Georgia is a place that is open to everyone who comes to it, whether they are tourists, immigrants, or entrepreneurs. However, even though Georgian hospitality applies to everyone, if you come to Georgia to do business or work, it is essential to understand the specificities of the country’s legislation to avoid the pitfalls and make your business operate smoothly.
Tax Code of Georgia
Key topics regulated by this law:
- Tax rates for companies and individuals
- Tax administration
- Tax exemptions and incentives
- Reporting requirements
- VAT, Income Tax, Profit tax, Dividend, Royalty tax
- International taxations
- Import and Export tax administration
- etc
Georgia’s tax code embraces a relatively simple structure and is designed with a business-friendly approach to attract investment and ignite stimulation in support of the country’s economic growth.
Flat Tax Rates
Among the major attributes of the Georgian tax system is the application of flat tax rates, for both individuals and businesses that serve to greatly simplify tax calculations and reduce administrative burdens associated with tax compliance. The personal income tax rate in Georgia sits at a flat 20 percent, while the corporate income tax rate is slightly lower at 15 percent.
Territorial Tax System
Georgia follows a territorial tax system for individuals, allowing for income sourced outside of the country to not be subject to Georgian taxes. This method ensures income sourced from international operations is not subject to taxation by Georgia, thereby enabling individuals to save on their international income taxes. Tax free portfolio (including crypto) and passive income is a huge advantage that Georgian tax code offers.
International Tax Treaties
Georgia went further in its efforts to eliminate the prospect of double taxation on cross-border businesses by entering into double taxation avoidance agreements with many countries. Providing both clarity and assurance to international businesses, these treaties ensure income is not taxed twice and result in smoother operations in an international setting for companies.
Streamlined Administration
In an effort to make the taxpayer experience as smooth as possible, Georgia proactively adopted electronic filing and payment systems as part of streamlined tax administration. The upshot – enhanced transparency, reduced compliance costs, and greater ease and convenience across the tax system for all taxpayers.
Anti-Corruption Initiatives
Understanding the dangerous toll corruption can have on the business environment, the Georgian government has designed and implemented a range of tactics to fight corruption in tax administration. These ideas are vital to a level playing field, fair competition, and overall integrity of the tax system.
Tax Incentives and Exemptions
The Georgian tax code also includes numerous ad hoc incentives and exemptions that are implemented for the specific purpose of attracting investment in identified sectors and regions. Free Industrial Zones (FIZs) throughout Georgia offer substantial benefits, such as exemptions from corporate income tax, property tax, and Value Added Tax (VAT) on imports that are crafted to nurture growth and development in these locations. These initiatives are a component of a broader suite of economic objectives.
Labor Code of Georgia
Key topics regulated by this law:
- Requirements to the labor agreement
- Requirements to the wages
- labor contract termination
- working hours
- overtime work remuneration
- paid leave, unpaid leaves, sick leaves
- business trips
- workplace safety
- etc
Georgia’s labor code lays the legal foundation for the complex, often contentious employer-employee relationship. Its provisions are designed to create a balanced, equitable workplace for all, to encourage harmonious labor relations and to protect the well-being of the workers it regulates.
Employment Contracts And Equal Treatment
The labor code stipulates that employment contracts spell out the terms of employment – wages, working hours, and conditions. It also prohibits discrimination on the basis of gender, age, race, or disability.
Limiting Working Hours, Requiring Rest Periods
No more than 40 hours shall constitute the standard work week (companies with special operating conditions are allowed to expand the working hours for up to 48 hours a week). Overtime work must be compensated at a higher (at least time and a half) of the standard rate of work, and the rest period between the shifts shall not be less than 12 hours. An employee is entitled to at least 24 consecutive hours of rest once per week. Employees shall be allowed annual leave which can range from 21-24 working days, depending on the particular industry they are employed in.
Wages
The Georgian legislation does not determine a specific minimum wage. As a result, employers are free to determine the amount of wages through the employment contract with other employees. The code merely requires that the employee must be paid for his/her work and that the manner of payment be determined beforehand.
