How I paid just 1% in taxes LEGALLY…

Sovereign ManSovereign ManNovember 17, 2020

[Today’s letter was penned by Lucas, a member of the Sovereign Man family]

Yesterday we reported how Deutsche Bank, one of the largest banks in the world, proposed that people working from home should have to pay an additional 5% tax to subsidize people who can’t work from home.

As absurd as this idea sounds, the authors claim that this tax has been needed for years, but “Covid has just made it obvious.”

And while the voices for higher taxes and more socialism seem to be getting louder and louder in the west, there ARE still places in the world that don’t share the same view.

Unsurprisingly many of them are in the east– former Soviet republics where people have actually lived through the horrors of socialism. So instead of punishing productive people with high taxes, they are trying to attract them with low taxes.

One of those countries is Georgia… A tiny ex-Soviet nation that has rolled out the red carpet for remote workers and other productive foreigners.

I moved here some time ago. And last week, I made my first tax payment to the Georgian government.

My tax rate was just 1%.That’s as close to 0% as you can get and it is completely legal.

This is possible, because Georgia has some very interesting tax incentives that hardly anyone has ever heard about.

The first incentive allows you to pay just 1% tax, but there are three important limitations to consider…

The first is that the tax is applied on the revenue and not the profit of the business and the second one is that you can’t earn more than approximately US$150,000 for more than two years in a row.

But despite these limitations, it’s an incredibly attractive structure for many people.

If you are a freelancer, remote worker (who can structure as a contractor) or run a business that is not capital intensive, such as affiliate marketing or selling of digital products, then your effective tax rate would likely be 1% or very close to it.

After all, these sorts of self-employment business models tend to have extremely low overhead, so your revenue and profit are very close.

But that’s not the only tax incentive Georgia offers.

Another interesting one applies to businesses that are providing IT services to clients outside of Georgia. Limited liability companies can apply for this incentive and slash their effective tax rate to just 5% (without any ceiling– you can earn as much as you want).

Both are incredibly compelling and I am actually taking advantage of both of them at the same time.

But even though I am paying just 1% or 5% tax, it doesn’t raise eyebrows anywhere. Georgia’s standard personal income tax rate is a flat 20% and the corporate tax is 15% (plus a 5% dividend tax).

Both rates are very reasonable by international standards, but not low enough for anyone to be suspicious about Georgian companies or to consider Georgia a tax haven.

That means it’s relatively easy to open bank accounts for Georgian companies, no uncomfortable explanations with clients and it’s even possible to get credit card processing (although the options are limited).

But it gets even better…

Now that I am an employee of a Georgian company (that I own), I am able to apply for legal residency. And after 6 years of residency, I’ll become eligible for naturalization and can obtain a Georgian passport.

That’s three major Plan B strategies that you can check off with just one country.

Getting started is also easy. Georgia probably has the most generous visa policy in the entire world. They actually welcome foreigners and remote workers.

That’s why they created a special remote worker entry permit that allows foreigners (including Americans) to enter Georgia despite COVID-19 restrictions and legally stay and work for an entire year (with the ability to extend it afterwards).

At this point you might be thinking that this is too good to be true and that in order to get these benefits you have to live in some underdeveloped, impoverished country.

But nothing could be further from the truth. In fact, Georgia is in what I call the “development sweetspot”.

Georgia is a developing country and therefore the cost of living is very low. But at the same time it’s developed enough that there aren’t any major inconveniences or dealbreakers.

And when I say the cost of living is very low, I mean it.

You can rent a nice 1-bedroom apartment in the city center for as little as $350, grab a nice lunch for around $5 and dinner for two in a very nice restaurant with drinks rarely exceeds $40.

But my all-time favorite example is that in Georgia you can rent an electric car (by the minute!) for less than what it costs to rent an electric scooter in the US.

And that brings me to the second side of the “development sweetspot”: The country is extremely technologically advanced and convenient.

There are several startups that offer everything from by the minute car rental to food delivery.

But the favorite convenience of all the expats here is that there is an entire industry of package forwarding companies that let you order products from the US, UK, Germany and even China for just $8 per kg.

Can’t find your favorite snack in the stores? Just order it from Amazon and it will arrive in around 7-10 days. And if the package’s value is less than $100, you won’t even have to pay any import taxes. It’s that simple here.

Of course, not everything is perfect about the country, but, at least for me, the benefits by far outweigh the negatives and it’s definitely a country you should at least consider.

And if you are a member of our international diversification service, Sovereign Man: Confidential, you can expect a very in-depth intelligence report about Georgia from me very soon.

Source

Source: Sovereign Man

Powered by WPeMatico


Newsletter

 Sign up now to receive our Daily Newsletters, straight to your inbox.