With a range of Free Trade Agreements, Georgia has access to a 900 million market that is not subject to customs tax, including Turkey, CIS and EU countries.
The predictability of political and investment climate is ensured by the Association Agreement signed with European Union in 2014. Georgia’s political system boasts open democracy and has demonstrated effective transition of governments with a consistent commitment to economic liberalization and Euro-Atlantic integration.
Through anti-corruption legislation, effective law enforcement and free access to online registries the Georgian economy promotes transparency, reduces bureaucratic burden and has won the UN Public Service Award.
Georgia is the one of the least tax burden countries in the world, with only 6 flat taxes and Corporate Profit Tax of only 15%.
|Form of government:||Unitary semi-presidential republic|
|Official & spoken languages:||Georgian|
|Time zone:||GET (UTC+4)|
|GDP (PPP):||$35.6 billion|
|GDP (PPP)/per capita:||$9.500|
|Average salary:||300-400 Lari (120-200€)|
|Major trading partners:||Turkey, United States, Russia, Azerbaijan, Armenia, United Kingdom, Bulgaria, Ukraine, Turkmenistan|
Novasigma has published an annual BFEE (Business Friendliness Environment – Europe) -index for 2017. European economies are ranked from 1-51 based on their business friendliness. The rankings are determined by sorting the aggregate distance to frontier scores on 20 topics each consisting of several indicators, giving equal weight to each topic. The rankings for all countries and economies are bench-marked to January 2017
|GEORGIA – OVERALL RANK 2017: 2nd (Europe)||78/100 points|
|1. Ease of incorporation process (bureaucracy, costs, time frame)||5/5 points|
|2. Privacy level of shareholders and investors||4/5 points|
|3. Privacy level of company directors and signatories||3/5 points|
|4. Availability of the private equity funding||3/5 points|
|5. Availability of the public and / or bank sector financing instruments||4/5 points|
|6. Reputation of the country (trading across borders with a company registered in this country)||2/5 points|
|7. Easiness of recruiting professional staff (professionalism, average pay, protection against dismissal)||4/5 points|
|8. Easiness of getting business premises (price, availability)||5/5 points|
|9. Suitability for production of physical products||5/5 points|
|10. Suitability for producing services||5/5 points|
|11. Size of the home market B2C (population and purchasing power)||1/5 points|
|12. Size of the home market B2B and public sector purchasing services from local businesses||3/5 points|
|13. Exporting physical products (markets nearby, logistics and toll)||4/5 points|
|14. Exporting services||5/5 points|
|15. Immaterial rights (compared to other countries)||4/5 points|
|16. The level bureaucracy or corruption during business operations||5/5 points|
|17. Company taxation||4/5 points|
|18. Dividend taxation, withholding taxes and tax treaties||4/5 points|
|19. Easiness of selling a business||4/5 points|
|20. Easiness of closing down a company||4/5 points|
|Overall rank 2016:||rank 24th (change in rank: 0)|
|– Starting a business:||rank 6 (average processing time 2 days)|
|– Dealing with construction permits:||rank 11 (no change)(average processing time 48 days)|
|– Getting electricity:||rank 62 (average installation time 71 days)|
|– Registering property:||rank 3 (no change)(average processing time 1 day)|
|– Getting credit:||rank 7|
|– Protecting minority investors:||rank 20 (no change)|
|– Paying taxes:||rank 40 (average company tax from profits 16,4%, average time used for taxation 362 hours per year)|
|– Trading across borders||rank 78 (no change)|
|– Enforcing contract:||rank 13 (average 285 days, average cost from standing amount 29,9%)|
|– Resolving Insolvency:||rank 101 (Average time processing bankruptcy: 2 years)|
New businesses registered in 2014: 17 136
First off, Georgia has low taxes compared to its counterparts in Europe. What’s more, income is taxed at a flat rate which is lower than that of every OECD member except for Hungary. It’s corporate tax rate is significantly lower than those of the United States, France, Belgium, Mexico, and Portugal (though, to be fair, it is still a lot higher than the rates you’ll find in Switzerland, Ireland, and Germany).
