Doing business in Georgia
- How quickly can I set up a business?
- What is the minimum investment needed?
- How can I raise finance?
- What are the legal requirements for setting up my business?
- What structure should I consider?
- What advice can you give me in regards to payroll and taxation requirements?
- Is there anything else that I should know?
How quickly can I set up a business?
Over the last ten years, Georgia – the pearl of the Caucasus, surrounded by mountains – has initiated a series of deep reforms of its economy. Georgia is a country which can provide a set of advantages for starting a business.
Georgia stands out as one of the countries with the simplest registration procedures at a global level. Also, the fees of the registration of a Georgian business are very low. Registration procedures are easy, efficient and encourage the creation of new business. The registration process can be completed in one day.
For registration purposes, the law does not require a document verifying the amount or existence of charter capital. A company is also not required to complete a separate tax registration because the initial registration includes both the state and tax registration. All companies must register with the National Public Registry of the Ministry of Justice of Georgia. For registration, a company must submit application and by-laws or a shareholder’s agreement. There are 3 steps to register:
1. To register a business, you must first pay the registration fees that are: GEL 100 (around USD 30) for regular registration, GEL 200 (USD 60) for expedited registration, plus GEL 1 (bank charges).
2. Register the company in the Public Register of Companies and register its articles of association to obtain a national identification number – it is free of charge.
3. Opening the bank account of the company in the bank of your choice – it is also free of charge.
What is the minimum investment needed?
In terms of taxation, Georgia is one of the lowest-taxed countries in the world. No minimum capital is required to start your own business. You can own 100% of the shares and the company creation is very fast, company registration, as we said, is done in one day.
Georgia can offer many benefits too, including very advantageous requirements for the minimum share capital for opening a new company. The legal types of companies that can be created in the country are suited for all types of businesses and the choice depends on the business plans and desire to expand the company in the future.
The company founders can each bring their own contributions, but minimum investment is not required. Limited Liability Company (LLC) is the most frequently used legal type of company in Georgia.
The Joint Stock Company (JCC) is another business form in Georgia that does not require minimum share capital.
How can I raise finance?
In order to start a business, it is necessary to mobilize a certain amount of money for current activities and development. Businesses can use different sources of financing to accumulate the necessary funds:
• Own funds
• Loans taken from a bank, microfinance organization or other financial institution.
Banks continue offering business, consumer, and mortgage loans. The International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD), Millennium Challenge Corporation (MCC), Asian Development Bank (ABD), and other international development agencies have a variety of lending programs that make credit available to large and small businesses in Georgia.
In addition, there are some government programs that promote business development. It all depends on the activity profile of the company. For example, the state program Hotel Industry, implemented by the agency “Produce in Georgia”, aims to develop the hotel industry throughout Georgia (except Tbilisi and Batumi). The program provides entrepreneurial people with the opportunity to develop their hotel business, create new jobs and attract more tourists through financial and technical assistance. Within the framework of the program, it is also possible to introduce successful international experience in Georgia by stimulating the establishment of international brands in the country.
The ‘tourism services’ industry program is implemented by the agency “Produce in Georgia”, which aims to develop recreation parks, adventure tourism, tourism services and balneological resorts. The program also offers technical assistance to the beneficiary, which includes reimbursement of the costs incurred by the beneficiary on the information-consulting services received on the territory of Georgia.
What are the legal requirements for setting up my business?
For the successful operation and development of a business, it is necessary to have an appropriate environment – the formation of which the government plays a leading role. The business environment is a combination of objective and subjective conditions and factors that influence the ability, direction, pace, and scale of a business. The business environment is shaped by the various measures taken by the government. Taxes are an important form of government-business relationship. A tax is a mandatory, unconditional monetary payment to the budget made by a taxpayer in accordance with the Georgian Tax Code, based on the necessary, non-equivalent and gratuitous character of the payment. Taxes shall be national and local. National taxes shall be the taxes provided under Georgian Tax Code, the payment of which is mandatory across the whole territory of Georgia. Local taxes shall be the taxes provided under Georgian Tax Code, introduced by normative acts of local self-government representative authorities (within marginal rates), the payment of which is mandatory within the territory of the relevant self-governing unit.
National taxes shall be:
• income tax
• profit tax
• value added tax (VAT)
• excise tax
• import duty
• A property tax shall be a local tax
All taxes are administered by the Revenue Service of the Ministry of Finance of Georgia. The rates for property tax are assessed by the local authorities, within limits set by the tax code. Persons subject to VAT are required to separately register for VAT.
What structure should I consider?
