Ranked 2nd in 2019 for actually starting a business; Georgia is even more easy for entrepreneurship then Singapore or Canada (Source: Doing Business). One reason for sure is, that foreign investors are heartily welcome to make investments in the country which is a nice addition before you will realize that the country has a policy of carrying free trade agreements with the European Union and European Free Trade Association countries.
While registering a company in Georgia is relatively easy it doesn't end there since you can own company shares without having any visa or work permit (and agricultural land is no exception).
Georgia has a policy of HNWI (High-net-worth individual) which says, that if an individual owns an asset or a property of more than GEL 3M or your annual earning is more than GEL 200,000 you will officially be considered as HNWI.
This a continuation of the series on Flag Theory.
|Basic education quality||Good|
|Average violent crime rate||Low|
|Average life expectancy||74 years|
Cost of living estimates
|Single student||US$ 472|
|Digital Nomad||US$ 652|
|Single retired person||US$ 928|
|Retired couple||US$ 1,234|
|Single entrepreneur||US$ 1,147|
|Entrepreneur with family of 4||US$ 2,161|
Advantages and disadvantages
|Business opportunities ahead||Still some degree of corruption|
|Chances are to be the Estonia of the Caucasus|
|Good banking jurisdiction|
|Low barrier to residency|
|(Very) low cost of living|
Work residence permit
People among the below-mentioned countries can stay and work for up to 1 year in Georgia:
- Albania, Australia, Antigua and Barbuda, Andorra, Armenia, Argentina, Australia, Azerbaijan, Bahrain* Bahamas, Barbados, Belize, Belarus, Bosnia and Herzegovina, Brazil, Botswana, British Dependent territories*, Brunei, British overseas Territories*, Canada*, Costa Rica, Colombia, Denmark Territories*, Dominican Republic, El Salvador, Ecuador, French Republic Territories*, Honduras, Holy see, Iceland*, Israel*, Kazakhstan, Japan*, Kyrgyzstan, Kuwait*, Lebanon, Malaysia, Liechtenstein*, Mauritius, Moldova, Mexico, Monaco, Montenegro, New Zealand, Netherlands Territories*, Oman, Norway, Qatar*, Saint Vincent, Russia, Panama, Grenadines, Saudi Arabia*, San Marino, Serbia, Singapore, Seychelles, South Africa, South Korea, Tajikistan, Switzerland*, Turkey, Thailand, Ukraine, Turkmenistan, United Arab Emirates*, Uzbekistan and the United States of America.
Also, whoever possesses a residence permit or a valid visa from the previously mentioned countries (*) are completely exempt from visas. The point to note is that people from the EU or Turkey traveling to Georgia don’t need to even have a passport to enter; their ID card is more than enough.
Foreigners can look for a job or they may start some kind of a business in the one-year span in which they are allowed to stay – so in order to gain a residence permit.
Citizens who are exempt from visas are: Chile, Iran, Uruguay, but can enter either for 45, 90, and 180 days respectively.
Selected residence types in further detail
Georgia has really kind of liberal policies for immigration, and it is not at all complicated to get the residency there. As soon as you make some investment, get a job, or start some kind of economic activity, you should immediately request the residence permit.
This could be done through either applying online through the Public Service Development Agency or getting in touch with any authorized representative, a subdivision of any Public Service Centre, Community Centre, Territorial Office of the Public Service Development Agency.
The application form and other important documents should be submitted in either English, Georgian and/or Russian.
There are a number of types of residence permits – the work, the investment and the permanent residence permits:
Work residence permit: Usually this is issued to people who want to start their own business or do work for their own-self as well as others. The business activity and/or the employment must be certified (e.g. employment contract, if the applicant is an independent professional she or he must provide a document that certifies their education or the activities they carry out prior). Another option is a statement from the bank stating that the applicant covers (at least) twice the cost they will be facing in Georgia per month, for as long as the person decides to stay (duration of the permit; mandatory or self-employed).
In the case of nationals of non-visa-free countries, one would have to possess a D1/D2 immigration visa. The fees will depend on whatever the terms are when the permit is issued, which may be 10 days, (GEL 410 ≈ USD 150), 20 days (GEL 330 ≈ USD 120) or 30 days (GEL 210 ≈ USD 77).
