Living in Georgia but want to operate through non Georgian company - possible?

[backpacker]

Guys do you really think a country such as Georgia has the means to enforce place of effective management on some Western expat living there?

Yes!

Clearly not but people in this forum like to masturbate to the idea of hypothetical tax chaos situations.

Naive!

 

[TheCryptoAnt]

Yes!

Naive!

 

[Marzio]

people in this forum like to masturbate

Oh yes, at least twice a day like prescribed by my doctor.

 

[CyprusLawyer101]

Where are your clients based?

 

[georgianboy]

assuming PE is not issue
Still, where would you recommend incorporating?

Customers from u.s, UK, western europe

 

[CyprusLawyer101]

assuming PE is not issue
Still, where would you recommend incorporating?

Customers from u.s, UK, western europe

Well, in the absence of sourcing clients from Georgia you immediately have a reduced tax risk from Georgian Authorities. PE risks are therefore out of consideration. Georgia has no CFC rules last time I checked. You are only looking at management and control issues ( tax residency) which has a very low risk prevalence and can be easily reduced with proper structuring. Cyprus is an excellent option. If you would like to discuss it, I can PM you. Kindly let me know.

 

[ska]

But what are the permanent establishment rules in Georgia?

If I'm a Georgian resident individual entrepreneur that manage or a director in the foreign company and I get dividends, how much tax will I need to pay? Will it be As a Georgian company (20% corporate tax) or as the individual entrepreneur : 1-3% ?

I'm not trying to avoid paying taxes, I'm trying to minimize them while protecting my privacy and liability.

I think you can just invoice your foreign company as an individual entrepreneur and pay 1-3% taxes as you're doing the work yourself
I don't see any problems

 

[boy20hki]

I said "you need to hire somebody there" so by paying a minimal wage to a director he will not be seen as the one managing the company from Georgia. 3% CIT in RO + 5% dividends income in Georgia = 8% total tax


Which is exctly his case.

This will not give him any advantage if he still manages/controls/coordinates the company from Georgia or this company is owned by him (>25% stake) and he wants to cash in dividends.


Salary or dividends = Yes.

Capital gains = No
Accumulate the value, then sell. You end up with a much lower tax bill. That's the idea of the Estonian Tax model.
Of course, it only works if someone does not rely on this company as the only source of income (which would anyway destroy most alternative tax options).

Well, in the absence of sourcing clients from Georgia you immediately have a reduced tax risk from Georgian Authorities. PE risks are therefore out of consideration. Georgia has no CFC rules last time I checked. You are only looking at management and control issues ( tax residency) which has a very low risk prevalence and can be easily reduced with proper structuring. Cyprus is an excellent option. If you would like to discuss it, I can PM you. Kindly let me know.

Could you explain a bit more, as I see that taxation in Georgia is quite nuanced and confusing. There are conflicting sources and definitions of what to calculate the tax.

+If you manage a foreign enterprise (any legal business entity) remotely (from which jurisdiction does not matter) from within Georgia territory while you are a tax resident in Georgia AND you do not have economic substance in the foreign country (no local staff, office), that foreign enterprise has pay tax in Georgia aka. 15% corporate tax. Why do you guys mention 20% tax here?
+When That foreign enterprise issue dividends to you from abroad, normally foreign dividend are tax free in Georgia only if you are truly passive shareholder but in this case when you are owner of it / performing service to be sold by that company while you are located in Georgia soil, then the dividend is considered as "Other income" by Georgian tax authority and will be taxed as 20% personal income tax in Georgia? I do not understand why you said dividend tax is 5% , afaik that 5% is applied to local company incorporated in Georgia only not offshore company

Here is number from https://expathub.ge/,
Georgia LLC: 15% corporate tax & 5% dividend tax
Georgia Virtual Zone Company: 0% Corporate tax, 5% dividend tax, 0% VAT, 20% salary tax
Georgia International Company Status: 5% Profit Tax, 0% dividends, 5% salary tax

+So overall with this setup: Georgia charges CIT 15% + Dividend tax 20%. What is the point of this, no tax saving benefit? Would it be easier to just choose the the route of Georgia Small Business Status for Individual Entrepreneur with 1% tax, sending big invoice to your offshore company as a Georgia-based individual entrepreneur and keep your Georgia turnover less than 165k USD/year. That offshore company with no local susbstance also taxed 15% corporate tax by Georgia but we keep its profit to minimal by invoicing its big invoice from Georgia.

 

[andrew28fl]

Hello,

I live in the country of Georgia.
They have here great tax benefits for sole trader / individual entrepreneur, but not so much for companies. Also, privacy sucks, and there is no legal protection like an LLC have.

Is there some way for me to do all my work through some company ill form outside Georgia for legal and privacy protection.
This way
Everything will be under the company name and I'll just get dividends or salary (whatever that is more tax beneficial) as an individual or individual entrepreneur and pay tax only on that?

1. Is such company will be considered Georgian company because the management of it and the work is done through Georgia?

2. Is it even legal to do this?

3. If it's doable, what are comfortable jurisdictions to do it without increasing my tax burden due to corporate tax of such company?

P.S
I'm not interested in U.S LLC because I'm not interested to get ITIN or provide and info to u.g goverment.

And, also not Emirates, because it's just too expensive to open and maintain.

Thanks for the help in advance.

I live in Tbilisi. I have read the expathub.ge articles as well, but every time I ask a fellow entrepreneur, they say Georgia doesn't tax foreign income/entities (which technically is wrong, I know). I personally know owners of US LLCs who haven't paid taxes for 5 years of more in Georgia without any issues.

