Georgia a low-tax country offering tax benefits
  • January 13, 2022
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Advantages of doing business in the country of Georgia and available professional accounting services

Georgia-low tax country with easiness of doing business and certain tax benefits

Georgia’s tax rates are quite low. Lower compared to many other European countries but it is still not the main benefit you can receive from doing business in Georgia.

Our blog available HERE provides more detailed information regarding the tax rates applicable in the country of Georgia.

Special tax incentives, relatively low costs, easiness of doing business, and strategic geographical location represent the other important reasons for which you may choose Georgia as a destination to invest in.

To know more reasons for starting a business in Georgia, our blog was published on Forbes Georgia HERE. Besides, high-quality professional services available in the country may be an additional incentive for you while making a decision whether to start the business in Georgia.

Professional legal and accounting services facilitate safely operating a business in Georgia

Business registration,  opening a bank account, tax consultation, bookkeeping, and reporting services are the services that usually make it easier and safer to do business in the new country.

The very first step in this process is to incorporate your company or register yourself as an individual taxpayer in Georgia; therefore, at the very first stage, you need to find assistance during business registration.

Business Registration and opening a bank account in Georgia

Business Registration and opening a bank account in Georgia

If you plan to relocate and/or move your business to Georgia, first you should register yourself or your company in the country. The business registration process is easy and fast here but it is still strongly suggested to do it with the assistance of a local professional firm providing registration services so that you make sure all is done correctly.

For your business registration, you should prepare a shareholders’ meeting minute or fill it properly at the Public Service hall. You also need a legal address and a translator confirming that English and Georgian versions of the [registration] application form are equal.

The process becomes slightly complicated if the shareholder is a foreign company.

The most frequent legal form of Georgian entities is a limited liability company (LLC).

The registration process can be carried out in person or remotely, through a Power of Attorney (POA) granted to a local professional.

For business registration services please, contact us at info@tpsolution.ge or fill in the contact for here: https://tpsolution.ge/contact/

Opening a Bank Account Remotely in Georgia

Opening a Bank Account Remotely in Georgia

Besides the business registration, opening a business or a personal bank account is Georgia is also possible in person or/and remotely, via POA.

Tax consultation before and after the business registration in Georgia

Please, bear in mind that before you register your business in Georgia it is very useful for you to choose the most suitable business structure, also to know whether it is more beneficial to register as an individual or a legal entity, or both. Thus, the tax consultation before registering the business is important, as it helps you make the best decision regarding the structure of your Georgian business and do required tax planning.

After the tax consultation, you may understand that you have a wonderful chance to enjoy tax incentives in Georgia or/and become familiar with the potential tax risks you need to avoid.

Once you set up the best business structure and incorporate your businesses in Georgia, ongoing or one-off tax consultation services will ensure constant clarity about your tax cases.

You might need consultations on Georgian tax law, as well as Transfer Pricing and International tax principles applicable in Georgia.

For tax consultation services you can contact us at info@tpsolution.ge or fill in the contact for here: https://tpsolution.ge/contact/

Transfer Pricing and international tax in Georgia

Transfer Pricing and international tax in Georgia

The Transfer Pricing (TP) legislation is in force since the end of 2013 in Georgia after the Georgian TP decree was published. The Georgian TP rules are similar to the OECD TP guideline with minor (but sometimes very important) deviations. The main legislative norms of Georgian Transfer Pricing are articles 126-129 of the Georgian tax code and the aforementioned decree of the Ministry of Finance of Georgia #423.

Regarding the TP issue which is not specifically regulated by the TP decree #423, Georgia’s TP law makes reference to the OECD TP guideline 2017. In other words, with regard to some Transfer Pricing topics (e.g. chapter 1 of OECD guideline, Intangibles, business restructuration) the OECD TP guideline 2017 is a part of Georgian Transfer pricing law.

For more details on Georgian TP legislation, read our article about the Georgian Transfer Pricing Rules. The article you can find HERE.

For preparation Transfer Pricing documentation and/or consultation services regarding Transfer Pricing in Georgia, please, contact us at info@tpsolution.ge or fill in the contact for here: https://tpsolution.ge/contact/

Besides the analysis of international and Georgian tax, implications, one of the main purposes for a tax consultation is to receive information about the tax incentives applicable in Georgia your business might qualify for.

Tax incentives available for certain companies/individuals in Georgia (non-exhaustive list is given below):

  • 1% tax for individual entrepreneurs in Georgia if they meet certain criteria of a “small business “status,
  • 0% personal income tax on capital gain in certain cases;
  • 0% personal income tax on foreign source income of individuals;
  • 0% personal income tax on a profit from reselling crypto (more details to be individually analyzed);
  • 0% corporate income tax for IT companies if they meet all criteria of “Virtual Zone Person” or low tax rates for IT firms with the status of “International company”;
  • Special (Estonian) regime of corporate income tax;
  • Other benefits.

General information on tax benefits applicable in Georgia to individuals is available in our BLOG.

Small Business (1%) tax in Georgia

Individual entrepreneurs in Georgia can enjoy as low tax rate as 1% on their service fees if they meet certain criteria set by the law.

Please note that 1% tax is applicable to certain “allowed” service fees, while it is not applicable to wage incomes (income from employment is taxed at 20% rate).

In addition, the Georgian tax authorities are entitled to re-qualify your service fee into wages if the substance of the operations provides them enough base for that; consequently, 20% tax instead of 1%.  Such a risk is higher if an individual (small business) provides services to only one or two clients.

Thus, please be aware that only renaming your employment contract and giving a title “service agreement” instead of “employment” might not be enough for enjoying 1% tax rate.

