Tax residence (also known as fiscal residency, residence for tax purposes, or other, similar terms) is an important concept for all tax payers living and working abroad. It determines how you are treated with regard to taxation in a particular country.
According to the article 34.2 of Tax Code of Georgia, A Georgian resident for the entire current tax year shall be a natural person who has actually stayed in the territory of Georgia for 183 or more days in any continuous 12-calendar-month period ending in that tax year, or a natural person who was in a foreign country in the public service of Georgia during that tax year.
The 183 day rule seems straightforward, but there are many nuances to consider when tracking your days. It’s advantageous to better-understand this rule and some of the details around establishing residency and being prepared for state residency audits.
Here are the top things to help residents determine whether they should declare themselves residents or nonresidents for tax purposes:
- Georgia can consider you a resident, even if your permanent home is elsewhere
Fundamental to the 183 day rule, however, is the fact that country to which you frequently travel may consider you a resident, despite your domicile being elsewhere. For example, you may consider your full-time home to be in Germany. You grew up in the Germany and your kids go to school there, but frequently travel in Georgia and found yourself in Georgia — anywhere in Georgia — 183 days last year. That means that Georgia will come knocking to claim its full share of all your income in taxes, despite your home is in Germany.
- Any amount of time can count as a day
According to the article 34.5 of Tax Code of Georgia, The day of actual stay in the territory of Georgia shall be the day, during which a natural person stayed in Georgia irrespective of the length of the stay. When it comes to determining residency, any amount of time spent in Georgia counts as a day. So, spending five minutes in Georgia is equal to spending a whole day
- Don’t forget about your “why”
In Georgia the state wants to know the exact amount of time you spend here but they also put significant focus on why you spend time there. In fact, the purpose of time spent in Georgia may have more weight in determining legal residency than the actual number of days spent. To classify as a nonresident, an individual has to prove that they were in the Georgia for less than 183 days and that their purpose for being in the state was temporary. More precisely, according to the article 34.4 of Tax Code of Georgia, The time of actual stay in the territory of Georgia shall not include the time, during which a natural person stayed in Georgia:
- a) as a person having a diplomatic or consular status or as a family member of such person;
- b) as an employee of an international organisation acting under an international agreement of Georgia or as a person in the public service of a foreign country in Georgia or as a family member of such person, other than Georgian citizens;
- c) when moving from one foreign country to another via the territory of Georgia;
- d) for treatment or leisure.
Article 34.3 of Tax Code of Georgia says that the time of actual stay in the territory of Georgia shall be the time, during which a natural person stayed in Georgia, as well as the time he/she spent outside Georgia specifically for treatment, leisure, business trip or education.
- Each TERM has its meaning
Article 34.3 of Tax Code of Georgia says that “A Georgian resident for the entire current tax year shall be a natural person who has actually stayed in the territory of Georgia for 183 or more days in any continuous 12-calendar-month period ending in that tax year.
“For the entire current tax year” means that for one day of a calendar year a person meets criteria provided by the definition above, he/she is considered as a tax resident for all calendar year long. So, one-day residency equals to residency for an entire calendar year.
“Any continuous 12-calendar-month” means that we do not count 183 days within a calendar year (January-December) but – during 12 consecutive months (5th March-4th February; 10th October-9th September, etc…)
It is also important the law does not require the 183 days to be successive. A person can leave the country and come back, counting 183 days within 12 months will still continue.
- The number of days is used only once
The status of a resident or of a non-resident is established for each tax period. At the same time, the days, according to which the natural person was deemed as a resident in the previous tax period, shall not be taken into account in establishing the status of residency in the following tax periods.