Crypto in Georgia: Legal and Tax Framework

By Georgy Tsaguria, Tax and Immigration Lawyer

This article serves as an ice breaker and short introduction of the main legal documents regulating the cryptocurrency in Georgia. This will be followed by a second piece which will delve deeper into the legal status and taxation of extraction (mining) of cryptocurrencies, and finally, a third and final piece that will detail on the legal and tax implications on receipt, storage, supply and exchange of crypto-assets.


Cryptocurrencies (crypto-assets) have emerged as a result of internet development, technological innovations, and the need for secure, fast, and cheap transfer, storage, and accounting of information. At the same time, crypto has provided a platform for new ways of speculations, financial crimes, and the possibility to receive illicit income securely. All of this has triggered the need to develop a modern legal and tax framework, which will keep up with the technology, the opportunities it offers as well as the threats that it may pose.

Georgian regulators were silent on the topic of crypto-assets until 20 December 2017 (which was a period of another enormous bullish market of crypto). On that day, the National Bank of Georgia (NBG) published a warning, which inter alia stated the following:

“…Digital currency is not a legal tender in Georgia. Activities related to digital currency are not regulated by the legislation of Georgia and, therefore, digital currency is not regulated by the National Bank of Georgia…”

The statement also warned the users of digital currency to understand the potential legal and financial risks related to their fluctuations, decentralized way of functioning, unregulated exchange platforms, and anonymity.

Based on the above warning, NBG showed its following position:

  1. Activities related to cryptocurrency are not regulated by the Georgian legislation;
  2. NBG does not regulate digital currency in Georgia;
  3. Crypto is not a legal tender in Georgia;
  4. Crypto bears legal and financial risks for the users.

It is noteworthy that Georgia still does not have a separate law on cryptocurrencies. At the same time, the Minister of Finance of Georgia has issued a public ruling N201 (Ruling N201) of 28 June 2019, which is the sole normative act (bylaw) of Georgia determining in detail what the crypto-assets are and interpretation of tax implications related to them.

Note: Public ruling is an instrument determined by the Tax Code of Georgia that clarifies the application of certain provisions of the tax legislation. If a person acts in accordance with a public ruling, a monitoring / law-enforcement authorities may not adopt a decision contradicting the ruling and may not impose additional taxes/sanctions.

Georgian law does not provide a legal definition of cryptocurrency or virtual currency. The Ministry of Finance of Georgia shares the definition of virtual currency established by the European Central Bank, which includes crypto assets: “…virtual currency / cryptocurrency is a digital expression of a value not issued by a central bank, credit or electronic money issuer, which in some cases can be used as an alternative to money…”

According to the Ruling N201: “…Crypto-asset is a digital asset, whose storage and exchange is done electronically, within a decentralized, peer-to-peer network, it does not require a trustworthy middleman and functions on the basis of distributed ledger technology software working in a network of computers, which uses cryptographic methods. Crypto-asset digitally reflects value, its issuance and exchange are conducted by decentralized consensus mechanism, without central trustworthy issuer and supervisor / controlling body, ownership on crypto-asset is confirmed using cryptographic methods…” and “…A crypto-asset has no physical form, is not located in a specific location, is not deposited in any account with a financial institution, and it is usually impossible to identify its issuer…”

At the same time, the Tax Code of Georgia (TCG, 22/07/2021 amendments) mentions and partly regulates crypto-assets as well, without going into detail about their definition. Therefore, we assume that the definition of Ruling N201 is the only definition that we might use for the determination of crypto-assets under Georgian laws including when interpreting the TCG.

The TCG on its end defines cryptocurrency as the same as / one of the versions of crypto-asset: “…cryptographic currency (crypto-asset)…” which means it at least includes cryptographic currency (cryptocurrency) within the scope of crypto-assets.

According to the TCG — cryptographic currency (crypto-asset) shall not be regarded as goods (just as the TCG treats cash), nor shall the transfer of ownership over them be regarded as service (again, just like the TCG treats cash). This approach towards cryptocurrencies is provided in the VAT part of the TCG.

There are more than 8,000 types of cryptocurrencies (such as Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Tether (USDT), Solana (SOL), Cardano (ADA), etc) today and they would all fall under the definition provided by the TCG.

Before moving on to the next topics, we would like to note that as of writing this article, Georgian legislators have not regulated and the Revenue Service of Georgia has not yet issued any guidance on the taxation of the majority of crypto-currency related operations. The sole guidance which exists at our disposal is the above-mentioned Ruling N201. Based on that Ruling, the position of the Ministry of Finance can be summed up as follows:

An individual is exempt from personal income tax on income received from the supply of crypto-assets; Exchange of cryptocurrency to national or foreign fiat currencies is exempt from VAT; Supply of computational speed (power) for crypto mining is:

  • (i) not VAT taxable when the recipient is registered outside of Georgia, and it does not have a managing place or permanent establishment in Georgia to which receipt of service is related;
  • (ii) VAT taxable, when the recipient is registered in Georgia, or it has a managing place or permanent establishment in Georgia to which receipt of service is related.

Other important cryptocurrency-related issues such as crypto mining; receipt, storage, supply, and exchange of crypto-assets); ICO; NFTs; Metaverse; staking; DeFi remain disregarded and unregulated (or, at the very best, not precisely or sufficiently regulated).

The lack of regulation is not very surprising as most other countries (including EU member states) also have not regulated most of the abovementioned topics yet. Due to Georgia’s approximation process of its legislation with EU legislation, we assume that going forward, Georgian tax authorities will share and consider an important judgment of the Court of Justice of the European Union (ECJ), Skatteverket v David Hedqvist C-264/14 (22 October 2015). The judgment is important in that it concludes, and of the majority of ministries of finance of EU member states agree, that:

  • (i) the purchase, alienation, and exchange of cryptocurrency is VAT-exempt;
  • (ii) mining is not subject to VAT (as service recipients are unidentifiable).

In addition, two crucial proposals are awaiting the committee decision for a regulation of the European Parliament and the Council — On Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (2020/0265(COD)), and On Information accompanying transfers of funds and certain crypto-assets (COM/2021/422). At their inception stage, it is still too early to predict what the final product will look like, however, it is for sure that in the case and whenever these proposals are approved, it has the potential to change the whole crypto legal and tax landscape in the EU, and eventually in Georgia.

Therefore, the second and third pieces of the series will rely on the analysis and evaluation of the Ruling N201, TCG’s VAT approach toward crypto-assets, and the assumption as well as the expectation that the position of Georgian authorities will be in line with that of the EU colleagues.

to be continued with the legal status and taxation of extraction (mining) of cryptocurrencies….

Learn More about the Legal Framework of Cryptocurrency in Georgia

LTA is a boutique firm assisting clients worldwide with their tax/estate planning strategies. Their main field of focus is helping non-residents to enjoy the Georgian legal and tax system, including help with legal/tax and accounting aspects.

Georgy is a tax lawyer specialized in helping people and businesses to implement tax planning strategies. Connect with Georgy today to discuss immigration and/or investment matters linked to Georgia.

This article is part of the Relocate Community. The leading independent platform for Global Migration. Dig deeper into core topics about relocation and connect with qualified Advisors . . . all in one place.

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