For more information about the  small business tax and the requirements read in our blogpost HERE.

The additional OUR BLOG the small business provides further details about comparison of a “service fee” and “wages income” for small business tax purposes.

 For small business registration service and initial tax consultation please, contact us at info@tpsolution.ge or fill in the contact for here: https://tpsolution.ge/contact/

Capital Gain tax in Georgia (0% for individuals in certain cases)

Note: there is no “capital gain tax” as such in Georgia but the capital gain is usually taxed under the general rules of either corporate or a personal income tax.

Capital gain from reselling crypto is not taxable in Georgia (note: this topic needs individual analyses before you start enjoying the tax exemption).

Besides, holding assets more than 2 years makes individuals free from the tax on capital gain from reselling such asset.

This exemption is usually applicable for the precondition that the asset is not used in the economic activity for 2 years before selling it. Such restricting rule (using in economic activities) does not apply to residential properties and shares in companies held for more than 2 years for the purpose of receiving dividends.

0% personal income tax on foreign source income in Georgia

Individuals are not taxed on their foreign source income in Georgia.

The foreign source-based income, however, is not any income coming from abroad to Georgia but the special article of the Georgian tax code (article 104) determines the type of income belonging to Georgian or foreign source, and in which cases.

As you can see, there are multiple tax benefits applicable for individuals in Georgia. In many cases, it is strongly preferred to become a Georgian tax resident and break ties with other jurisdictions to fully enjoy the incentives so that another jurisdiction does not tax in parallel your income being exempt or taxed at the low rate in Georgia.

More information about the definition of “foreign source income” (which is tax exempted income for individuals) you can read in our blog HERE.

Tax residency

Tax residency rule for individuals and legal entities in Georgia (general rule and exceptions)

The general rule of tax residency in Georgia for individuals is 183 or more days spent in the country through 12 consecutive months.

The tax residency rule for a legal entity in Georgia is the place of effective management OR registration.

More detailed information on the general tax residency rule of Georgia is available in our blog, which you can read HERE

Tax residency rule for High Net Worth individuals (HNWI) in Georgia

Apart of the general provision, the Georgian tax law provides the special rule of tax residency for High Net Worth Individuals (HNWIs).

According to this rule, High Net Worth individuals can become Georgian tax residents for a particular fiscal year even without spending any day in the country.

Definition of High Net Worth Individuals in Georgia

Notably, HNWIs represent natural persons (individuals) owning assets worth of at least 3 million Georgian Lari OR have received the income of the amount at least 200 000 Georgian Lari in each of last 3 calendar years from the year of the application.

Besides qualifying the HNWI criteria, you also need to satisfy one more condition to be qualified under tax residency applicable for High Net Worth Individuals.

More details on HNWI tax residency rule is available in our blog HERE.  

If you seek a support in becoming a HNWI tax resident of Georgia without spending many days in the country, please contact us at info@tpsolution.ge or fill in the contact for here: https://tpsolution.ge/contact/

We have gained significant experience in helping our clients to obtain High Net-worth Individual tax residency in Georgia.

Low or NO taxes applicable to IT companies in Georgia: “Virtual Zone Person” and/or “International Company”

Georgia provides special tax incentives for IT business as the country tends to develop the IT field and become an IT hub in the region. There are 2 special tax status available for IT companies to enjoy the following tax benefits:

Status of “Virtual Zone Person”: 0% corporate income tax on IT services provided from Georgia abroad.

Status of “International Company”: 5% corporate income tax, 0% withholding tax on distributed dividends, 5% wage tax, 0% property tax.

Below you can find more details about the aforementioned tax statuses.

Registration of “Virtual Zone Person” VS “International Company” in Georgia

I have explained the Pros and Cons of “Virtual Zone Person” vs “International Company” in my blog post published available HERE.

Note to bear in mind the new approach of Georgian tax authorities, according to which the sufficient business substance (having an office, relocating to Georgia, or hiring experienced local software developers) is requested from IT companies as a precondition to enjoy the tax exemption/incentives.

This new approach was declared by the Georgian tax authorities in 2021. More details are available in my blog post HERE.

Notably, it is required by the law to demonstrate sufficient business substance also in the case of “International company”.

In other words, “letter box” IT firms will not be entitled to enjoy tax benefits in Georgia anymore.

(H3) Corporate income tax in Georgia (special regime)

Georgia applies a special (so-called Estonian) mode of corporate income tax. Following this regime, companies are subject to the corporate income tax ONLY if they distribute dividends to shareholders. In other words, the Georgian companies do not pay corporate income tax annually but only if they decide to take out money from the company.

You also need to know that there are cases listed in the Georgian tax code which are deemed to be equivalent of distributing the dividends, thus taxable by CIT.

The corporate income tax rate in Georgia – 15%.

Georgian accounting and consulting

Georgian accounting and consulting firm based in Tbilisi provides services to international customers

Whatever reason attracts you to start doing business in/from Georgia, it is important to receive the high-quality tax, legal, accounting and other professional services minimizing the risks of making mistakes and facing problems/sanctions, also making it easier and safer for you to carry out the process of operating your business in Georgia.

TPsolution is among those few local accounting and consulting firms in Georgia that specialized both in international and Georgian taxation, having gained special knowledge in issues relevant for international clients. I, a practitioner tax professional with over 10 years of experience gained in Georgia and the EU always am personally involved in all tax-related service projects performed by TPsolution.

More information about TPsolution is available on the web-site: www.tpsolution.ge. You can also directly reach out at info@tpsolution.ge or fill in the contract form here: https://tpsolution.ge/contact/

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