The Law of Georgia on Entrepreneurs defines the following types of organizational-legal forms of enterprises:
An individual entrepreneur (IE) is an individual engaged in business activities. The IE shall fulfil his/her rights and obligations as an individual and, therefore, is subject to personal liability.
A joint liability company (JLC) is a company in which several individuals jointly, under a single brand name, engage in multiple and independent entrepreneurship. The partners are liable to the creditors for the obligations of the company as joint and several debtors – directly, without limitation on the entire liabilities, with all their property.
A limited partnership is a partnership in which several persons jointly, under a single corporate name, engage in multiple and independent entrepreneurship and the liability of one or more persons is limited to the payment of a guarantee amount to the creditors of the partnership. These individuals are called limited partners, while the liability of other partners is not limited and they are called complementary.
A limited liability company is a company whose liability to the creditors is limited to the property of the company and the liability of each partner is its share in the authorized capital.
A joint stock company is a company whose charter capital is divided into shares with the same nominal value. A share is a security that confirms the obligations of the joint stock company towards the partner (shareholder) and the shareholder rights in the joint stock company.
A cooperative is a community based on the labor activity of its members, which is designed to generate income and develop its members. The purpose of the cooperative is to satisfy the interests of its members and not to make a profit. The capital of a cooperative is created on the basis of the share contributions of its members. The amount of the share is determined by the charter of the cooperative.
What advice can you give me in regards to payroll and taxation requirements?
Georgia is located at the crossroads of Europe and Asia, in particular, in the Caucasus. It is bordered by the Black Sea to the west, the Russian Federation to the north, Azerbaijan to the south-east, and Armenia and Turkey to the south. Georgia is located at the ancient crossroads that connected and connects the countries of North and South, West and East. It was on it that the Europe-Asia transport highway – the Old Silk Road – passed. The geopolitical location of the country is assessed by the political and economic situation in the neighboring countries. Georgia’s geopolitical location is determined by its relations with directly bordering and non-bordering countries, as well as the political and economic situation in those countries.
One of the most important directions of human resource management is staff development. To perform this function, it is necessary to have a professional development plan for employees. It is an important management tool. The staff development plan is aimed at raising the level of general and special knowledge of the employees and is different according to the needs of business. Various motivational systems are used in Georgia: Promoting professional development, corporate insurance, organizational events and annual nominations, bonus and pension schemes, promotions, thank you letters, gifts and rewards, among others.
The goal of the tax policy in Georgia is to create an attractive and favorable tax environment for the private sector and foreign investment, as well as for starting and developing a business. For this, taking into account the problems identified in the tax administration process, tax administration is simplified, tax legislation and accounting standards are harmonized with EU legislation.
Is there anything else that I should know?
Located at the crossroads of Europe and Central Asia, Georgia is a bridge connecting several important economic regions. It is a key link in the shortest transit route between Western Europe and Central Asia for transportation of oil and gas, as well as dry cargo. On the one hand, it contributed to the socio-political and economic prosperity of the country, and on the other hand, due to its favorable strategic location, it was repeatedly the object of attack by invaders. Historical records about Georgia have existed for more than 4,000 years, and the Georgian alphabet is one of the unique alphabets in the world. Georgia is one of the first countries where Christianity was declared the state religion in the first half of the fourth century. Georgia is distinguished by cultural diversity. For centuries, people of different ethnic backgrounds and religious beliefs lived side by side in the country.
In 2014, Georgia signed an Association Agreement with the European Union, which entered into force in July 2016. In 2017, as a result of Georgia’s successful implementation of the Visa Liberalization Action Plan, visa-free travel to EU countries was launched.
Georgia’s priority tasks are to resolve conflicts with the breakaway regions, move closer to Euro – Atlantic structures and integrate with the European Union.
The fundamental issues for the country’s progress are the formation of a financial sector, the dynamic development of financial markets and the creation of appropriate markets. Georgian investments are of huge importance. The long-term effects of foreign investment result in increased employment and increases in household income. Georgia is developing its infrastructure and simplifying licensing and permits to ease constraints on business.
Kreston firm/s to be promoted in country
Our firms in Georgia
How can Kreston grow your business?
Select your business type:
As the Government implements new audit reforms and the market shifts away from the Big Four, what does the change mean for small audit clients?
From 1 April 2023, companies will need to digitally pre-notify HMRC of any planned R&D claims, and within six months of the end of the period to which the claim relates.
Congratulations to our German member firm, Kreston Bansbach, whose consulting arm Bansbach Econum, has been ranked among the top consulting firms in Germany in the Handelsblatt 2022 Best Consultants list.