How a foreigner can open a company in Georgia

Georgia is a promising destination for starting a business and investing. The country strives for international standards and regularly works to improve its economic climate.

Georgia is the country that combines such concepts as loyalty to non-residents, preferential taxation and a favorable territorial location. The created free and virtual zones attract startups, investors and businessmen from all over the world, making the country even more technologically advanced. A company in Georgia is suitable for import-export activities, international trade, investment, IT activities and shipping.

The establishment of companies in Georgia is regulated by the Civil Code of the country adopted in 1997, the Law on Entrepreneurs of 1994 and the Law on Promotion of Foreign Investments and Guarantees for Business in Georgia.

Types of Legal Entities

Limited Liability Company (LLC)

Limited Liability Company (LLC) is the most common form of legal entity in Georgia. This format provides significant flexibility and protection for shareholders, who are liable for the company’s debts only to the extent of their contribution. LLCs in Georgia do not require significant authorized capital and can be wholly owned by foreign shareholders, making them an ideal choice for foreign entrepreneurs looking to set up a business in the country. The ease of registering and managing an LLC is one of the reasons why this format is preferred by most companies.

Joint Stock Company (JSC)

For larger businesses, a Joint Stock Company (JSC) is an excellent option. Although a JSC is subject to stricter requirements and has a complex management structure compared to an LLC, it offers significant advantages, such as the ability to issue shares publicly and raise capital through the stock market. This type of legal entity is ideal for companies planning significant expansion beyond Georgia. Despite the stricter oversight requirements, JSCs provide greater transparency and reliability, which is important for attracting investors.

Limited Partnership

A limited partnership consists of 2 or more individuals or organizations that work together. There is at least one general partner who must assume full liability for the business, but the liability of the other partners may be limited to their share capital, according to the partnership agreement.

Subsidiary or Branch

Also, foreigners can open a subsidiary or branch in Georgia. This means that subsidiaries are separate legal entities, as opposed to a branch for the business.

Reporting

All companies in Georgia, including those established in the industrial zone, are required to prepare and submit annual financial statements to the tax authorities. The deadline for filing reports is October 1 of each year. Audit is mandatory only for large enterprises that meet any two of the following criteria:

• assets worth more than 10,000,000 GEL;
• income over 20,000,000 GEL/year;
• more than 50 employees.

Georgian Taxes

• Corporate tax - 15% / 0%
• Income tax - 20%
• Capital gains tax - 0%
• VAT - 18% / 0%
• Dividends - 5%
• Import tax - 12% / 5% / 0%
• Export duty - 0%
• Property tax - up to 1%

Georgia's tax system is famous for its privileges in free industrial zones and virtual zones. Companies established in industrial zones are completely exempt from taxation if they do not conduct local commercial activities. If such a company works with local partners, the corporate tax is only 4%. There is no property tax, VAT, import/export tax, or dividend tax in the FIZ.

Virtual zones, in turn, are intended exclusively to support IT activities and exempt from corporate tax only those firms that receive profits from abroad and export their goods or services.

Local classic companies are also not without tax advantages. They are subject to tax exemption: if the profit is not distributed, the company does not pay corporate tax. In all other cases, income tax is 15%.

VAT payers are companies whose annual turnover exceeds 100,000 GEL.

Company Registration

1. Submission of documents

To register a company, the future founder must submit a package of documents to the House of Justice:

• Passport or a notarized power of attorney of a representative who will perform registration actions on behalf of the entrepreneur;
• Application (it will be filled out by the operator of the House of Justice);
• A notarized charter of the company signed by all founders;
• Documents on ownership or lease of real estate to confirm the legal address;
• Pay the state fee and provide a receipt.

All papers must be filled out in Georgian. Originals in other languages must be translated and notarized.

2. Registration with the tax office

If the registration was successful, you will receive a message on your phone with the TIN and password for your personal account. You can download a registration certificate with all the details of the legal entity. Now you can submit documents to the tax office. Before that, you need to decide on the main type of activity; the codes can be found in the international directory.

To contact the tax office, you will need:

• a passport;
• a phone with an SMS from the House of Justice.

After registration, you need to log in on the tax service website. Then, get an EDS to sign reports and use government services remotely.

3. Opening a bank account

This procedure is quite complicated. Georgian banks are in no hurry to open accounts on the first request. The company that has applied to the bank will be examined in detail according to the following parameters:

• what the company does;
• legality of income;
• did the founders have experience in the chosen field;
• is there a possibility that the business will become criminal or somehow connected with terrorism;
• how many new jobs will the company create in the country.

After examining the company, the bank will ask questions to its owner, the answers to which must be confirmed. If he has successfully completed all the stages of registration and obtaining an account, he needs to know that:

• Georgian banking institutions are suspicious of companies that conduct international transactions;
• the register of directors is open and publicly available. Anyone can obtain personal information. To avoid this, instead of an LLC, it is worth opening a JSC (joint-stock company). This way your data will be in the private stock registry and will not be open to everyone.