Company formation in Georgia

Company formation in Georgia represents an attractive investment environment for foreign companies as the incorporation process takes a very short time, if all the requirements are fulfilled. Aside the easy incorporation process, foreign investors will be glad to know that their companies will benefit from the same rules as the local companies.

Advantages for setting up your business in Georgia

To prevent double taxation of income, Georgian tax legislation allows for credit to be given for profit tax paid outside Georgia against Georgian tax on foreign-source income. Georgia offers competitive cost factors (labour, utilities, real estate, taxes). Georgia’s workforce of 1.9 million people is highly educated – 30.8% have university degrees. Georgia boasts low tariffs, streamlined border clearance procedures and preferential trade regimes with major partners, including the EU, the U.S. and free trade with Turkey and CIS countries. Georgia has been a member of the WTO since 2000 and has no quantitative restrictions on trade. Georgia hosts an excellent infrastructure. Extensive public and private investment has developed a dynamic nationwide network of roads, railroads, waterways, harbours and airports. Georgia’s foreign trade has been growing rapidly since 2003 as a result of aggressive policy re­forms to make it easier and less expensive to trade across borders.

Types of companies in Georgia

Below are the types of company formation in Georgia:

Sole Proprietorship

A sole proprietorship is a company owned by a single individual. It is the simplest, least regulated form of business entity. The founder, referred to as the sole proprietor, fully controls the sole proprietorship, and there is no distinction made between the owner and the company. Therefore, the owner bears unlimited liability, i.e., is fully liable for the debts and obligations of the company, to the extent of one’s personal assets.

Limited Liability Partnership

A limited liability partnership in Georgia can be formed by at least 1 general partner and 1 limited partner. The general partner bears unlimited liability for the company’s debts and incomes, unlike the limited partner who has limited responsibilities as far as one’s contributions to the company’s capital are concerned.

Limited Liability Company

A limited liability company in Georgia can be formed by not more than 50 shareholders, among whom the capital is distributed as shares. These shareholders are liable only to the extent of their respective contributions.

Joint Stock Company

A joint stock company (JSC) is a company that has its shares listed at the Georgian Stock Exchange. A JSC may issue both common and preference shares. And, like a limited liability company, its shareholders are not personally liable for the debts or obligations of the company.

International Trading Company

An international trading company, or special trade company, in Georgia can be formed by someone wanting to trade overseas, provided the goods being traded cannot be of Georgian origin or sold to Georgian customers. Such a company enjoys corporate income tax exemption on its trading income. To be incorporated as a special trade company, one must reserve a warehousing space in an approved warehouse, and submit a special trade status application to the Georgia Revenue Services.

International Financial Company

If a company in Georgia offers financial services to overseas customers, it can be incorporated as an international financial company, provided the income sourced from foreign clients exceeds 90% of the company’s total income. Such a company can benefit from complete corporate tax exemption on the income derived from sale of financial services and securities to clients abroad. To be incorporated as an international financial company, one must obtain the licences required for the provision of the financial services, and submit an application to the Georgia Revenue Services.

Branch Office

A branch office is an offshoot of a company located abroad that wishes to conduct business in Georgia.

Corporate taxation in Georgia

Companies are considered to be subject to Georgian taxation if their place of management is located in Georgia. Georgian corporate income tax is levied on the worldwide income of resident companies. Foreign companies are taxed on their income derived from Georgian sources. However, in order to avoid double taxation, Georgia has signed tax treaties with 52 countries. The rates of the main Georgian corporate taxes are as follows:

  • Corporate income tax: 15%;
  • Value Added Tax (VAT): 18%;
  • Import taxes fluctuate between 0% and 12%;
  • Property tax does not exceed 1%.

In Georgia, there are no payroll, social security, capital gains, wealth, and inheritance taxes. Also, it should be noted that excise duties are levied only on selected types of goods, i.e., alcohol, tobacco, oil, gas, automobiles, and mobile communication services.