Rates for different activities are as follow:
Under Georgian tax law, in addition to income from employment, income tax covers “income from economic activities.” These activities include the following:
Establishing tax residency in Tbilisi now means that you’ll have the option of e-filing, making it much easier to pay taxes than it was previously. Tax residents can also pay their tax bill electronically on the Revenue Service’s website.
The government is currently developing an overhaul of the country’s corporate tax regime so that businesses will pay less in taxes than they currently do. Modeling its reforms on the Estonian tax system, Georgia plans to exempt all retained and reinvested profits from the 15 percent corporate tax.
That would mean that only profits that are distributed or paid out as fringe benefits will be taxable. In addition to the obvious benefit to businesses, research has shown that such a system brings economy-wide benefits as well.
A 2011 paper by Masso, Merikull, and Vahter found that Estonia’s introduction of corporate tax reforms in 2000 led to a higher investment rate and enhanced productivity. What’s more, providing incentives for companies to retain their profits increased holdings of liquid assets and reduced dependency on debt financing, which helped the country weather the financial crisis of 2008-2009.
In short, Georgia’s tax regime is already friendly toward individuals and businesses. If reforms are implemented from January 2017 as planned, the situation will only improve.
Eligibility for Tax Residency in Georgia
The process is pretty simple. Any individual living in Georgia for 183 days during a consecutive 12-month period is eligible to apply for tax residency. In most cases these applications are accepted.
Of course, you may not be able or interested in spending half a calendar year in Georgia. Fortunately, the government has created a special regime for those designated as “high net-worth individuals.”
Someone is considered to be high net-worth if: 1) the value of his/her confirmed property is greater than GEL3,000,000 (approximately $1.35 million USD); or 2) his/her annual income exceeded GEL200,000 (about $90,000) in any of the three years before the year they submit the application.
There are a few other conditions that must be met, however. The applicant must have either a Georgian residency permit or Georgian nationality … OR, the applicant must verify receiving at least GEL25,000 (just over $11,000) of Georgian source income during a single year.
Bear in mind that obtaining a Georgian residence permit is fairly easy for someone earning Georgian-source income in any significant amount, so the first option is practicable in most situations.
Georgians really don’t stand for red tape, and this process reflects that preference. Applications are submitted to the Revenue Service of Georgia along with documents confirming that the application meets all other requirements.
If the application meets all the legal requirements, the Revenue Service forwards the application to the Ministry of Finance for final approval. A decision must be made within nine days from submission of the application, and the applicant’s presence in Georgia is not required at any time during the process.
Georgian tax residence is granted for a one-year term. If a high net-worth individual wants to maintain Georgian tax residency status, he/she must re-apply. However, re-application is not required for individuals who become tax residents under the general rules on tax residency (by spending at least 183 days in Georgia during the relevant period).
In addition to the tax benefits of establishing your home and/or business in Georgia, Georgian tax residence offers potential benefits to those earning income in countries with which Georgia has bilateral tax treaties.
For example, in some cases a treaty partner country may not tax dividends received by a Georgian tax resident, even if those dividends come from a source in the treaty partner country.
If you’re considering whether to apply for Georgian tax residency, you should first take a close look at the bilateral tax treaty between Georgia and the country where most of your income is earned. If that country recognizes tax residency in Georgia, it’s possible that a large part of your income will not be taxed in any country.
We can help you establish tax residency in Georgia, allowing you to pay less in taxes each year on your current business activities.
