Say you are a Brit who is interested in moving your tax residency to Georgia. How easy would this be and how would you go about this?
From what I have seen there are 2 main methods by which you can achieve tax residency. By investment in local property (over a certain amount and with other conditions such as making £90k+ or so the previous 2 years and earning some money in the local currency). And by staying 183 days+ in any year.
So let’s say you decide to move to Georgia April of 2021 for example. You spend more than 183 days between April 2021 and 2022. You also rent a place there and designate it your official address. And you open a local bank account. Assuming you spent less than 30 days in the UK, would this be enough to convince the UK taxman that you no longer qualify for residency there?
After all, in April 2022 you would apply for (and hopefully receive) a certificate of tax residence in Georgia. April is tax time in the UK so would you contact HMRC and give them all the details along with the tax residence certificate (for sure UK and Georgia have a tax treaty of some kind)? This is assuming you haven’t been paying tax to the UK PAYE style throughout the year (in which case you would claim it back?)
Is the aforementioned enough for this to work or would you need to meet more conditions? I understand that the more ties you have with Georgia the better.
Also, assuming it worked, what conditions would you need to meet in order to continue being tax resident in Georgia thereafter? Presumably your tax residence would remain with them by default unless you qualified to be tax resident in another country? Presumably you’d need to make sure you spend less than 30 days a year in the UK from then on?
The first option you mention is for an official Georgian residency and yes that requires a property valuation by a licensed expert valuer of 100K USD or higher (on the property you have bought in your name / title) and that then gives the right to temporary (1 year) official residency with ID card - renewable annually as long as the property is still owned by you. You can get a longer term residency card (up to 5 years) if you buy 300k’s worth of property… same requirement to keep the property title in your name year by year … that used to make you eligible for a permanent residency but not any more. Either of those “temporary residency based on property purchase” options helps as there is nothing better to show the old tax officer than an official residency with ID card from your new country. A third official residency option is to apply for temporary residency with ID card on the basis of setting up a business. This requires 50k GEL annual turnover in the new company for each foreigner working in it with a residency card. Minimum salary to be paid to the worker (i.e. you) is under USD 400 per month and that is taxable at 20%. In all 3 options spouses and dependent children can then receive residency as dependents of the primary residency holder. I am not sure about how many days you can then spend in the UK from year to year … there is a formula on the HMRC website that is there for answering that question. On the Georgia side it is fairly straight forward… satisfy the 183 day rule and better still pay some tax here. That way you can show Georgian Revenue Service tax receipts to validate that your tax residency in Georgia is real. Naturally exiting the UK tax net is a complex subject and needs property UK exit tax advice to avoid the many pitfalls that can occur by missing important finer details.
So if I understand correctly you buy a property for £100k but is this a paid off apartment in full or mortgaged or either? And this residency is considered one and the same thing as ’tax residency?’ So you would be tax resident for the 1 year (from whence you acquired this ID card)? You don’t then need to be in the country 183 days in that particular case?
Regardless, if you decided to go for the 183 day option only; how would it work paying taxes in Georgia if you wouldn’t owe them anything (assuming all income was foreign which is not taxed)? Surely even if the tax return was null it would still count as an official tax certificate? What if you opened some Georgian bank accounts earlier on and accrued some interest which would be taxed in Georgia and hence declared on the tax return to the local revenue? What kind of professional would you see regarding existing the UK tax system? An international tax adviser or accountant for example?