Investment residence permit: This type is issued to a foreign citizen who invested at least USD 300 000 equivalent in GEL in Georgia. This provision is prescribed in the Law of Georgia on Promotion and Guarantees of investment (PDF). in such cases, residence permits are also issued to the investor’s family members, which include a spouse, underage dependent and/or fully dependent incapacitated person;
The applicant will need a document that certifies their investment made and some recommendations in written form from a member of the Government of Georgia or three citizens of Georgia operating a local business.
The permit is usually issued in 20 days (GEL 300 ≈ USD 110) or 30 days (GEL 180 ≈ USD 67).
Permanent residence permit: This type is issued to a citizen of another country having her/his spouse, parent and child of citizen of Georgia; also to a foreign citizen who, holding a temporary residence permit, has resided in Georgia during the preceding six years. Nevertheless if the person lived in Georgia for educational purposes or medical treatment or spent some time working at the diplomatic mission or at an equivalent representative office, this period cannot be counted towards the pre-requisite six-year term. Additionally a statement stating and certifying the applicants legal income will need to be given.
Apply for Georgian citizenship
The EU and Georgia have an agreement which states that citizens of Georgia can accede to the Schengen Area without having a visa. This agreement came in action on March 28, 2017. Additionally, citizens of Georgia can visit Latin America, Indonesia, and Malaysia with limitations.
Other than having a blood relationship in Georgia, an outsider can be granted citizenship in the following manner:
- Under an ordinary procedure: Having a job, real estate, developed business activities or possessing interest/shares in national enterprises. Also have been living uninterruptedly and legally for 5 years in the country and knowledge of Georgian history, language and the general rules of law.
- Under a simplified procedure: Georgian citizenship shall be granted with the simplified procedure to a person married to a Georgian citizen who has been legally and uninterruptedly residing in Georgia for 5 years prior to the submission of the application. additionally, a person is required to know the state language, Georgian history, and the basics of Georgian legislation.
- As an exception: An exception can be granted by the President of Georgia according to Article 12 (2) of the Constitution if the foreign applicant has special merit before Georgia or they are issuing of his citizenship is a State interest. He/she will need two reference letters from a relative or some legal persons who are registered in Georgia.
When he/she is granted the Georgian citizenship they must refuse their previous citizenship unless and until President of Georgia has granted an exception.
|Summary||Tax resident LLC||International Trading LLC||International Finance Company||Free Zone LLC|
|Other names||LLC||Special trading company||International finance company||Free industrial zone company|
|Companies use||All products and services||Trading with a global client||Supplying financial services||Manufacturing and export trading|
|Time to sign and invoice||1 week||3 weeks||3 months||3 weeks|
|Time taken to hire staff||1 week||3 weeks||3 weeks||3 weeks|
|Time taken to sign a lease agreement||1 week||1 week||1 week||1 week|
|Time taken to give account numbers||2 months||2 months||5 months||2 months|
|Time taken to give registration number||1 week||3 weeks||3 months||3 weeks|
|Companies tax rate||15%||0%||0%||0%|
|Is a limited liability company?||Yes||Yes||Yes||Yes|
|Grants and incentives available||Yes||Yes||Yes||Yes|
|Government approval required for outside investors||No||No||No||No|
|Resident manager, partner, director, legal representative required?||No||No||No||Yes|
|Least paid share capital||US$1||US$1||US$100,000||US$100,000|
|Bidding can be done for government contracts?||Yes||Yes||Yes||Yes|
|Companies' bank account location?||Bank of Georgia||VTB||Liberty Bank||Peoples Bank|
|Is it secure trade finance?||Yes||Yes||Yes||Yes|
|VAT payable on sales to local customers?||18%||No local sales allowed||No local sales allowed||0%|
|Average total business set up engagement costs?||US$11,500||US$18,150||US$32,550||US$17,030|
|Average total engagement period?||2 months||2 months||5 months||2 months|
Pros/Cons of starting your own business in Georgia
There are several advantages and disadvantages that you should consider to start your business in Georgia.
|Georgia allows foreign investors to invest and set up their own limited company with just one or more shareholder and one director, and neither of them has to be Georgian. Also, there is no minimum investment required to start a business there.||Those companies who are producing for the local market of Georgia face two challenges:
1. Georgia’s population is 3.9 million, second-lowest in Central Asia, just falling behind Armenia
2. As the population is very little; it’s purchasing power is also very small in Central Asia, falling way behind the European continent.