Workplace Safety And Health
The labor code requires that employees be given vocational training. Employers must also provide employees with the necessary personal protective clothing; the code states that in any case, the employer must take care of and provide for the protection of the employee. They are, moreover, entitled without sanctions, to walk off the job if they determine that it is unsafe.
Termination, Severance, And Rights
A fixed-term employment contract terminates when the term of the contract expires, the parties to the contract agree to terminate, or the objective that caused the contract to be signed is fulfilled. If the employer – except in cases of gross violation of their obligations to the employee – terminates the contract, they must pay the employee 1 or 2 months’ salary depending on the reasons for termination. The code sets the notice period which the parties of the employment contract must not violate. The notice periods can range from 3 to 30 days depending on the conditions under which the contract is being terminated.
Law on Entrepreneurs
Key topics regulated by this law:
- Documents required for company registration
- Process of company / branch / individual entrepreneur registration
- Minimum capital requirement
- Director appointment / dismissal
- Shares issuance / increase / decrease
- Capital injection into the company
- Standard samples for company charter
- Company liquidation
- Merger of the companies
The legal environment framing entrepreneurship in Georgia plays a crucial role in carving out the terrain of doing business in the country. The legislation catalogs the different business organization forms — limited liability companies (LLCs), joint-stock companies, and cooperatives are just some of the options — providing an inventory of organizational options that entrepreneurs can carefully consider in light of their vision for their company; be it a closely-held LLC, a publicly held joint-stock company, or a cooperative organized to meet the needs of its members.
Limited Liability Companies (LLC)
An LLC offers a form of company organization that protects personal assets from company liabilities, therefore reducing the financial risks associated with investment in the enterprise. This form is characterized by a high degree of operational flexibility and a bare-bones governance structure, with management by the members themselves or by managers appointed by the members. The legislation spells out the formalities for the creation of an LLC, identifying registration requirements and the necessity for capital contributions.
Joint-Stock Companies
For those entrepreneurs wanting to use the issuance of public or private equity as a means to grow the company, a joint-stock company could be the answer. This form segments the capital of the company into shares, making for the installment of funds through their sale and exchange. Here, too, the law is elaborate, spelling out the rights of the shareholders calling out matters such as voting privileges, dividends, and the transferability of shares. Unlike an LLC, this form has a necessary supervisory board in addition to a management board, each with defined responsibilities and the scope of their authority laid out in the legislation.
Cooperatives
And for the end user who is primarily concerned with something other than profitability, the formation of a cooperative could be the answer. Georgia’s law defines a cooperative as a business organized to meet some economic or social need of its members. The legislation identifies the forms these entities can take, outlines how they take in members, how they are to be governed, and how they are to operate, largely insuring that these member-focused entities can enjoy the same success that those focused primarily on profits can within the country.
The law on Entrepreneurs, as the whole code is known, trades in comprehensive coverage of a variety of areas beyond the different forms of companies in the country. For example, the law also touches on the rights and obligations of the members of a company, accounting and auditing, and the reorganization and dissolution of a company.
Law on Aliens and Stateless Persons
Key topics regulated by this law:
- Visa requirements for foreigners
- Residence permit options
- Investment residency
- Stateless persons status
- refugee status
- etc
Georgia’s legislation concerning the legal status of aliens and stateless persons is an emblem of immigration policy made and carried out with meticulous governance and humanity, balancing the protection of the individual and the sovereign interests of the country. At its heart, it is a law designed to create a zone of law-abidingness within the borders of Georgia for every person, regardless of their nationality or statelessness, and is animated by several objectives:
- Protecting While Respecting: It safeguards the rights and freedoms of aliens and stateless persons while respecting the principles embedded in the Georgian Constitution and norms of international law.
- Bringing the World to Georgia: It directs a transparent immigration policy that enhances Georgia’s growing identity as a state with which international relations can be built, particularly among cultures with a proud civilization and tradition of individual responsibility.
- Incorporating On the Basis of what Exists: More specifically, it is a framework of law that is legitimate by reason of its incorporation of international law. It is a law formed by a sovereign country that has clearly recognized the international standard for the treatment of aliens within its borders and beyond — Georgians who travel abroad to work, for instance. This is an international standard by which Georgia has said it desires to be judged on immigration and asylum matters. That plays host to more than 600,000 tourists per annum and seeks to become a major airline hub.
