The taxation of individuals in Georgia is regulated by the Tax Code of Georgia and is based on residency status. For Georgian tax residents, personal income tax rules determine how income is calculated, reported, and taxed, as well as which exemptions and preferential regimes may apply.
Taxable Income and Reporting Obligations
For resident individuals in Georgia, the taxable base is defined as the difference between the total income received during a calendar year and the deductions allowed under the Tax Code for the same period.
Resident individuals are subject to an annual declaration obligation, meaning they are required to report their income on a yearly basis.
In the case of employment income, taxation is administered differently. Salary is taxed on a monthly basis; however, the obligation to calculate, withhold, and pay the tax to the state budget rests with the employer, who acts as a tax agent.
Scope of Taxation for Residents
Georgian tax residents are considered taxable on income derived from both Georgian and foreign sources. At the same time, an important feature of the Georgian tax system is that foreign-source income earned by resident individuals is exempt from personal income tax.
As a result, in practice, resident individuals are effectively taxed only on Georgian-source income, while foreign-source income falls outside the scope of taxation.
This means that if a Georgian resident sells shares in a foreign company, disposes of real estate located abroad, or realizes gains from other foreign assets, such income is not subject to taxation in Georgia.
Tax Rates
The standard personal income tax rate in Georgia is 20%, which applies to most types of taxable income, including salary and other Georgia-source earnings.
At the same time, Georgian legislation provides for certain preferential tax rates. Income derived from the sale of residential property and a motor vehicle is taxed at a reduced rate of 5%. In addition, income received from the rental of residential property is also subject to a 5% tax rate.
The taxation of individuals in Georgia is based on their residency status. To better understand how residency is determined, see our guide on Georgian tax residency rules.
Long-Term Exemptions
One of the key features of Georgia’s personal income tax regime is the availability of full exemptions (0% tax) for certain types of capital gains, provided that the asset has been held for a minimum period.
Capital gains are exempt from taxation in the following cases:
- Gains from the sale of a vehicle are exempt if the vehicle has been held for more than six months.
- Gains from the sale of residential property are exempt if the property has been owned for more than two years.
- Gains from the sale of other assets, including land, shares, and movable property, are exempt if the asset has been held for more than two years, provided that these assets have not been used in economic activity.
The “Economic Activity” Test
As noted above, an important consideration when applying these exemptions to property other than motor vehicles and residential real estate is whether the asset has been used in economic activity.
Notably, holding shares for the purpose of receiving dividends does not constitute economic activity. Accordingly, if an individual acquires shares in a company and sells them after the required holding period, the gain may be fully exempt from taxation.
In contrast, if an asset is actively used for income-generating purposes, such as renting out property for business use, it is considered to be used in economic activity. In such cases, the exemption does not apply, even if the asset has been held for a long period.
This distinction is particularly relevant for investors, as it differentiates between passive investment and active business use of assets.
Georgian-Source Income
As noted above, although Georgian tax residents are formally subject to taxation on worldwide income, foreign-source income is exempt, and therefore taxation effectively applies only to Georgian-source income.
This creates a favorable environment for individuals with international investments. Resident individuals may hold foreign assets, including shares, real estate, crypto assets, or other investments, without triggering tax obligations in Georgia upon their disposal or receipt of dividends or interests therefrom.