|Foreigners who are up to registering a company in Georgia can enjoy the country’s beneficial tax regime: a) corporate tax rate is 15% and is the 4th lowest in Central Asia after Turkmenistan, Uzbekistan and Kyrgyzstan b) Companies are exempt from payroll tax, branch remittance tax, capital duty and social security contribution.||Although there are very huge investments being made in Georgia; the standard of living there is very low. It is reported to have said that about 21% of the country’s population is living below the poverty standard, proving it to be a challenge for foreign businessmen to understand and adapt to the country’s economy.|
|Income earned by foreign operation brought in Georgia may be given full exemption on company income tax to a) Companies doing trading business having income gained by Georgian business; lower than US$420,000 and 5% or their total custom value of the products traded with overseas customers; b) Companies with foreign-sourced income who exceeds 90% of their total income.|
|Georgia can be said to have a pool of young and talented labors as; a) Entrepreneurs can find young and talented labor on a very low cost and b) Georgia has a high-ranked skill development, and vocational education namely, the OECD Eurasia Competitiveness Program that is offered by the OECD and training program.|
|The setup process of business is very easy in Georgia as: a) Registration steps are very simple and easy compared to other Central Asian countries. The country has fewer and simpler registration steps than most other Central Asian countries. One can start a business there as early as a week. b) The application to register the setup is done with the National Agency of Public Registry and can be done either by one of the shareholders by a legal representative c) Therefore it is ranked on 16th Ease to do business ranking by the world bank.||Georgia shares a very confused and tense relationship with Russia, as: a) Military of Russia have occupied since the war in 2008; the regions of Abkhazia and South Ossetia in northern Georgia and they consider them independent territories. As Russia does not allow international interference, the issue remains unresolved. b) Majority of the gas is supplied by Azerbaijan, however, Georgia’s consumption of Russian gas, is important to equalize a diversified supply of gas and thus balance prices.|
|Companies who want to set up their business in the free zone will be exempt from a) VAT and import/export tax for certain products b) property tax and c) corporate income tax.|
|Other benefits include: a) Georgia has concluded fifty-two double taxation avoidance treaties with different countries including Singapore, UK, China, Germany India and Ireland among others. b) Georgia was ranked 13th freest economy in the Heritage Foundation’s 2017 Index of Economic Freedom, a measure of freedom enjoyed in business, monetary, financial, trade, investment and labor markets. The reason for Georgia’s high rank is free labor and minimal trade regulations. c) Due to the low electricity costs of just 4 cents per kWh, Georgia has become the Eurasian go-to destination to register crypto-mining companies.|
Best use-cases to initiate a Georgian company
- Tax efficiency: If one wants to save their tax, then Georgia could be the best option as it provides international trading companies as well as international financial firms with a very efficient solution to save tax. These companies don’t have to pay corporate income tax on their worldwide income.
- Access to Russia: If one wishes to capture the Russian market and enjoy several tax advantages they can first consider setting their operation in Georgia as it is very easy to move your business from Georgia to Russia.
- Outsourcing: Another option for an investment is to outsource the business process in Georgia. As discussed earlier, the unemployment rate in Georgia is up to 12.6%. Of which almost 50% of this population is around 20 to 34 years old. However, unfortunate that might be but if you look at it from the business perspective and outsourcing perspective; this surely entails that this group represents talent and skills that have not been yet discovered as a majority of the Georgians from these categories have done at least secondary education and most of them continue to carry their studies. The younger Georgians are very Good and fluent in both English Russian and about 70% of the population use Russian very well. So when Georgia waves off the social security tax and the individual personal income tax happens to be flat (20%), therefore outsourcing in Georgia becomes a very favorable point for investment by smart investors. Mainly outsourced departments are customer support, IT infrastructure, HR, management, etc.
- Real Estate: The country’s real estate needs are facing difficulty in achieving the best high level as it still can be described under a developing economy. A High Demand for A-class business premises and entertainment facilities is seen. Global Retail Development Index ranked Georgia on number 6. Therefore, while searching for an investment opportunity, this is an area that should not be neglected. Georgia’s Capital; Tbilisi, is regularly given the status of a business hub for this region as a huge number of international companies South Caucasus operate is this capital. Although the success rate for businessman investment is very high; room for more improvement is always there.