Alien’s Life within Georgia: Entry to Exit
Not only does the law concern the entry into Georgia and the stay of aliens within Georgian territory, it covers the period of an alien’s transit while more broadly remaining on Georgian territory and an alien has the obligation of departing Georgian territory. Thereby, in an orderly way, it decrees the regulations concerning the rights of aliens and the obligations of aliens and stateless persons and then the corresponding lawful procedures for their removal. It also recognizes the value of international cooperation in the fight against, and resolution of, illegal migration and a general politics of well-directed migration.
Principles and Provisions
- Core Principles: The legislation is anchored in a complex of principles that enshrine the importance of implementing federal reciprocity, fostering family unity, prohibiting discrimination in immigration, preventing statelessness, and promoting the best interests of children. It suffuses all intelligence alienage with the imperative of strict compliance with local and customary regulations of both the State of Georgia and the international community.
- Entry and Departure: Aliens are at liberty to enter and leave the territory of Georgia only by means of such checkpoints managed by border officials and during such hours of business of the offices charged with their management, armed with proper and unexpired and effective visa, or travel documents, such as the law clearly specifies by category.
- Visas and Documentation: The piece of legislation delineates various visa categories, the issuance and acceptance of travel documentation, and the terms and conditions thereof, e.g., electronic visas, temporary IDs while stateless or seeking asylum, etc.
The Georgian Residence Permit System
One of the most significant parts of the act is the administration of the Georgian residence permit. The text creates a series of new residence permit categories applicable to aliens wishing to settle in Georgia on a more permanent basis. For a comprehensive guide of the visa types for those looking to immigrate to Georgia see our service.
Ensuring Compliance: Inspections and Obligations
The bill mandates the thorough inspection of all aliens upon arrival and again upon departure for compliance with Georgian law. The law also imposes various obligations upon aliens, as well as a series of bases for denial of entry or grant of stay, for instance, ongoing criminal investigation. Importantly, like other intelligence immigration laws, it provides the right of appeal of certain adverse visa decisions and immediate entry deny, ensuring fairness in administrative appeal.
Law on IT Promotion
Key topics regulated by this law:
- IT Virtual Zone company tax implications
- Requirements to get the tax exemptions for IT Virtual zone companies
- Circumstances where one can lose the status of IT Virtual Zone company
- IT international company tax implications
- Requirements to get the tax exemptions for International IT Companies
- Requirements to keep while working with this status to avoid the revocation of the status
The Georgian legislation, through the law on Determining the Status of an International Company, and Approving the List of Permitted Activities and Certain Expenses, provides a framework that outlines specific regulations and benefits for companies operating in the IT sector.
Software Development and Release
This cornerstone of the IT industry regulates software development and the release of an array of products, from computer games to business applications, as provided by the Georgian National Classification of Economic Activities code 582. This alignment with strategic objectives underscores the country’s commitment to software innovation.
IT Consulting/Computer Programming
Covering computer programming, IT consulting, and management services, this segment requires a skilled workforce adept at navigating the digital world. Facilitated by regulation under code 62, it emphasizes the delivery of cutting-edge IT solutions.
Production and Delivery of Digital Products
This area includes critical services such as software support and updates, maintaining the lifecycle of digital products and enhancing the user experience.
Web Development and Hosting
Services in web development and hosting are vital, adhering to standards that ensure quality, security, and reliability, thereby supporting a robust web services infrastructure.
Software Provision
Regulations govern the distribution of software and updates, enforcing intellectual property laws and maintaining quality standards to protect both providers and users.
Access to Software/Software Downloads
Regulatory standards ensure legal frameworks are followed for software distribution, protecting intellectual property and ensuring high-quality product dissemination.
Online Security and Maintenance Services
Stringent regulations for online security, including firewall and anti-virus installations, ensure top security and data protection standards, fostering a secure online environment.
