I know forum posts can never contain all the info that is required to elicit very accurate advice and most posts try to give helpful generic advice. I kinda feel the scope of the authors questions could be a bit narrow and my apologies in advance if I am missing anything, but here goes anyway. This post is probably mostly off topic for this thread, but i saw mention of Georgia and special tax options so thought I would chime in, just in case any of the below info might be relevant for the thread author or others somehow. As others have already made clear︀ - selecting the best jurisdiction for any tax purpose requires a broader strategy to be︁ in place first - and too tight a focus on fiscal tax issues too early︂ in the planning can look like jurisdiction shopping and lead to trouble later if all︃ the serious substance does not follow the choices. By substance I tend to go with︄ whatever a conservative (non-tax minimizing) person will think is solid substance, as these days that’s︅ the only strategy that seems likely to avoid the current trend in aggressive tax changes.︆ Rule 1: Plan on tax issues getting harsher and more complex and more aggressive -︇ that is a common message in this forum… and there is a lot of collective︈ wisdom and experience backing it up 🙂.
1. Regarding Georgia Free Zone Company status -︉ it only works for manufacturing companies physically based in one of the very few actual︊ Free Zones. Heavy emphasis here is on physical manufacturing of physical products.
2. You can︋ get an advance tax ruling from Georgian Revenue Service to test for eligibility for any︌ specific special tax regime - costs about 10k gel apparently but could be essential and︍ well worth it.
3. The other (different) Georgian option already mentioned by others in this︎ thread is Virtual IT Zone Person status (with 0% CIT and 5% WHT on dividends️ and 20% wages tax). This works fine if there is proper economic substance in Georgia and most importantly if ***software*** is actually being created in Georgia for **export**. So… If your company is creating software of any kind as part of your overall business - and if it can be made in Georgia - then definitely worth a look. There are other special tax schemes in Georgia targeting different types of business and its essential for your business activities and model to be a conservative match for the Georgian government requirements of any scheme you try (and after a positive advance tax ruling is in︀ hand). Naturally how any scheme gets interpreted and dealt with by other countries tax departments︁ is an entirely different subject.
4. Georgia has a bunch of very good DTA’s and︂ Free Trade Agreements. Many allow for zero WHT on payments to Georgia.
5. Re point︃ 3: You would either need to employ a local software developer or move / locate︄ a foreign software developer in Georgia …. These days a first temporary residency permit for︅ employment / ID card will be issued for a year usually (minimum is 6 months)︆ but the second temporary residence permit can be for 10 years - depending on the︇ strength of the financials in your residency application and your citizenship. The financial requirements (for︈ the 10 year permit) are still low enough to be quite viable for lots of︉ people making a good western level income.
6. A 10 year residency permit provides some︊ longer term stability which helps make Georgia a safer option given its ‘instability’ in certain︋ aspects. A 10 year permit helps convince other countries tax offices that you are established︌ for the longer term in Georgia and not shopping around.
7. There is some chatter︍ that the government will reduce the 20% flat tax on wages next year - but︎ we have to wait and see. 8. After a couple of years of activity a️ Georgian company might become eligible for the special International Company status. Again an advanced tax ruling would be essential. Wages tax drops to 5% and other advantages.
9. Also after 2 years of profitable activity the Georgian company can be used to open Liaison Offices / Trade Representative Offices in many countries including known lower tax ones like Bulgaria, with the ability to send one or more Representatives to live there. Turkey does not tax the wages paid to foreign representatives of TRO’s. There is lots on the internet about using a TRO in Bulgaria as the easiest way for **non-EU citizens** to get Bulgarian︀ temporary residency, and Bulgaria allows up to 3 foreign Representatives.