Tax incentives in Georgia

Company formation in Georgia offers many tax incentives. In order to boost the economic development of the country, the government of Georgia introduced two major tax incentives, namely, (1) Free Industrial Zones (FIZs) and (2) a special customs regime for companies that export goods outside the country.

Georgian FIZs are located in 3 cities: Poti (a seaport), Kutaisi (country’s third largest city), and Tbilisi (the capital of Georgia). Companies that operate within the FIZs can benefit from 0% tax on corporate income, import, and property as well as significantly reduced VAT rates. A wide range of activities are permitted in the FIZs, e.g., manufacturing, trading, construction, financial, and consulting activities. Furthermore, all Georgian companies that produce goods for export can opt for a special Internal Processing Customs Regime license. Such a license permits the importation of raw materials which are used for production of goods to be exported into the country without paying customs duties and VAT.

The biggest advantages of a Georgian limited company

  • 15% corporate income tax (One of the lowest between OECD members)
  • 100% foreign ownership and directorship allowed
  • No information exchange
  • Highly skilled and cost effective labor force
  • Remote bank account opening possible
  • Low startup and maintenance costs

The biggest mistakes when starting a business abroad

Many agencies and law firms do not advise comprehensively or wrongly. Learn what to look for.

Gravity of the situation

Often, these law firms think foreign companies are half-silk, tax evasion is favored and mailbox companies are the leaders rather than the exception. This is true, however, only in some start-up agencies that do not have the necessary expertise. Self-proclaimed law firms that do not employ tax accountants or lawyers usually set up companies that are unlikely to operate legally. We set up and look after companies that can withstand tax audits and that are legally operated.

Is physical presence required in the country where you wish to set up your company?

You can set up a company worldwide, as long as the respective country allows you as a foreigner to acquire shares in local companies or to act as a managing director. If this is not the case trustees can be used. For example, Cyprus allows every EU citizen to own and run a business. Nevertheless, trustees can be used for the purpose of identity protection. However, it is important that the management takes place locally, in the country in which the company is to be taxable. In addition, a permanent establishment must be set up. Without these, a major tax offices around the world do not recognize the company and in the worst case would require additional payment of corporate and business taxes plus late payment surcharges. We rent you a real office and set up a permanent establishment that meets all requirements beyond doubt.

Problematic Law firms: Privacy is not regarded.

Some law firms bind customers with toggle contracts and exert pressure when the customer wants to close his company. If you are a client of a law firm that has established a legally flawed company, they can be blackmailed. Because in the case of a fiscal problem, law firms without a license are not bound by a duty of secrecy.

Migrating to a different law firm

We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. The process of changing law firm is made often difficult on purpose. Therefore, we have developed a principle of trust. If you are not satisfied with us and want to change, you can do that at any time. The necessary documents (resignation letter), you receive from us standardized after founding. You are therefore protected against unexpected costs and you are free at any time to visit another law firm. So far we have not lost any customer to another law firm.

Privacy / Firm Location

Your accounting documents are kept safe with us. In addition, all electronic data is stored encrypted and accessible only by us, which are bound to a professional secrecy. All accounting records are also stored locally only. Neither authorities nor hackers are able to access this data.

No taxes?

There are quite a few locations in the world that do not charge taxes on companies or individuals, or only estimate a very low flat rate tax. But this can rarely be used without corresponding change of residence. If you are a resident of any major country, the relevant double taxation agreement is decisive. Providers who promise otherwise lead them to tax evasion, which in the case of discovery usually punishes severely. We advise against setting up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in your origin country can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous private account no longer exists.

We comply with the following code:

  • Legally secure foundations
  • No unexpected(hidden) costs
  • No false promises
  • Finding the right solution by focusing on your requirements

With this strategy, we have been on the market since 2013 and have not disappointed any customer so far. And we prioritize it in keeping that way. We strive to ensure that every client is satisfied and does not take risks with the solutions we provide for them, but only exploits legal opportunities. Starting a company that involves doing real business is more costly than a letterbox company, but it is the only way to save on taxes without risking legal action.

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