We say it all the time here: go where you’re treated best. That’s true for increasing your personal freedom, as well as for finding opportunities as an entrepreneur and investor. When it comes to taxes and investing, going where you’re treated best can be categorized into three groups of countries.
The first group includes high tax countries like Germany, the US, Japan, and the UK. These countries collect high rates on income, investment, corporate income, consumption, etc. You might ask why it’s worth investing in a high tax country. Higher taxes mean lower returns, right? Sort of. Sometimes. It depends on the situation. It’s still worth investing in many of these destinations because they have strong economies with well-developed financial systems — annoyingly high taxes aside.
The second group of countries includes tax havens. Such locales include The Bahamas, the Cayman Islands, Vanuatu, Monaco, and a few others. None of these countries collect income tax. Some don’t collect taxes on dividends or capital gains, either. But there’s usually a downside. The Caymans and Monaco are only accessible to the ultra-wealthy. And Vanuatu is tiny and relatively undeveloped. So they’re not ideal places to set up shop, either. In this group, only The Bahamas strikes a balance of opportunity and cost-effectiveness.
The third and best group is low-tax countries. These countries collect some of the income produced within their borders — usually a relatively small percentage — and keep their hands entirely off income that their residents earn elsewhere. As our founder, Andrew Henderson, has discussed before, these are often the best places to do business. You’ll pay some tax, but much less than you would in most Western countries. Plus, you won’t have to deal with the baggage many tax havens carry.
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How Much Will You Pay in Taxes in Georgia?
Within that group of low-tax countries is Georgia. This small country bordering Europe and Asia has a dynamic economy and a government firmly committed to private sector growth. The Georgian Revenue Service also has a very reasonable approach to collecting taxes, and becoming a tax resident in Georgia is very possible.
Income earned outside of its borders is never taxed. This greatly benefits anyone living there, but most of their income is generated outside of Georgia. Even if you earn income in Georgia, taxes on Georgian-source income are relatively low. If you’re wondering how much you will pay in taxes if you become a tax resident in Georgia, take a glance at the following tax rates:
- Income Tax: 20%
- Value-added Tax: 18%
- Corporate Tax: 15%
- Capital Gains and Interest: 5%-20%
- Property Tax: 1%
Georgian tax residents also have the option of e-filing, so paying taxes is much easier and faster than in many other countries. Once you establish residency, you can pay your tax bill electronically on the Revenue Service’s website.
Sounds good, right? There’s a lot more to be excited about.
Corporate Tax Reforms
The Georgian authorities overhauled the country’s corporate tax system back in 2016, modeled on successful reforms made by Estonia in 2000.
The reforms meant that retained and reinvested profits were exempt from the 15% corporate tax. Only those profits that were distributed or paid out as fringe benefits are taxable. Those benefiting from the country’s tax policy on non-Georgian source income, to begin with, with a very small corporate tax bill, the reform meant even less taxes.
In addition to paying less, it was also about making it easier to pay. According to statistics from the World Bank, Georgian companies once spent an average of 362 hours per year preparing, filing, and paying their taxes, resulting in an American-style tax season of madness with everyone trying to calculate their projects and get their papers filed at the last minute.
Under the current system, companies are required to submit monthly tax declarations. Research has shown that the monthly system is simpler and requires fewer hours worked by accountants.
Georgia now enjoys an incredibly straightforward, easy-to-follow tax system at a flat 15%, making it one of the most capitalist countries in the world. This Caucasus nation also ranked high on the World Bank Ease of Doing Business Index, at 7th, making it one of the best places to start or move a business.
Lower Corporate Tax Rates Mean Higher Growth and More Jobs
A lower corporate tax rate provides investors and business owners an obvious advantage. A smaller range of taxable activities gives you more control over your business, as well as stronger financial incentives to do business in the first place.
Lower corporate tax rates stimulate business activity, which means more hiring and higher rates of investment. As more and more governments are realizing, this has widespread benefits for the business community, workers, consumers, and even tax collectors.
A paper published by a group of economists at the Estonian National Bank found that exempting retained and reinvested profits from corporate tax led to higher investment and productivity rates in Estonia over the next decade. It also helped Estonia’s economy get through the financial crisis of 2008. By providing an incentive for companies to hold liquid assets (rather than rely on debt financing to grow their operations), there were fewer bankruptcies than in harder-hit economies.
Georgia is a Low-Tax Destination for Starting an Offshore Company
There are plenty of reasons to invest and become a tax resident in Georgia. It’s an emerging economy with low costs and a business-friendly approach to governance. Its service and real estate sectors are trending upward but still have a lot of untapped potential.
Georgia’s strategic location and fast-growing economy put it in the ideal position for those looking to access both the European and Asian markets. It is a developing low-tax country with many benefits for entrepreneurs and investors, making business easy with little beauracracy.
If you think Georgia might be the right location for your business, and setting up there almost certainly will help you pay less in taxes, speak with the Nomad Capitalist team about tax residency there today. Soon, you’ll be able to pay less in taxes each year on your current business activities. If you’re interested, apply to become a Nomad Capitalist client, and we will help you go where you are treated best.