Working remotely from Georgia for a foreign employer: what to do under Georgian law

What to do

1. Source is the place of work: employment in Georgia produces income from a Georgian source. The place of work decides, not the employer's country (Tax Code of Georgia, Art. 104), and the place where the money is received is irrelevant (Art. 104). The exemption therefore applies only to income NOT from a Georgian source (Art. 82). A non-resident also pays tax on income from a Georgian source (Art. 79). Residence, meaning 183 or more days in any continuous 12-month period (Art. 34), does not change this conclusion.
2. Who pays: salary paid by a non-resident without a permanent establishment in Georgia is not taxed at source, because the employer is not a tax agent (Art. 154). The employee pays personally: the rate is 20% (Art. 81), the declaration is due by 1 April of the following year (Art. 153), and payment is due by the same deadline (Art. 62). Otherwise, late declaration carries a fine of 5% of the tax for up to 2 months and 10% for longer (Art. 274), plus penalty interest.
3. Sole entrepreneur instead of employment: employment is not economic activity (Art. 9); taxable income of a small business does not include salary (Art. 90). Small business (individual entrepreneurs only) pays 1%, or 3% above 500,000 lari (Art. 90), and this applies only with an actual switch to a services contract. A resident's services to a foreign client from Georgia are also a Georgian source (Art. 104). Changing the contract 'on paper' while keeping the subordination carries a risk of reclassification as salary.
4. Migration: a foreigner without permanent residence who becomes self-employed counts as a 'labour migrant' (Law of Georgia on Labour Migration, Art. 3). Check the requirements for the right to work.
5. Double taxation: the employer's country may withhold its own tax. Check the treaty and obtain a certificate of residence in Georgia.
6. Where to apply: Revenue Service (rs.ge) for the declaration, small business status and certificate of residence.
7. Evidence: employment contract, pay slips and statements, a count of days in Georgia; for an entrepreneur, service agreements and invoices.
8. Traps: treating a foreign company's salary as 'foreign income'; waiting for the employer to withhold tax; registering as an entrepreneur at 1% while actually working as an employee; believing that a non-resident pays no tax.

Be sure to check

• salary for work performed in Georgia is Georgian-source income; the exemption for foreign income does not apply
• the foreign employer does not withhold tax; the employee declares by 1 April and pays at 20%
• a non-resident is also taxed on Georgian-source income
• entrepreneur or small business status does not cover salary; only an actual switch to a services contract is lawful
• double taxation and right-to-work requirements for a self-employed foreigner: separately