In the wake of crypto’s mainstream adoption and the expansion of the FinTech industry, Georgia is one of many nations in the process of incorporating crypto regulation into a series of anti-money laundering laws.
The Ministry of Economy and Sustainable Development of Georgia has been creating new directives with the goal of fostering crypto’s growth through sustainable regulation. According to Georgian policy makers, this legislation is aimed at making Georgia a future crypto hub.
Prior to this announcement, Georgia was already considered an optimal country to live in for those involved in crypto. As of 2022, Georgia was ranked the fourth most crypto-ready country based on a variety of factors which include high numbers of crypto ATMs per-capita and crypto-friendly policies.
Additionally, Georgia has shown its eagerness to embrace crypto with a recent announcement from the National Bank of Georgia declaring that it is planning to pilot the first iteration of a digital lari.
With Georgia’s historically relaxed laws regarding digital assets undergoing reevaluation, in order to ensure compliance in 2023, it is necessary to stay up-to-date on the most recent policy amendments.
2023 Brings New Regulations for Virtual Assets
Prior to the fall of 2022, the only law that included crypto was Public Decision №201. It was passed in 2019 and provided a degree of legal framework for the taxation of crypto, but left its definition fairly open ended.
When the parliament of Georgia reconvened in the fall of 2022 to discuss amendments to the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism, the first amendments towards a new era of crypto regulation were introduced.
While crypto is not legal tender in Georgia, it can be used to pay for goods and services through the use of a Virtual Asset Service Provider, or a VASP. When using a VASP to make a payment, crypto is deducted from your digital wallet by the VASP, which then exchanges it into fiat money. The recipient ultimately receives the fiat money as a deposit from the VASP.
Under the new set of regulations, VASPs need to become registered entities with the National Bank of Georgia 90 days after the law goes into effect. A fee of 10,000 GEL will be required to register as a VASP.
Those exempt from this registration are crypto miners and individuals who are buying, selling, and trading crypto. It is also important to note that NFTs are excluded from Georgia’s definition of a digital asset.
Georgian AML/CTF regulations did not bind VASPs to comply with them prior to the introduction of this new amendment. However, it has now been deemed by the Georgian government that these entities play an important role in helping to prevent money laundering and illegal funding of terrorist activities.
As a result VASPs need to evaluate and verify their clients as well as all transactions that they process. They are legally responsible for evaluating and managing the risks of those using their conversion services.
Crypto Taxation in Georgia for Individuals
A principal reason that many crypto-enthusiasts have been attracted to Georgia is its lack of taxation on the sale of crypto. In Georgia, income is only taxable if it comes from a Georgian source as defined by Georgia’s tax code.
Therefore, since profits from crypto are a foreign source of income, there is no personal income tax on the supply of crypto assets. Similarly, there is zero taxation on the profits made from converting a cryptocurrency into the national currency, the Georgian lari.
Crypto mining is also subject to relatively relaxed taxes. The sale of computing power (hash) from Georgia to other countries is not subject to value-added tax. Additionally, both individuals and corporations can maintain the right to input VAT for such transactions. For those selling computing power within Georgian territory to another Georgian resident, this qualifies as a taxable event and is subject to a standard rate of 18% VAT.
Salaries paid in crypto by Georgian companies to Georgian residents are considered taxable events and are classified under the bracket of personal income tax. Georgia’s PIT is a flat rate of 20%, and in addition to the tax, for all Georgian residents, an additional pension deduction is also owed on crypto earnings.
Streamlining Compliance with Rise
As Georgia continues to roll out increasingly stricter policies around digital assets, it is important for companies operating with crypto treasuries to remain vigilant. The cost of noncompliance is high and many believe that on the heels of the newest Anti-Money Laundering amendments more regulations are to come.
Let Rise take care of ensuring your company’s global compliance in an ever-changing legal landscape. Rise is a web3-enabled payroll platform that streamlines payments in fiat and cryptocurrencies while guaranteeing total compliance.
Regardless of the currency in which you hold your treasury, Rise has an option for you. Learn more about how you can scale your global teams with Rise today.
While crypto is not legal tender in Georgia, it can be used to pay for goods and services through the use of a Virtual Asset Service Provider, or a VASP. When using a VASP to make a payment, crypto is deducted from your digital wallet by the VASP, which then exchanges it into fiat money. The recipient ultimately receives the fiat money as a deposit from the VASP.