In the end, in my︁ own personal opinion…. the trends are very clear. No matter what we hope to achieve︂ in terms of quality of life, it increasingly seems if we want the best fiscal︃ arrangements then we must aim for serious economic substance and serious (183+ days) length of︄ stay in the country we claim as our tax residency, because anyone not doing that︅ could eventually find themselves caught in the ever tightening and ever increasingly complex layers of︆ tax nets. For example, I would not think it wise to become a TRO Representative︇ in any country without making sure I was performing the real duties of a representative︈ in that country… and keeping all the records to prove it. Anything less could be︉ construed as a tax residency ‘arrangement’ by any other country looking into your finances and︊ tax obligations. Most countries require such records anyway for TRO’s they permit in their jurisdiction︋ - especially when/ if the Representative wishes to renew their residency permit at some point…︌ but some people seem to focus in on getting a lower tax residency as their︍ primary goal when it should be part of a wider strategy… about longer term security︎ for their financial future and short/medium/longer term lifestyle objectives.
10. If using a special tax️ scheme in Georgia (or any other country) for your business location while personally living / tax resident in a different jurisdiction, then check each special tax scheme option against your own country’s rules and the reverse. Fo example, your home country might tax any dividends you receive from Georgia if those dividends did not already have some tax deducted in Georgia. In such cases the Georgian Virtual IT Zone status is better than the International Company status since dividends have 5% WHT. On the other hand, your residency country might not care about if tax was deducted from the dividend already but they might care︀ / tax you more if the Georgian company was not paying CIT. So in such︁ cases a Virtual IT Zone company might not be best and an International Company that︂ pays some CIT could be better.
So many variables …. And what is the use︃ of a zero or low tax tax country if every other country will tax business︄ payments going there or dividends received from there and banks flag every move?
If you︅ cannot afford to get expert advice on your specific objectives and circumstances and on any︆ specific tax related choices you are considering, then you are amongst friends here because many︇ of us have been in that situation before 🙂 …. and my advice these days is︈ to go as simple as possible with structure/s and study the short listed options very︉ deeply, and also be as deeply conservative as possible (by which I mean serious economic︊ substance and 183+ days stay ) and you will be glad you did. As many︋ others have said - better to pay moderate taxes and have better long term security.︌ Always remember this golden rule … tax offices are aware of most of the tax︍ minimization options that exist and nothing you are thinking of doing is unknown to them︎ 🙂. So try to be conservative and employ strategies they allow for. For example, it️ is almost always better to go with a country (like Georgia) that has never been on the grey list than a country that is or has been. If possible it’s better to start early with a well thought out, realistic, broad and conservative plan (if possible) than try to rejuggle jurisdictions later. I know these are only words but at least never rush into anything. Hope there is some useful info scattered in amongst all that somewhere 🙂.
1. Regarding Georgia Free Zone Company status -︉ it only works for manufacturing companies physically based in one of the very few actual︊ Free Zones. Heavy emphasis here is on physical manufacturing of physical products.
2. You can︋ get an advance tax ruling from Georgian Revenue Service to test for eligibility for any︌ specific special tax regime - costs about 10k gel apparently but could be essential and︍ well worth it.
3. The other (different) Georgian option already mentioned by others in this︎ thread is Virtual IT Zone Person status (with 0% CIT and 5% WHT on dividends️ and 20% wages tax). This works fine if there is proper economic substance in Georgia and most importantly if ***software*** is actually being created in Georgia for **export**. So… If your company is creating software of any kind as part of your overall business - and if it can be made in Georgia - then definitely worth a look. There are other special tax schemes in Georgia targeting different types of business and its essential for your business activities and model to be a conservative match for the Georgian government requirements of any scheme you try (and after a positive advance tax ruling is in︀ hand). Naturally how any scheme gets interpreted and dealt with by other countries tax departments︁ is an entirely different subject.
4. Georgia has a bunch of very good DTA’s and︂ Free Trade Agreements. Many allow for zero WHT on payments to Georgia.
5. Re point︃ 3: You would either need to employ a local software developer or move / locate︄ a foreign software developer in Georgia …. These days a first temporary residency permit for︅ employment / ID card will be issued for a year usually (minimum is 6 months)︆ but the second temporary residence permit can be for 10 years - depending on the︇ strength of the financials in your residency application and your citizenship. The financial requirements (for︈ the 10 year permit) are still low enough to be quite viable for lots of︉ people making a good western level income.
