Benefits of relocation of business to Georgia:

  • Strategic geographical location (i.e. a door to Russia and the Eurasian Economic Union, a single market of 183 million people, as well as to China and to Central Asia) and ease of travel to Europe and East Asia with direct flights to major destinations;
  • The EU and Georgia signed an Association Agreement on 27 June 2014, which entered into force since 1 July 2016. The agreement introduces a preferential trade regime – the Deep and Comprehensive Free Trade Area (DCFTA). This regime increases market access between the EU and Georgia based on having better matched regulations;
  • Georgian Language is the official language in Georgia. Residents of Georgia, approximately above 40 years, have good command of Russian. English language is quite commonplace across all ages;
  • A developed and stable banking system, advanced digital banking infrastructure, liberal approach towards foreign capital and foreign currency, internationally-oriented banking regulations;
  • The visa policy of Georgia allows citizens of 98 countries to enter, reside, work and study in Georgia for 1 full year without the necessity to obtain either visa or residence permit;
  • Low tax rates and preferences, especially as regards CIT, which aims to bolster corporate growth
  • Low cost of labor and utilities.

1.Tax rates and tax administration

Tax administration procedures are conducted by Legal Entity under Public Law (LEPL) within the Ministry of Finance of Georgia – the Revenue Service.

Tax system of Georgia is composed of national and local taxes. National taxes include Personal Income Tax, Corporate Income Tax, Withholding Taxes, VAT, Excise Tax and Import Duty. A Property Tax shall be a local tax.

Apart from these taxes, employed and self-employed persons are obliged to make pension contributions to the funded pension scheme, as a part of the funded pension system.

The Personal Income Tax rate is flat and amounts to 20% of taxable income. This tax is paid by a resident natural person and a non-resident natural person earning income from a Georgian source.

Corporate Income Tax rate is flat and amounts to 15% of the object of profit taxation and is paid by resident enterprises and non-resident enterprises that conduct business in Georgia through a permanent establishment and/or earns income from a Georgian source. To receive a taxable amount, the object of taxation must be divided by 0.85. The object of profit taxation shall be a) distributed profit b) costs incurred or other payments not related to economic activity c) free delivery of goods/services and/or transfer of funds d) representation expenses paid in excess of a limited amount determined under Tax Code of Georgia. Due to the above-mentioned amendments the existing profit tax model was shifted to the so-called "tax on distributed profits" model, very similar to Estonian one. Under the Estonian Taxation Model and after 2017, January 1 st under the Georgian Taxation system all businesses, except profit-sharing businesses, should be exempt from income tax. More specifically, if a company reinvest its profits, it will no longer be obliged to pay income tax.

Under the Tax Code of Georgia an income tax/profit tax return shall be filed with a tax authority by 1 April of a year following the reporting year.

Different taxation rates apply to the different withholding tax, in particular:

  • Dividends paid by a resident enterprise to an individual, a non-entrepreneurial (non-commercial) legal entity or a non-resident enterprise shall be taxed at source at the rate of 5% of the amount payable;
  • Interests paid by a non-resident's permanent establishment or by a resident, or on their behalf to an individual or to a non-resident having no permanent establishment in Georgia shall be taxed at the source at the rate of 5% of the amount payable;
  • Royalty paid by a non-resident's permanent establishment or by a resident or on their behalf to a resident individual (other than the individual registered as a VAT payer) shall be taxed at the source at the rate of 20% of the amount payable.

The Pension Contribution conducted by employed and self-employed participants' amounts to 6% of the taxable salary of an employed person and/or of the income of a self-employed person. In case of employed participant, The Pension Contribution is divided up between the Employee, the Employer and the State, each contributing 2% of the designated amount. In case of a self-employed person, The Pension Contribution is divided up between the Self-employed and the State. 4% is contributed by the Self-employed and 2% by the State.

The VAT rate is flat and amount to 18%. Accounting period of the VAT is a calendar month. A taxable person registered as a VAT taxpayer shall submit to a tax authority a VAT declaration not later than the 15 th day of the month following the accounting period and shall pay the tax within the same period. A VAT taxable person shall be considered any person who, at any place, independently performs any type of economic activity, irrespective of the purpose and result of the activity. The VAT taxable transactions include, the supply of goods by a taxable person within economic activity in the territory of Georgia, for consideration, the provision of a service by a taxable person within economic activity in the territory of Georgia, for consideration, the import of goods.

A taxable person shall, unless otherwise provided for by this Code, from the day when he/she exceeds the total amount of GEL 100 000 for VAT taxable transactions of supplying goods/providing services carried out during any 12 consecutive calendar months, within not later than 2 business days, apply to a tax authority for registration as a VAT taxpayer. The obligation of a taxable person to calculate and pay the VAT shall arise from the moment of carrying out a taxable transaction, just mentioned (including this transaction), according to which the total amount of taxable transactions has exceeded GEL 100 000.

Excise Tax rate is different depending on the product concerned. The accounting period for excise tax is a calendar month. It shall be subject to payment by the 15 th day of the month following the accounting period of performing an excisable transaction, except otherwise provided by the Tax Code of Georgia.

Import Tax rate is different depending on the product concerned. It may amount to 5%, 12% or fixed tax and its exact amount depends on the quantity and type of imported product or service.

The property tax rate is no more than 1% of the value of the property. In all specific cases, the amount of property tax rate depends on the status of the property owner (whether it is a natural person or a legal person), as well as the type of property and the amount of income. The tax period for property tax shall be a calendar year. An enterprise/organisation shall file a property tax return with the tax authority by no later than 1 April of a calendar year, and pay the property tax within the same time frame.

