This is the third article relating to Disguising Employees as Contractors from the desk of our Legal Columnist, American Intellectual Property expert Daniel Klein, who is based in Tbilisi and Armenia, – a follow up to our recent article relating to tax rates (See Legal Insights with Klein Law: Dangers of Disguising Employees as Contractors; The Blackmailer. Part 2).
Residence Permits Basics
Georgia has one of the most lax systems on the planet in terms of right to stay in the country, allowing visitors to stay a full year, leave for a day, and return to reset the right to stay for another year.
There is talk in the government that in order to comply with global norms in its efforts to become an EU member, that the standard of 90 cumulative days in 180 might at some point become the new reality.
RP permits can be obtained for many different reasons, but the most common is to do this either through an employer, meeting certain thresholds for income as an Individual Entrepreneur (IP) or through studies.
Employment of Foreign Workers; the 20K$ Rule
For every 50K Lari (about 20K USD) of income that a company has, it is allowed to apply for a foreign workers Work Permit (which is more or less the same as an RP). So, if a company has, say, 200K USD of income, it is permitted to apply for up to 10 WPs.
Individual Entrepreneurs with more than $20K USD of Income
Further, this 20K rule applies to those who have IP. And as our Part 1 article points out (The Dangers of Disguising Employees as Contractors – Part 1), Georgia is an incredibly attractive destination for Digital Nomads, especially when compared with Europe, which is generally a very strict destination for DMs, since they have a strict 90 day rule. Applying for DM status varies from country to country, but in no case is the tax the crazy low 1% it is in Georgia.
Turkiye, which is outside the EU, is a very popular destination for DMs, since the requirement is even more relaxed in that only a lease is required to obtain an RP. However, this is only a theoretical rule, as the Turkiyiesh government is now rejecting most RP applications and these rejections often depend on the applicants’ citizenship.
Companies utilizing the $20K Quota Rule
The tax consequences for companies is a lot less interesting, since the company is subject to 15% corporate income tax, and employee taxes are a bit north of 20%.
Students
Students are also eligible for RP status. The problem is that when renewing or initially applying for RP status, recent experience has shown that RP status is often denied. This can be a real hardship for students, who might have invested family savings to move to Georgia and then find they need to leave some time after arrival.
Rejection Trends
For all RP applications, the trend in Georgia is that applications are frequently rejected. Rejections can be for national security reasons, prior visa violations, or often apparent arbitrary reasons.
Buying Time
For rejectees there is always hope that the court will be able to overturn a rejection. That process takes about 6 months. If the court action is not successful, it is also possible to appeal, which could take up to another 6 months, or more. Again, it is almost guaranteed that the rejectee can extend their stay until the final decision is made. At the end of the day, it is absolutely imperative for those who have established ties to Georgia and are passionate about staying legally in the country to try..
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