Investing in Georgia

Question:

How advantageous is investing in Georgia?

Answer:

Incorporating a company in Georgia is an attractive option for several reasons:

• To begin with, it is located in a strategic area bordering Asia and Europe, with a developed infrastructure. It is an important distribution hub between both continents, and also has a good trade relationship with practically all countries, including the European Union, the United States, China, Turkey, and Iran. It is part of the World Trade Organization, has free trade agreements with the EU and the EFTA countries, Russia, and other countries of Eastern and Central Europe. This provides access to a market of over 900 million people without any duty tariff restrictions, and a system of generalized preference with US, Canada, Japan, Norway, and Switzerland. In addition, Georgia has signed bilateral investment agreements with 32 countries.
• Foreigners can own a company in full, without requiring any kind of visa or permit, and incorporation is relatively simple. As has been mentioned before, Georgia ranks 7th globally in terms of ease of starting a business, and 6th in the time it takes to do so. There is a one-stop shop for both tax and state purposes.
• There are no restrictions on the purchase of real estate by foreigners, excluding agricultural land.
• Georgian banking system is very well-developed. Therefore, Georgian Banks usually offer the possibility to open an account in USD, EUR and GEL and the fees applied to its exchange rates are small (about 0.10-0.15%), as well as considerably reduced rates for banking services such as transfers.
• Currently, interest rates on bank deposits are highly attractive for both short and long-term, - up to 10% for long-term deposits in local currency, and 3.5% for deposits in Euros or US dollars.
• Taxes are considerably low in Georgia, The World Economic Forum’s Global Competitiveness Report listed Georgia as the 8th lowest-tax economy. Georgia taxes legal entities on their worldwide income, but a tax credit may be available for foreign tax paid up to the income tax assessed in Georgia.
• Companies registered in Georgia are subject to a 15% flat corporate tax on their actual and deemed distributed profit. This means that profits retained and reinvested in the company are not subject to taxation.
• Dividends in the hands of the recipient from both resident and non-resident entities are not deemed to be profit distribution and therefore not taxable unless they are from a considered tax-haven jurisdiction or are taxable by law margin. Capital Gains are included in corporate income tax base.
• Regarding anti-avoidance rules, Georgia has a comprehensive transfer pricing regulation, where transactions between related companies (both resident and non-resident) should be made at fair market value and documentation should be maintained and submitted to tax authorities under request.
• Thereare no thin capitalization and controlled foreign companies (CFC) rules in Georgia.
• There is a progressive real property tax, which may not exceed 1% of the average residual value of fixed assets, investment property, uninstalled equipment and construction in progress.
• There are no payroll, capital and stamp duties, transfer, social security, wealth or inheritance taxes.
• It is possible to use the accelerated depreciation of capital assets with the total deduction during the first year and the remainder of losses for tax purposes on the profits of the companies for 10 years.
• At 1.5%, Georgia’s average duty tariff rate is the lowest of all WTO countries, as well as having the free trade agreements mentioned above.
• The value-added rate is 18%. In addition, there are attractive tax incentives in the so-called Free Industrial Zones (FIZ). Companies located in the FIZs, which may be foreign, are exempt from corporation tax, import and export tax, dividend taxes, VAT and property tax.
• The combination of a quick and simple registration process and the strategic location of these zones results in a very favorable environment for incorporation. The only applicable tax is 4% on transactions between free industrial zones and the rest of the territory. There are four FIZ zones currently. These are operated by private companies, and the investor must rent a parcel from these operators.

 

DOMES offers the full package of services in all relevant fields for business and investment management, including incorporation, legal assistance, accounting services and bank account management. All services may be done remotely, using a PoA. Please get in contact with us directly for more information.