The World Economic Forum’s Global Competitiveness Report Stated that Georgia lies on the 9th lowest tax-paying economy indicating taxes are comparatively lower in Georgia. One can have a tax-free residency in Georgia if they can prove that he has not stored any Georgian-sourced income.
Local-sourced income will be taxed at twenty percent, dividends, interests will only be taxed at source at a withholding tax of five percent base and shall not be included in an individual’s personal income tax base. Income earned from rental shall also be subject to a 5% tax rate which is a reduced percentage.
Although Georgia taxes companies on their worldwide income, they can claim for a tax credit on the tax paid in other countries up till the income tax paid in Georgia. Registered companies are expected to pay roughly (see comparison on company registration) a 15% tax on their actual or to-be-paid profit. That entails that the retained profits which are to be reinvested in companies are exempt from further tax.
Whatever payment is made to residents or non-residents on interests, royalties and dividends are to be taxed at a withholding tax of 5%.
Payments Made to technical or professionals will be taxed at ten percent withholding tax.
If the applicant company is a resident, considered tax-haven, where fifteen percent tax will apply.
Whether a resident or otherwise, dividends are not taken as something that would be distributed amongst the shareholders; therefore, they are not taxable unless considered from a specific tax jurisdiction. Corporate income tax base includes gains from the capital.
Anti-tax avoidance rules state that Georgia has very detailed and elaborated transfer pricing rules, where transactions between two related companies (either resident or non-resident) are to be made at fair market value and proper papers should be stored and submit them to the tax authorities if in case asked. There are no such rules on controlled foreign companies and thin capitalization.
Real property tax which is in place states that it should not exceed 1% of the average remaining value of fixed assets, uninstalled equipment, investment property, and construction.
There is no such capital, payroll and stamp duties, social security, transfer, wealth or inheritance taxes.
One can use the increased depreciation of assets with the overall deduction in the first year and whatever loss is remaining it could be divided in the next coming ten years. It has the lowest tariff rate amongst the WTO countries being only 1.5-%; this is in addition to the free trade agreements. The VA rate is 18%.
There are many incentives for the taxpayers in this ‘so-called’ Free Industrial Zones (FIZ). All the companies that come under FIZ, although foreign, are exempt from import and export tax, corporation tax, dividend taxes, property tax, and VAT. All it takes is a very easy process for registration and the location of these zones makes the surroundings very favorable for the incorporation.
The solo tax that applies is 4% on whatever transactions take place between the rest of the territories and the free zone. Mainly there are four FIZ zones which are situated in the port of Poti, Hauling, Kutaisi, and Tbilisi, these are all operated by private companies. The investor is expected to rent a parcel to the mentioned operators.
Rules for individual taxation are that a tax resident is one who stays for a minimum of 183 days in Georgian territory, and they will be taxed only on their income which is Georgian. Thus clearly states that whatever income earned elsewhere is not subject to any tax in Georgia. The tax rate is a flat 20%, however, interest income, the dividend will be taxed at a 5% withholding tax and it’s not available
Income from rental purposes is subject to a reduced 5% tax rate if there are no deductions made earlier from this income.
Gains from the capital are usually subject to a standard rate of tax however there is an exception for those gains which are from the sale of those properties which have been held for up to two years.
Gains from the sale of some residential property with have a linked plot is subject to a reduced 5%.
A person who owns real estate will be subject to a tax ranging from 0.8% to 1% on whatever the property’s market value is.
Households who have an annual income less than GEL 40,000 (≈US$ 16,500) are completely exempt and those households whose annual income is between GEL 40,000 and GEL 100,000 (≈US$ 41,200) are subject to a tax rate which is reduced and ranges from .05% and .2% on whatever the property’s market value is.
If you want to know about the latest policies and tax rates, please visit the website Revenue Service of the Ministry of Finance of Georgia.
There are a number of ways to make a smart investment in Georgia, whether you choose to invest in agriculture, real estate, manufacturing, tourism or outsourcing.
The government plays a vital role in bringing in and attracting more investors to make it a thriving destination for investment purposes, offering so many grants and incentives and also lowering or making them non-existent effectively reducing the cost of doing business there.
There is a huge number of success stories from Georgia that in return encourages more people to invest there. In a follow-up article you will learn more about the banking sector in Georgia and the specific benefits.
Website and the information contained herein is not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice.