The business landscape in Georgia for the year 2023 is teeming with promising prospects, attracting keen interest from experts and potential investors alike. The country's strategic geographical location serves as a compelling reason for entrepreneurs to consider Georgia as an ideal destination to establish and grow their enterprises. This allure is further accentuated by Georgia's abundant opportunities and encouragement for investors to establish their legal entities within its borders.
Why Opt for Company Registration in Georgia?
Georgia stands proudly at the vanguard of the globe's most rapidly expanding and evolved economies. The harmonized and clear-cut efforts of governmental branches craft a flawless environment in Georgia, perfectly suited for the establishment of holding companies.
Embarking on a business venture in Georgia metamorphoses into an effortless and expeditious journey, provided one delves into the nuances of Georgian legislation that steer this course. Navigating through the labyrinth of document submission until the acquisition of the registration certificate unfetters entrepreneurs, unveiling a plethora of investment prospects and competitive edges. Harnessing an unparalleled infrastructure that facilitates the seamless movement of commodities, nascent enterprises strategically position themselves at the crossroads of numerous pivotal logistical networks.
Georgia's Attractive Investment Landscape
Georgia effectively lures international stakeholders through various incentives. Conducting business for non-residents is straightforward, with minimal capital requirements and no mandatory physical presence. The country boasts free trade agreements with the United States, China, and several other nations, along with Double Taxation Avoidance Agreements (DTAs) with over 50 countries and organizations, demonstrating Georgia's dedication to fostering global cooperation and investment.
Navigating through Georgia's Tax System:
The tax policy extends preferential nominal rates to small businesses (1%), IT companies (5%), and maritime transportation enterprises (5%). The tax system is designed to be straightforward and streamlined, reducing administrative complexities for foreign investors and businesses. Georgia's taxation structure offers benefits for investors:
- Corporate Profit Tax (CPT): No tax on profits retained or reinvested, or a flat 5.75% rate.
- Personal Income Tax (PIT): A 20% tax applied to personal earnings.
- Personal Income Tax on Interest, Dividends, and Royalties: A 5% tax on received interest, dividends, and royalties.
- Value Added Tax (VAT): A standard rate of 18% on goods and services.
- Import Tax: Rates vary from 0% to 12% based on the imported goods category.
- Excise Tax: Imposed on specific goods.
- Property Tax: Up to 1% on property holdings.
It's important to acknowledge that tax rules and rates may change over time, and each investor's situation is unique. Before making investment choices, it is advisable to seek guidance from a professional advisor or the relevant authorities for the most up-to-date and accurate information.
Incorporating a Company in Georgia's Free Zone
The most attractive for foreign entrepreneurs, both freelancers and large international companies, is the establishment of a business in а free industrial zone (FIZ) of Georgia. The country's flexible and comprehensive legislative framework fosters a business-friendly environment, promoting a favorable investment climate. Tax and commercial benefits for FTZs companies include:
- Personal Income Tax (PIT) Exemption.
- Dividends and Interest Tax Exemption.
- VAT Exemption for FTZ Trade.
- No Employee Withholding Taxes.
- VAT and Import Tax Exemption for Export and Import.
- Property Tax Exemption for Industrial Park.
- Reduced Tax for FTZ Enterprise Trade.
The presence of an economic activity permit forms the foundation for company registration in Georgia's free industrial zones. A variety of licenses is accessible for a diverse array of operations, encompassing:
- Manufacturing and trading.
- Both broad industrial and niche trade endeavors.
- Storage services.
- Advisory services.
- Manufacturing of IT goods and provision of related services.
- Management of logistic enterprises.
- Provision of financial services, including banking.
Furthermore, within this sector, businesses can take advantage of modern infrastructure, competitive rental fees, robust electrical networks, low electricity tariffs, a skilled workforce, simplified licensing, and streamlined cost calculation procedures. These factors are especially relevant for those considering registering a logistics company in Georgia.
Challenges and Considerations for Business Setup
While the prospect of company registration in Georgia holds promise, it comes with challenges. Establishing a bank account necessitates a registered office and engagement of a local director or accountant under salaried terms. Securing a merchant account can be formidable; an alternative involves setting up an account for a Georgian enterprise within a designated payment system.
Navigating Paths for Foreign Entrepreneurs
Foreign entrepreneurs eyeing the Georgian market and expansion can explore promising avenues:
- Establishing an IT enterprise, capitalizing on the advantages of the Virtual Zone.
- Registering a trading company for cross-border transactions and international operations.
- Exploring the financial sector, particularly banking, with various opportunities available.
In the financial sector, the landscape primarily comprises banking institutions. Prospective entrepreneurs seeking to establish a presence in Georgia's financial domain are presented with multifarious opportunities within this burgeoning market. The potential establishment of an international financial company is admissible, contingent upon fulfillment of specific criteria. The registration process for conducting international financial business mandates the creation of a legal entity in any Georgian region, excluding the Free Industrial Zone (FIZ).
Key Considerations for Company Registration
The process of company registration in Georgia follows a sequential blueprint:
- Select the optimal company type aligned with your business operations.
- Choose a suitable name and formally register it.
- Compile foundational documents and submit them to relevant authorities.
- Enroll in the Entrepreneur's Register to obtain a unique identification number.
