Relocation from Israel to Georgia

What Does the Relocation Process to Georgia Involve

Relocation involves several critical steps. First, review employment or business opportunities in Georgia, the cost of living across regions, the local tax system, education options, and access to healthcare services. Second, consider whether you intend to sever your Israeli tax residency. This affects income tax obligations, national insurance, and estate planning. You must also plan how to manage your finances, assets, and private health insurance. Georgia has a public healthcare system, but foreign residents often rely on private insurance for higher-quality care.

You must also ensure legal status in Georgia. While Israelis can enter visa-free and stay up to one-year, long-term relocation may require registering for residency, obtaining a residence permit, or setting up a business entity. Georgia is known for its simplified residency processes, especially for freelancers, remote workers, and investors. If you plan to purchase property, Georgia permits foreigners to buy apartments and commercial real estate freely, although agricultural land is restricted. Legal and tax advice is recommended before making property purchases.

Tax Aspects of Relocation to Georgia

A major question is whether you will continue to owe taxes in Israel after moving. This depends on whether you have terminated your Israeli tax residency.

Termination of Tax Residency

Israel taxes residents on worldwide income, while non-residents are taxed only on Israeli-sourced income. Residency is determined by the “center of life” test and the number of days spent in Israel.

According to Section 1 of the Israeli Income Tax Ordinance:

• The “center of life” test considers economic, familial, and social ties.
• The days test assumes Israeli residency.

If you spend 183+ days in Israel in a single year, or 30+ days in the current year and 425+ days combined over the current and two prior years.

To terminate residency, you must file Form 1348 (“Declaration of Residency”) with the Israel Tax Authority (ITA), documenting that your center of life has shifted to Georgia. Keep thorough documentation and avoid creating new ties in Israel. The ITA may examine your residency years after departure. A proposed amendment to Israeli tax law could make the days test conclusive, increasing the importance of tracking your time spent in Israel.

Double Taxation Treaty Between Israel and Georgia

Israel and Georgia signed a double taxation treaty in 2011 to prevent double taxation of income. The treaty determines tax residency in dual-residency cases, outlines withholding tax limits on passive income, and regulates employment income. Generally, employment or business income earned in Georgia is taxable in Georgia. If you remain an Israeli resident, Israel may also tax your income, but relief can typically be claimed through foreign tax credits.

In dual-residency cases, tie-breaker tests are applied:

• Permanent home location
• Center of vital interests
• Habitual abode
• Citizenship

The treaty caps withholding tax rates on passive income as follows:

• Dividends: 5%–10% (depending on share ownership)
• Interest: 5%
• Royalties: 5%

Exit Tax

Upon terminating Israeli tax residency, you may owe an “exit tax” on unrealized capital gains. Section 100A of the Income Tax Ordinance treats your assets as if sold the day before residency ends. The gain is calculated on the difference between the original purchase price and value on the exit date.

Exit tax applies to shares, securities, and other qualifying assets. Israeli real estate is excluded, as it is taxed in Israel regardless of residency. The method and timing of payment can greatly affect your liability—consult with an international tax adviser before departure.

Effect of Residency Termination on Income Tax

• If the move is temporary, and Israeli tax residency remains, you are taxed in Israel on worldwide income. You may claim tax credits for taxes paid in Georgia.
• If the move is permanent and Israeli tax residency is terminated, you are only taxed in Israel on Israeli-source income. All other income will be taxed under Georgian law.

Tax System in Georgia

Georgia has a favorable tax regime, especially for individuals and small businesses. Residents are taxed on Georgian-source income only (i.e., no tax on foreign income).

Personal income tax:

• Flat 20% on employment income
• 1% or 3% for small businesses registered under the Micro/Small Business Status

Corporate tax:

• 15% on distributed profits (retained earnings are not taxed until distributed)

Capital gains:

• Generally taxed at 20%
• Exemptions may apply to long-term asset sales or if not part of regular business activity

Value-Added Tax (VAT):

• 18% standard rate on most goods and services

Georgia does not impose a wealth tax or an inheritance tax

National Insurance (Bituach Leumi) and Social Security

There is no social security agreement between Israel and Georgia. If you remain an Israeli resident, you must pay reduced Bituach Leumi contributions. If you terminate your tax residency, you are no longer obligated to contribute and lose entitlement to Israeli benefits. Georgia requires certain local contributions to pension or health programs for residents with formal employment. However, private health insurance is commonly used among foreigners.

Transferring Funds from Israel to Georgia

When transferring funds to Georgia, consider banking options, currency exchange, transfer times, and reporting rules. Transfers that do not represent taxable income may not be subject to withholding tax but could still require ITA pre-approval under Section 170(a) of the Ordinance. Always comply with anti-money laundering regulations and international standards (FATCA, CRS). It is advisable to open a Georgian bank account in advance.

Opening a Bank Account in Georgia

Opening a bank account in Georgia is relatively simple for foreigners. Most banks require:

• Valid passport
• Local phone number
• Residential address (temporary or permanent)

Accounts can usually be opened within a day. Some banks offer multi-currency accounts and online banking. Proof of income is not always required, especially for basic personal accounts.

Returning to Israel

If you return to Israel after severing your residency, you may be eligible for tax benefits as a returning resident or veteran returning resident. These may include exemptions on income and capital earned abroad before your return. Reinstating health insurance (Bituach Leumi) may require a waiting period of up to 6 months. Additional support may be available from the Ministry of Aliyah and Integration.

Relocating to Georgia offers significant advantages, including simplified bureaucracy, tax-friendly policies, and a welcoming environment. However, the process still requires careful financial, legal, and tax planning. It is strongly advised to consult with professionals before making the move. Nimrod Yaron & Co. specializes in terminating Israeli tax residency and providing comprehensive guidance for relocation to Georgia.