For the people living in Georgia, do you or know any one who actually pays taxes on their US LLCs in Georgia? I think most people file their 5472s and 1120s and call it a day.

 

[boy20hki]

I live in Tbilisi. I have read the expathub.ge articles as well, but every time I ask a fellow entrepreneur, they say Georgia doesn't tax foreign income/entities (which technically is wrong, I know). I personally know owners of US LLCs who haven't paid taxes for 5 years of more in Georgia without any issues.

For the people living in Georgia, do you or know any one who actually pays taxes on their US LLCs in Georgia? I think most people file their 5472s and 1120s and call it a day.

Those owners of US LLC you know, do they just register with Georgia Small Business Status for Individual Entrepreneur and keep their Georgia sole trader income less than 165k to get 1% tax, correct? In fact, cost of living there is low so not really need to declare as high a turnover as 165k on Georgia paper at all I guess. And most of their real money is kept in their US LLC biz account in brick and mortar USA bank (maybe not EMI like Mercury)?

 

[andrew28fl]

Those owners of US LLC you know, do they just register with Georgia Small Business Status for Individual Entrepreneur and keep their Georgia sole trader income less than 165k to get 1% tax, correct? In fact, cost of living there is low so not really need to declare as high a turnover as 165k on Georgia paper at all I guess. And most of their real money is kept in their US LLC biz account in brick and mortar USA bank (maybe not EMI like Mercury)?

The ones I know haven't registered with Georgia at all. They don't file taxes in Georgia. In their mandatory US filing of 5472s and 1120s, they do claim that they manage the entities from Georgia. For immigration, they use their Canadian/UK passports and get 360 days/year visa free access to Georgia.

I know that even Georgians skim on their taxes, a lot. Like nobody pays the 5% income tax on rental income. I know a lady who managers 25 properties and pays nada in taxes. But I would love to hear from more expats who might have contradicting information. Has anyone ever gotten in trouble over their taxes from foreign income?

 

[boy20hki]

The ones I know haven't registered with Georgia at all. They don't file taxes in Georgia. In their mandatory US filing of 5472s and 1120s, they do claim that they manage the entities from Georgia. For immigration, they use their Canadian/UK passports and get 360 days/year visa free access to Georgia.

I know that even Georgians skim on their taxes, a lot. Like nobody pays the 5% income tax on rental income. I know a lady who managers 25 properties and pays nada in taxes. But I would love to hear from more expats who might have contradicting information. Has anyone ever gotten in trouble over their taxes from foreign income?

That's interesting to know how the situation is handled there in reality...could be quite different from written law...
I think maybe they use this treaty, it says these citizens can spend 1 year in Georgia w/o visa...but I guess as longer stay than 1 year they probably have to register (tax) residency or as natural person there unless they travel around different places frequently...
https://migration.commission.ge/index.php?article_id=160&clang=1If they do register then their income would be taxed either 1% or 20% I think, as US LLC is pass-through entity and taxed as local income...but US does not join CRS or report to Georgia they can get away easily with not revealing their US LLC. I have same kind of setup so for this I understand.
Is international/Cross border banking transaction there as bad as people complain about it here? I guess your friend must USD swift wire from US LLC bank account to the their Georgian bank frequently...

 

[TheCryptoAnt]

Is international/Cross border banking transaction there as bad as people complain about it here? I guess your friend must USD swift wire from US LLC bank account to the their Georgian bank frequently...

Personal acc are not really restrictive in any currency if the amount is on the lower side.
USD coming from x to Georgia is fine too.

The issue most people refer to is with corp accs.

 

[andrew28fl]

I guess as longer stay than 1 year they probably have to register (tax) residency or as natural person there unless they travel around different places frequently..

If you go by the law, you could trigger tax residency (and hence taxes on global income) even without staying for 183 days in Georgia. Permanent Establishment would get triggered if you make any business decisions/manage operations from within Georgia. The point I was trying to make is that Georgia doesn't seem to care, or have resources to enforce any of this. Most the expats here are not super wealthy, they are more like English teachers who earn money online or run some dropshipping/shopify businesses. I think if Georgia got too strict with them, they would just pack up and leave. Expats who are in Georgia on the 360 day entry permits, just make a visa-run to a neighboring country to renew and get another 360 day access.

If they do register then their income would be taxed either 1% or 20% I think, as US LLC is pass-through entity and taxed as local income...but US does not join CRS or report to Georgia they can get away easily with not revealing their US LLC. I have same kind of setup so for this I understand.

Again, if you go by the law, all the income of that LLC would be taxable as personal income in Georgia. This isn't enforced or pursued by the authorities to the best of my knowledge. Kinda like Thailand..they need the expats here otherwise their economy would lose momentum.

Personal acc are not really restrictive in any currency if the amount is on the lower side.
USD coming from x to Georgia is fine too.

The issue most people refer to is with corp accs.

Agreed. When I opened my account at TBC, they gave me GEL, EUR and USD accounts at the same time. When I wire money from US to Georgia, when the amount was over 100k, they asked me for some details about the source of funds. I just make it a point to only transfer money from my personal foreign account to my personal account in Georgia. So source of funds would be "savings for personal expenses". All my future wires have gone thru without any issues.

From my early research, which is a few years old now, it's a pain to operate a Georgian entity. Tons of reporting and laws. I just decided not to dabble into that early on.