My understanding is bank account interest is not taxed in Georgia. In my view if you are talking about relocating to minimise a substantial amount of tax then the more substance you can show in your new country of residence the better. Tax officers have a lot of leeway at determining if a tax exit is real and with substance or just an attempt at avoidance. So in my view and especially if you have a substantial amount at risk then you want official residency in your new country (ID card) and also to be able to show your ties to and engagements in the new country. Best to keep in mind that tax offices are usually the best informed places on earth about tax avoidance options, as they have a constant stream of exiting customers! It is wise to think that your old tax office knows more about establishing true tax residency in your new country than you do. Then there are little traps. For example, you might find eligibility for your drivers license in your old country is determined by residency (not citizenship). For example, I sometimes read about people claiming they have exited Australian tax but keeping their Aust drivers license. Imagine their dismay when the tax officer asks about their drivers license and says they must be tax resident in Australia as they are still using their license which is only residents are allowed to hold. So in my mind and when a substantial amount of money is involved, go for the full exit option and manage any inconveniences that might entail so you are fully exited and not partially. One other suggestion: most experienced relocation advisors would not recommend buying residency based on property purchase unless you were already very happy with the new country based on extensive personal experience and you understand the true resale value / market. If you want to go the property purchase route its best if you have plenty of resources to relocate again if you decide you want to leave but cannot sell the property. Everyones circumstances are different of course… but buying a property can be a real noose otherwise. The old tax office needs to see plenty of other evidence that its a real change of tax residency and not just a holiday house.
For sure it won’t be easy for the ‘old tax residence’ to let you off the hook. But it must be possible without too much difficulty.
Let’s forget the property route for the moment. If you stay 183+ days in Georgia then you can apply for tax residency which should result in a document to show the old tax country. If you combine that with spending little time in the UK (say less than 15 days) at least for the first year (the year you want to start being tax resident in Georgia) then surely it would be enough. I know the anglo-giants like Australia, Canada and UK use 4 tests to discern whether you are non-resident for tax purposes (of which days out is just one factor)
It seems to me that if you are investing in Lari in a local bank in Georgia then it would be taxable there. Perhaps, if you were to set up an offshore company there and pay tax through it to Georgia then it would add more power to the case? If you had a UK company you could move that to Georgia also. If I had a property in the UK I could rent the entire place out so my official address would therefore be in Georgia (at a rental place until I can afford to buy a place there outright). You’d pay rental income from the UK property to UK of course but you should still be able to be non-resident. Not much I could do about the UK driver license unless giving it up was necessary.
Everything you are suggesting is heading in the right direction to be able to show you have made Georgia your home and economic centre. I do not think bank interest is taxable in Georgia. There are many such advantages to living in Georgia :). If you open a company in Georgia then have a real office and employ a local person (wages are cheap). Have your local personal bank account in the same bank as your company account. Pay wages to yourself and pay tax on the wages - all out of the company account. Then use the personal account for all your local living expenses. That provides the documentary evidence that you really are living in Georgia. The extent of the effort you need to go to depends on your type of business, whether you are claiming tax treaty or free trade benefits, how much money is potentially taxable and where.
I am happy to suggest to the publishers of the website below that they include Georgia as a citizenship by investment destination & recommendation IF someone (preferably a professional servcie provider)- can provide a very simple bullet point comparison of Georgia with Turkey ( check simple advantages of Turkey for citizenship by investment here) … and the same applies to Cyprus, Portugal, Greece, Albania, Bulgaria, and Macedonia. This publisher has a steady client flow of investors for Turkish citizenship but some of them may be better served by alternative destinations, regimes, countries, etc. Vanatau has recently been proposed but seems a long way off …
One of the hardest issues is determining your tax complexity and liability if you ever need to live in the country where you obtain second citizenship. Turkey is a complex high tax country. So it is an interesting option for a second passport but not so great tax-wise if you should ever want to, or need to, actually live there for more than 183 days in the year (or, to be safe, for any number of days when you cannot show stronger ties to some other country). Turkey would be a great option if it also offered a territorial or lower tax regime for new citizens who would also like the option to actually become a long term resident. Even establishing a company in a Turkish tax free zone does not reduce the tax for a Turkish tax resident… tax is simply transferred to being levied when the dividend (from the tax free company) is received by the shareholder. My preferred list of second passport countries are those that welcome the new citizen as a full time resident with favourable tax regimes to encourage you to actually engage in more and support your new country of choice through living there for as long as you might like (or need to one day) - without needing to count days to escape the complexities of the new country’s tax law.
I think ideally you would have a 2nd passport in a country which is a territorial tax country. For example Paraguay. But then they would want you to pay taxes there to get the citizenship in the first place (as well as all the other conditions) so it is a catch 22 by the looks of it.