What comes to mind when you think about company formation in another country? Probably all the steps related to it – select a country, figure out its tax system, register the company, and so forth.
All these steps require great detail, research, and in most cases, leg work. That’s why most people stick to on-site company incorporation, even if it costs them tons more in the longer run.
Another reason why people avoid setting up companies outside their home country is because of the reputation attached to them.
However, times are changing, and people are curious to explore what’s outside their country and comfort zone. Many foreign investors and digital nomads have already discovered the joys of operating in a business-friendly jurisdiction, and you could be next.
The most significant piece of the company incorporation in another jurisdiction is selecting the country where you’ll set up your business entity.
Most people know Hong Kong, the Cayman Islands, the Bahamas, etc., as popular company destinations, and they are – for good reasons. But these markets are already quite saturated owing to their popularity.
What if you want to set up your business in a country that is still developing and relatively under the radar? That’s where Georgia comes in.
This article will discuss setting up a company in Georgia and which business structure will benefit you.
Before we jump into the details of setting up a legal entity in Georgia, let’s see why you should choose Georgia as your business destination.
Why Set up a Company in Georgia?
Strategic Free Trade Agreements
Georgia is a small Eastern European country with less than four million population. With stats like these, some business people may be hesitant to establish a base in Georgia, but the reality is quite the opposite.
Georgia has introduced several economic and political reforms over the years to make the country business-friendly and attractive to foreign investors.
Currently, Georgia has free trade agreements with the European Union, EFTA, and CIS countries. Moreover, the country also has a free trade regime with China, Turkey, and Russia, among other countries.
As a result, Georgian products reach over 2.3 billion consumers worldwide through free trade regimes. That’s one-third of the world consumer market. So if you are hesitant because of the country’s small size or consumer mass, you can let go of your worries.
Low Corporate Tax Rate
One quality that most popular business friendly countries share is a tax-free regime, but Georgia is not a tax-free country. Georgia may not be a tax haven but boasts a simplified tax regime with flat tax rates. Moreover, Georgia has no wealth, inheritance, or gift taxes.
The country also has a territorial tax system, meaning that foreign income is tax-exempt for Georgian residents.
At 15% and 20%, the income and corporate tax rates are relatively low, and when you consider the range of business and tax benefits in Georgia, the amount seems to be worth it.
Dividends are taxed at the rate of 5%. However, that rate can be reduced due to double taxation treaties.
Georgia uses the Estonian tax model, meaning that a company is not required to pay taxes for the obtained income unless the profits have been distributed.
If your company’s revenue reaches 100,000 GEL, you’d also have to pay 18% VAT.
Business Friendly Policies
Georgia has a strong political and cultural commitment to making business easy. The customs and taxes are streamlined to ensure that companies don’t waste time in bureaucracy.
The business registration fee is reasonably priced, the registration process is streamlined, and the company charter can be in any language.
In Georgia, you can set up a free zone company. Moreover, IT virtual zone companies are granted zero-tax status.
Tax Exemptions and Advantages
Georgia offers tons of tax breaks and advantages to foreign nationals looking to set up a company in Georgia.
Double Taxation treaties
Georgia has signed over fifty Double Taxation Avoidance Agreements. Moreover, it has bilateral agreements on investment promotion and mutual protection with thirty-two countries. A double tax treaty is a great tool to prevent individuals from the dual tax trap.
International Company Status
In October 2020, Georgia introduced International Company Status for certain IT and Maritime sector companies based in Georgia. ICS-qualified companies qualify for the following tax breaks:
- 5% corporate tax
- 0% dividend tax
- 5% Tax withholding on employee income
- 0% property tax
Virtual Zone Company
If you own an IT company, you can qualify for the status of a virtual zone company, which offers the following benefits:
- 0% profit tax on services delivered outside of Georgia
- 0% VAT
Remotely from Georgia
In 2020, Georgia introduced a state program called “Remotely from Georgia,” allowing foreigners from 95 countries to stay and work in Georgia for a year if they intend to stay in Georgia for at least 180 days.
The program is aimed at digital nomads, freelancers, entrepreneurs, and remote workers who can stay visa-free in Georgia for a year per their passport.
Under “Remotely from Georgia,” you only have to pay 1% income tax instead of 20%. However, you must fill out a monthly tax declaration. For this, you’d need a good accountant.
Tons of Investment Opportunities
Georgia lies at the intersection of Europe and Asia, providing a primary base to access European and Asian markets. Moreover, the country boasts stable economic relations with the EU, China, Turkey, etc., exponentially increasing its consumer market.
Georgia’s tourism, real estate, and service sectors are thriving and provide excellent investment opportunities for foreign and local investors.
Which Business Structure Should You Choose in Georgia?
Georgian legislation covers the following types of companies:
- Joint Stock Company (JSC)
- Limited Liability Company (LLC)
- General Partnership
- Sole Proprietorship
- Joint Venture
- Branch Office
- Limited Partnership
Company registration is required for all the structures mentioned above except for a Joint Venture. As a foreigner, setting up an LLC or a JSC in Georgian are two of your best options.
The main reason foreigners prefer JSCs and LLCs is that the liability toward their creditors is limited to the shared capital. Therefore, the shareholders of such companies are not personally liable against third parties.
Moreover, JSCs and LLCs have flexible corporate structures and don’t have a minimum capital requirement.
Benefits of Opening an LLC in Georgia
If you choose to open an LLC in Georgia, you can expect to receive the following benefits:
- For most businesses, no capital requirement exists for incorporation.
- Registration is only done once, and you don’t need to register your business annually.
- The number of shareholders can be anywhere from one to fifty individuals. You are not required to have any local partners, meaning that a Georgian LLC can be owned and managed by foreign citizens.
Steps to Register a Business in Georgia
Registering a business in Georgia is relatively quick and easy. It’s also the first step to opening a business in Georgia.
The potential owner must register the company with the National Agency of Public Registry and obtain an identification number. Registration takes 24 hours to complete through Georgia’s single-window registration process.
You need the following documents for registration:
- shareholders’ agreement
- legal address
The shareholders’ agreement must contain your company’s name, which must not be identical or similar to an existing Georgian company. Moreover, you’ll need shareholders’ identification details, their share percentage in the company, legal addresses, Email addresses, and identification details of the director.
To run your business activities, you must open a corporate bank account in Georgia. It usually takes two to ten days to open a business account.
You are at an advantage here because Georgia has one of the world’s most sophisticated and stress-free banking systems.
What are You Waiting for?
On paper, the first step while setting up a Georgian company is registering it. However, in reality, a step precedes even registration – finding a capable legal consultant.
If you want to register a business or branch office, open a bank account, and fulfill all the tax obligations without running into legal complexities, you require professional help.
That’s where NOMOS comes in. We’ve been providing legal consultation about tax services, asset management, real estate affairs, licenses, etc., and we’d love to do the same for you. Just give us a call, and we’d help you set up a company in Georgia.