For clients looking to avoid the potential impact of AEOI/CRS protocols on Offshore Bank/Investment Accounts it can be extremely useful to hold dual residency eg a residency permit enabling you to claim legal residency in a country other than where you ordinarily reside and/or in which you are liable to report income/pay taxes.
Howso?
The CRS protocols require banks/financial institutions to tell your country of tax residence if you are banking/receiving passive income/investment returns in a bank or investment account outside of the country where you are resident for tax purposes (ie a/the country where you are required by law to report income/pay taxes).
But how do the Banks etc decide which country to report to? It depends on what documents they hold proving the Account BO ie Beneficial Owner’s ID/residency…. If the docs show the BO is resident in X country (and if the primary purpose of the Account is to receive passive/investment/portfolio income AND if the bank is located in a country that has signed the MCAA/committed to the CRS Protocol) then X country may be informed of the existence of the account.
You see usually when setting up an Offshore Bank or investment Account (whether for an individual or for a Company) the applicant is required to provide the bank with proof of the Beneficial Owner (“BO”)’s ID and residential address.
To prove ID the applicant usually has to supply the Bank with a certified copy of the BO’s passport or National ID Card. Some banks also now require us to show proof of the client’s TIN (ie Taxpayer Identification Number).
To prove residential address we have to supply the bank with a certified copy of a bank/card statement or utility bill showing the client’s name and residential address on the document.
Ideally if you can supply the Bank with proof of ID/address (and ideally also a TIN) from a country other than the country where are you required to report income/pay tax there should be no risk of your Offshore/investment account being reported to your local tax authorities.
Where to Obtain a Second/Legal Residency
When considering where to apply for a second residency Georgia can be an attractive option as it can provide legal residency without you having to relocate or spend most of the year in Georgia.
A Georgian residence permit, combined with an individual Tax Identification Number (TIN), gives you an official connection to Georgia that can be useful for banking, investments, company formation and KYC purposes.
Why can Georgian legal residency be useful?
Georgian legal residency generally has no ongoing minimum-stay requirement. You can maintain Georgia as a secondary base without changing where you primarily live.
It can help you:
• Provide formal legal residency and a Tax ID for digital nomads and frequent travelers who may not currently have a clear country of tax residence.
• Provide a transitional legal residence for people preparing or dealing with an Exit from their country of residence, while they spend time exploring different countries before deciding where to settle.
• Add a government-issued residence document and Tax ID for KYC and compliance where demanded.
• Use Georgia as an additional jurisdiction of residence when forming companies or dealing with banks or international institutions that require KYC.
• Access broader banking, brokerage, investment, trading and lending opportunities in Georgia.
• Register with your country’s embassy or consular services in Georgia as a legal resident.
• Access resident services, including potentially a Georgian driving license.
• Maintain a Georgian address and utility bills if useful for banking, personal or international documentation.
• Invest or trade in crypto in Georgia. Crypto gains made by individuals for their own benefit can be tax-exempt in Georgia.
Maintaining a home in Georgia is optional. You can add more physical substance only if or when it becomes useful or necessary. Moreover Georgia makes it easy to build genuine local substance quickly, and the residence card is one of the key foundations for doing so.
Georgia follows territorial taxation. Foreign-sourced income is generally outside the scope of Georgian personal income tax.
There is also no general individual exit tax if you later stop maintaining your Georgian residency.
How to obtain legal residency in Georgia
There are 3 ways by which you can obtain Georgian Legal Residency…
1. Legal Residency through a Business / Entrepreneurial Activity
A Georgian LLC can qualify you for a work residence permit once the applicable requirements are met.
For the standard entrepreneurial route, the business generally needs annual turnover of at least GEL 50,000 per foreign applicant (approximately €16,500), together with the other applicable requirements.
A Georgian company can be registered remotely, allowing the structure to be set up before the residency application.
2. Legal Residency through Real Estate USD 150,000+
You can also qualify by owning Georgian real estate with an officially assessed market value above USD 150,000 equivalent in GEL.
This can provide a renewable short-term residence permit.
The property does not need to be your home. It can be rented on the long-term or short-term market.
Qualifying residential rental income can benefit from a 5% Georgian personal income tax rate.
If you hold an apartment or house for more than two years, the gain on sale is generally exempt from Georgian personal income tax. If sold within two years, the gain is generally taxed at 5%.
For a stronger long-term option, qualifying investment or real estate of at least USD 300,000 can provide access to Georgia’s investment residence framework and, subject to the applicable conditions, a route toward indefinite residence after maintaining the qualifying investment for the required period.
And if you want Georgian tax residency?
To obtain Georgian tax residency and a tax residency certificate, you generally need to spend 183+ days in Georgia, or qualify through the High-Net-Worth Individual residency program, which can remove the minimum-stay requirement.
For many people, legal residency alone can already provide what they need: an additional residence jurisdiction, stronger ties with Georgia, local identification, banking and investment possibilities, and greater international flexibility.
Georgian legal residency can therefore be a practical “nice-to-have” second residency: easy to maintain, without requiring relocation, while keeping the option to strengthen your connection with Georgia at a later time.
Other popular second residency options include:
Panama – Check this link for details: https://offshoreincorporate.com/second-residence-options-panama/
The UAE – Check this link for details: https://offshoreincorporate.com/uae-second-residency-programs/
Nevis – Check this link for details: Nevis Second Citizenship Program FACT SHEET.docx
The other thing you could do to avoid the CRS is to set up your Offshore Bank/Investment Account at bank located in a country that has not signed the MCAA ie the treaty that gives rise to the CRS protocol. For details of which countries have signed the MCCA as of the date of writing date check this link: https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/tax-transparency-and-international-co-operation/gir-mcaa-signatories.pdf
AND If you want to be able to argue that you are not the beneficial owner of the entity holding the bank/investment account what you can also do is set up a Private Foundation (ideally a Seychelles Foundation) to act as the shareholder of your LLC/Offshore Company. Check these links for details:
https://offshoreincorporate.com/seychelles-foundations/
https://offshoreincorporate.com/why-should-i-register-my-foundation-in-seychelles/
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.
