Offshore Company Managed by a Perpetual Traveller

[Jea]

So if an offshore company is being run by a PE in Georgia, but doesn't have any Georgian sourced income then it looks like Georgia won't tax it anyway?

Looks like that's the case:

Non-resident enterprises carrying out economic activities in Georgia through a permanent establishment (PE) are subject to CIT with respect to its Georgian-source income. (source: http://taxsummaries.pwc.com/ID/Georgia-Corporate-Taxes-on-corporate-income)

 

[khinkali]

@Jea foreign companies can be subject to taxes on Georgia sourced income whether they have a PE or not, based on location of customer, service provider, service recipient or delivery of goods. Also a natural person can be taxed on "economic activity".

The right approach for you depends on what you do. For example if you offer IT services then you might as well set up in Georgia, pay yourself a small wage @20% tax and take dividends @5% tax (no company tax for virtual zone). Or looking at your avatar if you work with crypto, that might not be taxable in Georgia as a natural person (see public ruling 201 here and here). If you ship goods between two other countries, then a PE of a foreign company might be good. If you provide non-IT services yourself to foreign clients, then it looks like tax @20% whether you work through a PE or not.

Written advice (non binding but a good indication) or a paid ruling from the Georgian tax office seems quite cost effective and efficient.

 

[Spinat]

You already said it, people need to speak with a Tax Lawyer in Georgia to make sure how they have to read the rules. Guessing is not the basic of a long term solution I also questioning if any tax authority will accept this kind of setups, if you don't live there, to be non taxable in the country of UBO's residency.

 

[unicorn]

@ khinkali & Jea : I think it depends on the TYPE of activity you have.

Eg : you have an online business in country X but you are a resident of Georgia. If you visit country X once or twice a year, and you say that you have your meetings there with your bank in country X, your accountant in country X, your lawyer in country X : then normally - imo - country X is your place of effective management ; in so far that the online company would mainly generate passive income.

Regardless of how much time you spend in Georgia. Your offshore company (making most of your income) could also be managed by a seperate management company (making little income). Who cares if that little income is then taxed a bit in Georgia ? You are then only shareholder of your main company.

I don't think an offshore company can be ran by a PE. It's the other way around I think : the mother company runs the PE. Income from a PE is usually local source income - otherwise there is no point in having a PE.

For the goods : I think NO as the source of income (the paying country) is not Georgia. For the services : I don't know. For the crypto : if it is using software, it could be a virtual IT company and these are tax free for all foreign sourced income.


Very good questions, I hope someone knows the answers !


The problem with "talk to a tax lawyer" is, that if you ask 3 tax lawyers, you usually get several differents answers ...

 

[khinkali]

country X is your place of effective management

Lawyers and accountants are normally excluded from being classed as managers when they perform their professional duties. So the effective management is likely to be where the business is actually run from. You mentioned passive income; if it really is passive then the place of management might not follow you around.

Jea's original post is about "perpetual traveler". unicorn's questions are quite Georgia focuses do I've spun off a new thread for this.