6. A 10 year residency permit provides some︊ longer term stability which helps make Georgia a safer option given its ‘instability’ in certain︋ aspects. A 10 year permit helps convince other countries tax offices that you are established︌ for the longer term in Georgia and not shopping around.
7. There is some chatter︍ that the government will reduce the 20% flat tax on wages next year - but︎ we have to wait and see. 8. After a couple of years of activity a️ Georgian company might become eligible for the special International Company status. Again an advanced tax ruling would be essential. Wages tax drops to 5% and other advantages.
9. Also after 2 years of profitable activity the Georgian company can be used to open Liaison Offices / Trade Representative Offices in many countries including known lower tax ones like Bulgaria, with the ability to send one or more Representatives to live there. Turkey does not tax the wages paid to foreign representatives of TRO’s. There is lots on the internet about using a TRO in Bulgaria as the easiest way for **non-EU citizens** to get Bulgarian︀ temporary residency, and Bulgaria allows up to 3 foreign Representatives.
In the end, in my︁ own personal opinion…. the trends are very clear. No matter what we hope to achieve︂ in terms of quality of life, it increasingly seems if we want the best fiscal︃ arrangements then we must aim for serious economic substance and serious (183+ days) length of︄ stay in the country we claim as our tax residency, because anyone not doing that︅ could eventually find themselves caught in the ever tightening and ever increasingly complex layers of︆ tax nets. For example, I would not think it wise to become a TRO Representative︇ in any country without making sure I was performing the real duties of a representative︈ in that country… and keeping all the records to prove it. Anything less could be︉ construed as a tax residency ‘arrangement’ by any other country looking into your finances and︊ tax obligations. Most countries require such records anyway for TRO’s they permit in their jurisdiction︋ - especially when/ if the Representative wishes to renew their residency permit at some point…︌ but some people seem to focus in on getting a lower tax residency as their︍ primary goal when it should be part of a wider strategy… about longer term security︎ for their financial future and short/medium/longer term lifestyle objectives.
10. If using a special tax️ scheme in Georgia (or any other country) for your business location while personally living / tax resident in a different jurisdiction, then check each special tax scheme option against your own country’s rules and the reverse. Fo example, your home country might tax any dividends you receive from Georgia if those dividends did not already have some tax deducted in Georgia. In such cases the Georgian Virtual IT Zone status is better than the International Company status since dividends have 5% WHT. On the other hand, your residency country might not care about if tax was deducted from the dividend already but they might care︀ / tax you more if the Georgian company was not paying CIT. So in such︁ cases a Virtual IT Zone company might not be best and an International Company that︂ pays some CIT could be better.
So many variables …. And what is the use︃ of a zero or low tax tax country if every other country will tax business︄ payments going there or dividends received from there and banks flag every move?
If you︅ cannot afford to get expert advice on your specific objectives and circumstances and on any︆ specific tax related choices you are considering, then you are amongst friends here because many︇ of us have been in that situation before 🙂 …. and my advice these days is︈ to go as simple as possible with structure/s and study the short listed options very︉ deeply, and also be as deeply conservative as possible (by which I mean serious economic︊ substance and 183+ days stay ) and you will be glad you did. As many︋ others have said - better to pay moderate taxes and have better long term security.︌ Always remember this golden rule … tax offices are aware of most of the tax︍ minimization options that exist and nothing you are thinking of doing is unknown to them︎ 🙂. So try to be conservative and employ strategies they allow for. For example, it️ is almost always better to go with a country (like Georgia) that has never been on the grey list than a country that is or has been. If possible it’s better to start early with a well thought out, realistic, broad and conservative plan (if possible) than try to rejuggle jurisdictions later. I know these are only words but at least never rush into anything. Hope there is some useful info scattered in amongst all that somewhere 🙂.
