clause stands on its own, which means the answer does not change for the weeks you work from somewhere else, unless the service goes through a permanent establishment you have abroad.

That income is taxed at 20% under the general rules, and nothing is withheld on a payment from a foreign client, so it goes on your own annual return, for which the Revenue Service states the last day as 31 March of the following year.

When Georgia treats your foreign company as its own

The Tax Code calls a company a Georgian enterprise when its place of business or its place of management is in Georgia. Either test on its own is enough, and registration abroad answers only the first of them.

Place of business runs down a ladder: the place of state registration, failing that the legal address in the founding documents, failing that the principal place of business as the tax authority determines it, and failing that the place of management.

Place of management means the place of effective management, that is the place where the board of directors or another management body exercises its managerial functions under the founding documents, whatever the location of the top controlling bodies and wherever the income arrives. Where a company is run by a manager appointed by agreement or resolution, or by a person who simply runs it without either, the place of management is that manager's own place of business or place of residence.

A company registered abroad whose director sits in Tbilisi and takes its decisions there therefore has its place of management in Georgia, which makes it a Georgian enterprise. Art 28 sets no minimum number of days, no count of board meetings and no de minimis, so the test turns on where the managing is actually done.

A Georgian enterprise is taxed under the distributed profit system, where 15% falls due on profit that leaves the company rather than on profit as it is earned, and it files a profit tax return every month, by the 15th of the month that follows.

Where two states both claim a company as their resident, Georgia's agreements with the United Kingdom and Germany each award it to the state of effective management, and the Ministry of Finance lists 58 countries and territories with a treaty in force.

Neither the Code nor either of those treaties gives you a number to measure yourself against, so the answer rests on facts: who takes the decisions, and from where. David Sisvadze, who spent 6 years inside the Revenue Service of Georgia, sets out where a particular arrangement lands in a written opinion he signs.

What the Code does not have is an attribution rule. There are no controlled foreign company provisions in it, and the general anti-avoidance article does not tax a Georgian resident on a foreign company's retained profit. Georgia reaches a foreign company through residence or through a permanent establishment, not by looking through it to you.

What creates a permanent establishment in Georgia

If the company stays foreign, the second route in is a permanent establishment: a fixed place through which a foreign enterprise carries on economic activity in Georgia, wholly or in part, including activity carried on by an authorised person.

A foreign enterprise with one is taxed on the same distributed profit basis, and the object is the payments made and expenses incurred that arise from that establishment's activity. The rate is 15%, the taxable amount is the payment divided by 0.85, and the return is the same monthly one, due by the 15th. Georgian-source income that is not attributable to the establishment is taxed at source instead.

5 of the 9 arrangements above do not create one on their own, which is where holding shares, letting property out and keeping a place only to buy goods or collect information sit. Registration is not something you file for: the duty to register a permanent establishment lies on the tax authority, which keeps the register. Where a branch of a foreign company goes into the register of entrepreneurs and non-commercial legal persons, the Public Registry puts it on tax record and issues an identification number at the same time.

The treaty definitions are narrower than the Code's, and the construction site line above is the clearest case: the United Kingdom treaty makes a site a permanent establishment only after more than 12 months, and the Germany treaty after more than 6.

What you owe whichever way the company question lands

Two duties do not wait for any of that to be settled.

The first is reverse charge VAT. Services supplied in Georgia by a taxable person who is not established here are taxed in the hands of the customer at 18% of the amount paid, and the reverse charge lands on every person established here except a non-entrepreneur individual and an enterprise inside a free industrial zone, with VAT registration making no difference to whether it is owed.

What registration changes is the cost. A registered buyer assesses the tax in its monthly VAT return and credits it in that same return where the service serves its taxable supplies, while an unregistered one pays it by the 15th of the month following the reporting period and has no credit to take. Supplies that are exempt from VAT are outside the charge altogether.

The second is withholding when you pay a non-resident. Georgian-source payments to a person with no permanent establishment in Georgia are taxed at source, at a rate that depends on what the payment is.

The last line turns on where the recipient is registered. A country counts as one with preferential taxation when its law exempts a legal person from profit tax, imposes none on received or distributed profit, or taxes it at no more than one third of the Georgian rate, which means 5% or less, and the Government sets the list by resolution.

Taking money out of the company

Only dividends from a resident legal person are Georgian-source, so a dividend from your company registered abroad is exempt in your hands as a Georgian resident. A Georgian company works the other way: it withholds 5% when it pays a dividend to an individual, and that 5% is the end of the tax for a resident individual, who does not add the dividend to gross income.

Salary is different again. Pay for employment physically performed in Georgia is Georgian-source whoever pays it and wherever it is paid, so salary from your own foreign company is taxable here at 20% for the work you do while you are in the country. No Georgian tax agent withholds it while the employer is a non-resident with no establishment here, which leaves it on your annual return rather than in a monthly filing.

Frequently asked questions

How many days in Georgia make me a tax resident?

183 days or more of actual presence, counted across any continuous 12 calendar month period that ends in the tax year. Any part of a day counts as a full day, and time you spend outside the country on a business trip, on holiday, in treatment or in study counts as time inside it. Once the total is reached, residency covers that whole tax year.

Does a Georgian residence permit make me a tax resident?

No. Art 34 counts days of physical presence and nothing else, and a visa, a residence permit, a registered address and a registration as an individual entrepreneur appear nowhere in it. A permit counts for tax in one place only, as a document accepted on the high net worth individual route, which is a separate procedure with conditions of its own.

Is the salary I pay myself from my own foreign company taxable in Georgia?

Yes, for the work you do while you are in Georgia. Pay for employment physically performed here is Georgian-source income whoever pays it, taxed at 20%. Your foreign employer has no Georgian withholding duty while it has no establishment here, so you declare the salary yourself on the annual return, due by 31 March.

Do I owe Georgian VAT on software and advertising bought from abroad?

If you are established in Georgia as anything other than a non-entrepreneur individual, yes: 18% of the amount paid, under the reverse charge, whether or not you are registered for VAT. A VAT-registered buyer assesses and credits it in the same monthly return where the purchase serves taxable supplies. Services exempt from VAT are outside the charge.

Does a double tax treaty stop Georgia taxing my company?

Not where the effective management sits in Georgia. Business profits are taxable only in the state of residence unless the enterprise trades in the other state through a permanent establishment there, and where both states claim the same company as resident, the United Kingdom and Germany treaties both give it to the state of effective management.

How far back can the Revenue Service go if it decides tax was owed here?

3 years. Tax is assessed and a demand served inside 3 years, measured from the close of the calendar year the liability arose in, and an audit reaches back 3 years from the close of the year it is looking at. Either period stretches by 1 year where less than a year is left and you file a return covering it.

Should I close the foreign company and register in Georgia instead?

It depends on where the work is done and who the customers are. A Georgian company pays 15%, and only on profit it distributes, while an individual entrepreneur with small business status is taxed at 1% of turnover up to GEL 500,000 a year, so the comparison is between two real numbers: what you would distribute, and what you turn over.