For several consecutive years, Georgia has maintained a leading position in the field of crypto currency mining in the world. The attractiveness of the jurisdiction for the extraction of fiat money is explained very simply: cheap electricity, the absence of legislative restrictions, tax breaks and closed information about cash flows from around the world. All of these factors attract not only Georgians, but also foreigners who want give crypto currency mining a try. It has been estimated by the World Bank in 2018 that at least 200,000 people in Georgia are involved in currency mining.
The significant influence of this sector on the country’s economy has led to the fact that on June 28, 2019, the Minister of Finance of Georgia, Nodar Khaduri, signed a bill on taxation of crypto currency. The bill includes the following:
- individuals in Georgia are exempt from income tax on any profit received from the sale of crypto currency;
- the sale of the crypto currency or its exchange for Lari or other currency is not subject to VAT (applies to transactions between legal entities and individuals);
- The sale of computing power (hash) from Georgia abroad is not subject to VAT. In addition, individuals and legal entities retain the right to input VAT;
- The sale of computing power (hash) within the territory of Georgia (between residents) is subject to VAT;
- a hash purchase by a Georgian resident abroad is subject to VAT.
In addition, the Minister has emphasized that the Lari will remain the only means of payment in Georgia, and that it continues to be it is forbidden to pay for goods with crypto currencies.
The steps Georgia has taken in regulating cryptocurrencies mirrors those taken in other jurisdictions. We expect that locally registered companies active in the sector may be looking into relocating their residency outside Georgia while keeping the operations in the country, in order to take full advantage. We advise companies active in the currency mining industries to seek professional assistance in evaluating their long term strategy and tax options.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.