Set up a Strategy Call with us and we’ll determine whether we think you’re someone we’d like to do business with.
|Overall rank 2016:||57th (60/100 points)|
|– Property rights:||40/100 points|
|– Freedom from taxes:||87/100 points|
|– Freedom of speech/religion:||75/100 points|
|– Limited government:||70/100 points|
|– Gun rights:||30/100 points|
|– Drug rights:||20/100 points|
|– Freedom from corruption:||49/100 points|
|– Freedom from inflation:||78/100 points|
|– Business freedom:||88/100 points|
|Taxation of dividends:||–|
|VAT registration:||A business with annual business revenue of GEL 100 000 , must register for VAT purposes.|
|– VAT Rates:||The standard rate is 18%, certain transactions are exempt.|
|Alternative minimum tax:||No|
|Withholding tax (general):||–|
|– From Dividends||Paid to non-residents entities, non-commercial legal persons and to individuals are subject to a 5% withholding tax, unless the rate is reduced under tax treaty.|
|– From Royalties||Paid to a non-resident are subject a 5% withholding tax, unless the rate is reduced under a tax treaty. The rate increases to 15% if the recipient is a foreign company registered in an offshore or low-tax jurisdiction.|
|– From Interests||Paid to residents and nonresidents is subject to a 5% withholding tax, unless the rate is reduced under a tax treaty. However, where interest is paid to a non-resident registered in an offshore or low-tax jurisdiction, the rate is 15%.|
|– Technical services||Paid to a nonresident are subject to a 10% withholding tax. If the non-resident provides technical services with respect to oil and gas transactions, the rate is 4%. The tax rates may be reduced under a treaty. The rate is 15% if the foreign company is registered in an offshore or low-tax jurisdiction.|
|Capital gains tax:||Capital gains are taxable as business income at the regular corporate income tax rate.|
|Real property tax:||Households with annual income below GEL 40 000 are exempt from real property tax. Where annual income is between GEL 40 000 and GEL 100 000, the tax is payable at rates ranging from 0.05% to 0.2% of the market value of the property: above GEL 100 000, the rates range from 0.8% to 1 %.|
|Tax treaties:||Georgia has concluded tax treaties with 49 countries, and tax information exchange agreements with eight countries. Georgia does not honor the treaties concluded by the former Soviet Union, except for the treaty with Japan.|
|– Transfer pricing||Georgian tax legislation contains comprehensive transfer pricing rules, and there are specific provisions in the Tax Code that are aimed at regulating the taxation of transactions between related person. According to Georgian tax legislation, transactions, and the principle of fair market value should be taken into account. The tax authorities can compare the conditions of transactions between related persons with those of transactions between unrelated parties and can allocate income and expenses between related, parties based on principles that would have applied in transactions between independent person. Georgian transfer pricing rules generally follow OECD transfer pricing principles. Five pricing methods are recognized for evaluating Whether prices are at arms length; these are the comparable uncontrolled (independent) price; resale price; cost plus; net profit margin; and profit split methods. Transfer pricing rules apply to cross-border transactions between a Georgian resident company and a related foreign company, or a Georgian resident company and an unrelated foreign company registered in an offshore or low-tax jurisdiction. Taxpayers should maintain contemporaneous transfer pricing documentation, which should be submitted to the tax authorities within 30 calendar days of any request.|
|– Thin capitalization rule||Thin capitalization rules, which were expected to enter into force 1 on January 2016, have been postponed until 1 January 2018.|
|– Disclosure requirements||No|
Compliance for corporation:
Personal taxation basis:
Income tax rates in Georgia
Social security payments in Georgia:
Inheritance/estate tax in Georgia:
Net wealth/net worth tax in Georgia:
Incorporation services in Georgia
Company administration in Georgia
Additional business services in Georgia (by Novasigma Certified Partners)
Some of the common domestic accounting services we provide in Georgia include
Value Added Tax (VAT)
Legal services in Georgia for all Novasigma Clients including companies and their owners and directors
Novasigma has built in Georgia a team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.
Banking services in Georgia
Financial services in Georgia
Insurance services in Georgia
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