2.Legal Forms of Business

As per the Law of Georgia on Entrepreneurs, operational after January 1 st 2022, six forms of doing business are stipulated, one of which possesses no legal personality and is conducted by the individual. Legal designation thereof is an individual entrepreneur. It exercises his/her rights and fulfils his/her obligations in business relations as a natural person. It is personally liable to a creditor with all his/her assets for the obligations arising from his/her business activities, unless otherwise provided for by an agreement between the individual entrepreneur and the creditor.

Other five forms of doing business include, General Partnership, Limited Partnership, Limited Liability Company, Joint-Stock Company and Cooperative, all of which possesses independent legal identity and acts as independent legal person.

Partners of General Partnership are personally liable to creditors, without limitation, for the obligations of the company as joint and several debtors.

Limited Partnership is composed of General Partner/Partners and Limited Partner/Partners. The liability of the Limited Partner to the creditors of the Limited Partnership is limited to a guarantee amount, whereas General Partner/Partners are personally liable to the creditors of Limited Partnership, without limitation, as joint and several debtors.

Limited Liability Company, is a company, the capital of which is divided into shares and the partners' liability for the obligations of which is limited. This Form is mainly used for the businesses without necessity of acquiring public funding and which chiefly operate outside of the domain of regulated financial markets.

Joint-Stock Company is a company whose capital is divided into shares and shareholders of which are not liable for the obligations thereof. This is a legal counterpart of the U.S. Corporation, mainly operating on the regulated financial markets and observing stringent disclosure and compliance requirements.

Cooperative is a company based on the labor activity of its members or incorporated to support the economic or social activities of its members, the objective of which is to satisfy the needs of its members, and the primary goal of which is not to make profit.

3. Currency regulation

The Lari (GEL) is the only legal tender in Georgia. Since 1998, the GEL has maintained a floating currency. There is no informal or parallel exchange rates in Georgia. Foreign businesses may convert GEL into hard currency at the market exchange rate and freely transfer the proceeds abroad without limitation. One may hold foreign exchange in bank notes or on deposit in designated bank accounts. There are no limitations on these accounts' operations.

4. International banking availability (possibility to open bank account in a local bank etc.)

National Bank of Georgia and commercial banks use SWIFT to process international payments and messages. There are no restrictions on the number of bank accounts individuals and enterprises may hold with Georgian banks. Banking is one of the fastest growing sectors in the Georgian economy. The cost of lending remains high but may decline as Georgia's banking sector develops.

As of July 1, 2021, Georgia's banking sector consists of 15 commercial banks, including 14 foreign-controlled banks, with 154 commercial bank branches and 830 service centers throughout the country. Two Georgian banks are listed on the London Stock Exchange: TBC Bank (listed in 2014), and the Bank of Georgia (2006).

Credit from commercial banks is available to foreign investors as well as domestic clients, although interest rates are high. Banks continue offering business, consumer, and mortgage loans.

Foreign investors are allowed to open bank account in the local banks. These accounts are permitted to be in foreign currency. There is no restriction imposed upon commercial banks by National Bank of Georgia in this regard.

5. Entry requirements (Visa/work permits)

Categories of visas in Georgia include:

  1. Diplomatic visas (Type A);
  2. Special visas (Type B);
  3. Ordinary visas (Type C);
  4. Immigration visas (Type D);
  5. Transit visas (Type C).

The one, which relates to the Entry requirements i.e. which serves working purpose is to be found within Type D.

D1 category of the Immigration visas pertain to persons arriving in Georgia to conduct labor activities, representatives and consultants of companies and firms who travel to Georgia to perform their official duties, aliens entering Georgia to work under concluded contracts, persons arriving in Georgia to carry out entrepreneurial activity under the Law of Georgia on Entrepreneurs.

The visa shall be issued by:

  1. The Ministry of Foreign Affairs of Georgia or,
  2. Diplomatic mission, the Georgian interests division at a diplomatic mission of a third country and a consular office of Georgia or,
  3. Authorized body designated under an individual administrative legal act of the Minister of Internal Affairs of Georgia.

Visa requirements can vary from one embassy to another. Some of the general requirements include:

  1. a completed and signed visa application form;
  2. a valid passport with at least one blank page for any entry stamp;
  3. an employment contract with a company based in Georgia;
  4. payment of the visa fee.

In the case of employment of an alien in Georgia, a local employer shall, within 30 calendar days after the entry into force of an employment agreement, send a notification on the employment of an immigrant to the Ministry of Labor Health and Social Affairs of Georgia in a material or electronic manner.

Foreign nationals should begin the visa application process by getting in touch with the nearest Georgian consulate or embassy. The officials at the embassy will be able to provide an accurate, up-to-date list of the requirements for the visa. Foreign employees can apply for a visa online through Georgia's e-application submission process. Applicants should gather all necessary supporting documents before beginning their visa application. After applying online, the applicant will need to submit an additional hard copy of the completed application form along with the required documents to the embassy. In some cases, the applicant can mail these documents to the embassy. Otherwise, they should take them to the embassy and submit them in person. Upon approval of the visa application, the employee can travel to Georgia. Once there, they'll need to obtain a residence permit from the Public Service development agency. Spouses and dependents who travel to Georgia with the employee will need residence permits as well. Residence permits for foreign workers are valid for one year, after which they are eligible for renewal for up to five years.

Detailed information as regards this procedure is stipulated in Ordinance No 280 of the Government of Georgia on Approval of the Procedures for Issuing, Extending, and Terminating Georgian Visas.

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.