Tax Incentives
Georgia offers attractive tax incentives for IT companies to drive growth and attract investment, reflecting its ambition to become a regional technology hub. These benefits, including reduced profit tax rates and deductible expenses within Georgia, position the country as an attractive destination for IT innovation.
Decree on Information Technology Zones
This law fosters foreign investment and growth of IT enterprises, offering virtual zone persons tax exemptions and deregulating the operational environment to attract IT businesses. It simplifies the acquisition of virtual zone status, promoting rapid integration into Georgia’s IT sector and encouraging a broad spectrum of IT-related economic activities.
This legislative environment creates an attractive ecosystem for IT companies, aimed at fostering innovation, creativity, and entrepreneurship within Georgia’s digital economy, positioning the country as a destination for technological excellence and investment.
Law on Individual Entrepreneurs
Key topics regulated by this law:
- How to get a micro business status
- Ho to get a small business status
- Activities that do not benefit from the decreased tax rate for small businesses
- List of activities that pay standard flat rate even if they are small business
Georgia is dedicated to developing a flourishing business environment, structuring its Tax Code to reflect this objective. The strategic shaping of the Tax Code is aimed at vitalizing the entrepreneurial spirit and reinforcing small businesses—the lifeblood of the national economy.
Simplified Taxation Regimes
Special taxation regimes introduced within the Code help circumvent complexities that impede business enterprise, exemplified in key legislation that outlines eligibility for micro and small business statuses, specifies certain prohibitions, and clarifies income types exempt from these tax modalities. The ultimate goals are to demystify the tax framework for entrepreneurs and smooth the fiscal terrain in Georgia.
Micro Business Status
Empowering Grassroots Entrepreneurship:
For entrepreneurs or entities with an annual income not exceeding 30,000 GEL, micro business status offers a fiscal haven, exempting them from standard taxation’s grasp. Eligibility is tightly controlled, with specific activities and income types outlined as disqualifiers to ensure transparency and integrity.
Small Business Status
Deepening the Benefits for Slightly Larger Businesses:
Expanding upon the micro business foundation, small business status caters to entities with annual receipts under 500,000 GEL, maintaining exclusions to ensure benefits apply to genuinely small-scale operations. This status encourages small businesses to capitalize on reduced tax obligations and simplified compliance.
Fixed Tax: A Paradigm of Fiscal Certainty
The fixed tax regime stands as a beacon of fiscal predictability, detailing activities eligible for a flat tax rate and enhancing operational flexibility under a stable taxation framework.
Law on Investment Promotion
Key topics regulated by this law:
- Rights and obligations of the foreign investors in Georgia
- Guaranties from the government of Georgia to protect investors
- Compensation upon deprivation of investment
- Dispute resolution options
Georgia, positioned at the crossroads of Europe and Asia, stands out as a prime destination for investors, thanks to the Law of Georgia on Promotion and Guarantees of Investment Activity. This law underscores Georgia’s commitment to fostering an investment-friendly environment, opening its doors to both local and foreign investors to partake in its economic development. The law aims to demystify Georgia’s investment framework, providing a clear guide for investors to navigate and leverage the opportunities available.
Understanding Investments
Georgia’s investment laws adopt a broad definition of investment, covering a wide range of assets and intellectual properties utilized for entrepreneurial activities within and outside Georgia, aiming to generate profits. This broad coverage ensures a variety of investment forms are included, providing a strong legal framework to protect investor interests.
Investor Rights and Protections
The law offers various guarantees and rights to create an open and transparent investment environment. Investors enjoy the freedom to manage bank accounts in any currency, access loans, invest in securities, and own property both locally and internationally. A significant provision ensures the protection and repatriation of profits, allowing investors to transfer their income freely abroad at market exchange rates.
Navigating Prohibitions and Limitations
The law also sets certain investment prohibitions and restrictions to protect national interests and align with international norms, such as bans on investing in arms production, dangerous waste management, and narcotics. Certain sectors are reserved as state monopolies, ensuring investments comply with safety, health, and security standards.