- Attain a certificate affirming state status and facilitate the tax registration process.
- Initiate the opening of a corporate bank account.
The bedrock of corporate existence within Georgia mandates endorsement by the Federal Public Registry Agency, operating under the aegis of the Ministry of Justice. The foundation is laid through the notarization of a comprehensive application, encompassing critical particulars such as company nomenclature, business genre, domicile in Georgia, articulated purposes, and bolstered by:
- Notarized replicas of the founding documents.
- Comprehensive particulars about the company's progenitor, including name, address, birthplace, educational trajectory, and professional experience.
- Granular insight into the statutory capital's extent, accompanied by intricate breakdowns of each partner's contributions.
- Elucidation concerning each member of the supervisory board and managerial cadre.
In instances where necessitated, the registration process mandates notarized translations into Georgian. Fulfillment of the registration fee is obligatory before inclusion within the Entrepreneur's Register. Once all stipulated documentation is tendered, and the requisite fee remitted, the company stands poised to receive an identification number and a certification signifying both tax and state registration.
An integral phase within the registration protocol encompasses the initiation of a Georgian bank account. Pertinent elements germane to this facet encompass:
- Furnishing a tax registration certificate.
- Provision of identity document duplicates for all authorized representatives.
- Mandatory submission of the director's specimen signature (alongside other designated signatories).
Diverse Organizational and Legal Forms in Georgia
Entrepreneurs exploring Georgia have an array of business legal forms to choose from:
- LLC: This form is attractive to local and international investors and can be created by individuals or legal entities, and also gives the right to obtain a license for a virtual IT zone in Georgia.
- JSC: Registering a joint-stock company in Georgia is particularly suitable for large and complex projects, even including the possibility of launching an IPO on the Georgian Stock Exchange.
- Individual Entrepreneur: Small enterprises commonly embrace this legal form. The “small business” status qualifies for a 1% income tax rate if the IE's annual turnover remains under $145,000 USD. If the turnover exceeds this threshold, the applicable rate becomes 3% of the profit.
- Branch Office.
- General Partnership and Limited Partnership.
- Free Industrial Zone Company.
Exploring Market Entry into Georgia
Foreign investors can gain a foothold in the local market by establishing a branch in Georgia. This form of establishment extends from a foreign parent organization, which remains liable for the branch's financial obligations. However, a branch doesn't hold independent legal standing. The process for opening a branch in Georgia involves:
- Providing a resolution from the parent company to establish a Georgian branch.
- Submitting founding documents of the parent organization, along with proof of its registration as a legal entity in its home jurisdiction.
- Designating the appointed director of the branch or any other legal representative in the country through a resolution.
- Furnishing a certificate confirming the registered address of the company in Georgia.
- Presenting identification documents of the appointed branch director and evidence of the registration fee payment.
Investment Opportunities in Georgia
For foreign investors, Georgia offers several pathways for establishing and growing businesses, covering business visas, bank account setup, and navigating the tax landscape. Business visas require projected financial performance, while freelancers can engage as private entrepreneurs. Other visa options cater to specific business activities. Corporate bank accounts provide flexibility, easy transfers, and cost-effective maintenance. The tax system boasts advantages, including reduced rates for specific sectors and international cooperation agreements.
If you're a foreign investor eyeing opportunities in Georgia, there are various pathways to consider for establishing and growing your business. Let's delve into the key routes for foreign investment, covering business visas, setting up a bank account, and navigating the tax landscape:
Business Visa Application for Company Formation:
Foreign investors keen on launching a Georgian company can apply for a business visa. To qualify, you need to show the projected financial performance of your company. Specifically, your business should achieve a turnover of $50,000 in the first year, $100,000 in the second year, and maintain $120,000 annually from the third to fifth years.
Engaging as Foreign Freelancers (Operating through IE):
If you're a foreign freelancer operating as a private entrepreneur, you can tap into the Georgian market. Just provide a bank statement confirming your financial capacity to conduct business activities in Georgia.
Other Visa Options for Foreign Businesspeople:
Foreign entrepreneurs also have the option of exploring diplomatic visas, which can be utilized for specific business-related activities upon your arrival in the country.
Establishing a Corporate Bank Account:
A corporate bank account is required. With its help, all transactions with partners, cash processing, as well as local and international transfers are carried out. Established banks like Bank of Georgia, Terrabank, TBC, and Silk Road Bank facilitated the opening of corporate accounts for foreign entities.
The Exciting Future of Georgia's Business Environment
Georgia's robust tax system, streamlined registration processes, and appealing business incentives position it as a hub for entrepreneurial growth. As the country continues its development trajectory, both local and foreign investors stand to benefit from the myriad opportunities and advantages offered by Georgia's business ecosystem.
Should you require guidance on investment regulations in Georgia or assistance in launching a startup within the nation, our team of experts at YB Case stands ready to provide their adept counsel.
Embarking on the commencement of a business in Georgia necessitates a thorough application encompassing the subsequent essential company’s details:
- Name of the Company
- Business Type
- Corporate Objectives and Aims
- Registered Company Address
- Commencement Date of Operations
- Particulars of Participants
- Contribution of Each Participant
- Documentation detailing Board and Supervisory Board Members