Facilitating Investment Promotion
The Georgian government, particularly through the Ministry of Economy and Sustainable Development and the Investment Centre of Georgia, actively develops and promotes attractive investment frameworks. This proactive stance is designed to identify potential investors and streamline the investment process, showcasing Georgia’s commitment to economic expansion.
Tax and Labor Framework
The investment law details tax incentives and labor relations to further attract investment. It sets conditions for employing foreign nationals, including unrestricted income repatriation, alongside favorable tax regimes, enhancing Georgia’s appeal as a competitive investment destination.
Property Rights Assurance
The law provides clear guidelines for acquiring land use rights or rights to utilize the country’s natural resources, vital for industries like agriculture, mining, and energy. This legal clarity supports investors in confidently leveraging Georgia’s natural assets for their ventures.
Efficient Dispute Resolution
Investor protection is bolstered by mechanisms for dispute resolution, including a designated forum for resolving disputes involving investors or between investors and public authorities. This commitment to the rule of law ensures disputes are settled equitably and efficiently, instilling confidence in investors regarding their ventures in Georgia.
Transitional Provisions for Existing Investments
Investments existing prior to the current law are seamlessly integrated under its provisions, demonstrating Georgia’s dedication to maintaining a modern, compliant investment landscape. This thoughtful approach ensures that pre-existing investments adapt smoothly to new legal standards, affirming Georgia’s commitment to a productive and well-regulated investment environment.
Law on Economic Freedom
Key topics regulated by this law:
- Limitations for any current or future government to increase taxes
- Self limitations to the macroeconomic indicators
Georgia’s legislative landscape is celebrated for establishing a comprehensive legal architecture that governs entrepreneurial activities, protecting economic rights and freedoms, and setting down parameters for fiscal responsibilities. This primer delves into the pivotal legal instruments that shape the business environment in Georgia, laying the groundwork for a flourishing entrepreneurial spirit.
Protection of Economic Rights and Freedoms
At its core, Georgia provides robust protection for economic rights and freedoms, recognizing them as inherent human rights essential for a reliable and transparent business environment where fairness and transparency are not just ideals but practical standards. These protections are enshrined in Georgia’s constitution, ensuring entrepreneurs operate within a secure legal framework.
Strategic Economic Policy
Georgia’s legal framework promotes economic freedom, advocating for minimal government intervention in the marketplace. It is complemented by a responsible fiscal policy and a tax system that encourages innovation and expansion, reflecting the dynamic spirit of the Georgian economy.
Taxation Governance
Entrepreneurs play a significant role in the taxation scheme, with the law requiring any major tax code amendments to be put to a public referendum unless they are designed to neutralize the tax burden. This policy balances fiscal flexibility with the need to maintain taxpayer sovereignty, ensuring that changes to fiscal policy are carefully considered and justified.
Fiscal Responsibility and Growth
Georgia maintains strict parameters for key macroeconomic indicators, dictating limits on government spending, deficit, and public debt. This enforces fiscal boundaries that entrepreneurs can navigate confidently, ensuring a stable economic foundation for business growth.
Principle of Budget Universality
This principle mandates that all tax revenue, whether national or subnational, be directed towards budgeted expenditures. It ensures the wise, efficient, and transparent use of public funds, bolstering the economic ecosystem and promoting fiscal integrity.
Capital Mobility Assurance
Acknowledging the fluidity of capital across borders, Georgian law facilitates the free movement of capital within and outside the country. It emphasizes the importance of regulatory compliance for seamless financial transactions, supporting both domestic and international business operations. This approach underscores the mutual benefits of a regulated yet open financial system, ensuring that businesses can operate effectively within Georgia’s vibrant economic landscape.
Wrapping Up
It’s always complicated for big firms and individual entrepreneurs to start a business in a foreign country. It is crucial to understand the country’s legislative framework before jumping into the business environment in the new place. Georgia has relatively simple and convenient legislation for foreigners who want to build their businesses in Georgia, mainly due to Georgia’s focus on the development of the country’s economy.
If you made it to the end, congratulations! Now you have a comprehensive overview of the most essential legislations you’d want to be familiar with to live and work in Georgia. However, of course, each of the points requires a way deeper investigation.