Low tax rates and, an attractive investment climate, a free economic zones, the opportunity to work worldwide are not all the advantages due to which entrepreneurs open a business in Georgia. According to Geostat, as of January 1, 2023, there are 915,636 registered companies operating in the country.
At the same time, over 323 thousand of them are limited liability companies (LLC). This is one of the most common and convenient forms of doing business for business. How to open an LLC in Georgia and optimize taxation by legal methods, as well as why company owners choose this particular organizational and legal form, will be discussed in our material.
Why entrepreneurs choose Georgia to register a company?
Georgia is a historical and strategic center of commerce and trade between the West, the Middle East, Russia and Asia. It was ranked 7th among 190 countries in the Ease of Doing Business report of the World Bank and 26th in the world’s freest economies in 2022. The state is attractive for investors, because here they get access to all markets, and business – all the opportunities for stable development.
Entrepreneurs who operate in Georgia identify several reasons at once to open a company in this country:
- Low tax rates: the taxable base is not the company’s income, but the profit distributed among the shareholders – dividends (the so-called “Estonian” taxation model);
- Benefits for IT companies: maritime transport, special tax regimes, free industrial zones;
- Well-functioning laws: real rule of law. If there is a valid law in Georgia, then it can really be used, there are no legislative acts that exist only “on paper”. All business entities and citizens carefully monitor their observance so that there are no claims against them from the regulatory authorities. Sanctions in the country are quite tough. For example, missing the deadline for tax registration is punishable by a fine of almost $200. Also, the principle of discretion really works in the country: everything that is not prohibited by law is allowed. If there is no direct ban on a particular type of activity, then it can be done;
- Opportunity to bring a startup or established business to the international market: at the same time it will not be considered offshore, in terms of the legislation of other countries. In Georgia, it is equally comfortable to develop both a new IT startup and a large business that is actively developing, ready to expand and enter the international level;
- Absence of corruption: at least “de jure”, at the level of companies and individuals. It is not customary in the country to thank with money, it is shameful to promote “ours” to positions. But business recommendations help build a career.
Structure of LLC in Georgia
An LLC in Georgia is a complete analogue of international Ltd. Legislation provides a fairly extensive freedom of action to manage society. It may have one or more founders who are liable for the debts of the enterprise within their shares. The company can be managed by one or more directors, or a board of directors or a board of shareholders.
A director may have absolute or limited powers to enter into transactions on behalf of the company. All legal aspects relating to the most important issues: the rights, duties and responsibilities of the founders, the conditions for the alienation of shares are indicated in the memorandum of association.
Documents required for LLC registration
Non-resident individuals, as well as foreign companies, have the right to register an LLC in Georgia. The procedure is simple and takes from two to seven days.
Future LLC owners need to come up with a company name in Georgian or Latin and reserve it for registration. After that, the House of Justice will need to provide:
- Application for registration;
- Copy of the memorandum of association;
- Copy of the company’s charter. The legislation does not establish requirements for the minimum amount of authorized capital;
- Copy of the passport;
- Document on the appointment of the director to the position and his consent. They may be a non-resident;
- Consent of the property owner to use it as the legal address of the LLC;
- Receipts for payment of the state fee. For urgent registration, you will have to pay 210 lari (a little more than $80), for regular registration – 110 (almost $43).
Documents must be translated into Georgian and translations must be notarized. You can submit all documents to the registration authority in person. In this case the non-resident will be accompanied by a representative of the country, or through a representative by proxy.
For example, you can contact a special consulting firm that provides such services if the future business owner is experiencing difficulties, such as a language barrier. Everyone in the country knows English, but there are the inscriptions on all the plates, in ATMs, SMS notifications for registering online banking in Georgian.
Immediately after receiving the company registration documents in Georgia, you need to register with the tax authorities, having previously selected the taxation system and open a bank account.
Opening a bank account
The procedure for opening an account in Georgia is much faster than in European countries. For example, in the UK the average term for opening an account is two years, in Georgia it is 14 days. There are no state banks in the country, only commercial ones. The largest and most famous are Bank of Georgia, TBC Bank and Liberty Bank.
You can open an account both in rubles and in world currencies. The client receives all popular services: Internet banking, access to the account through apps, etc. To open an account, you will need a Georgian SIM card.
The procedure is almost no different from opening a settlement account in any other state of the post-Soviet space. But citizens of Russia and Belarus may be asked to confirm the sources of funds, and additional questions in order to exclude the illegal activities and connenctions. For non-residents of these countries the approval rate is about 70%.
General tax regime
By default, Georgia has a tax system similar to most post-Soviet countries, and as with many general tax regimes, it is creditable and refundable as a legitimate method of reducing the tax burden.
| Tax | Percentage |
|---|---|
| Value Added Tax (VAT) if the company’s income exceeds 100,000 lari per year (about $39,000 by end of March 2023) | 18% |
| Income tax rate (exempted if the company reinvests the profits) | 15% |
| Dividend tax | 5% |
| Income tax | 20% |
Preferential tax regimes
International companies that have registered in a free industrial zone (FIZ) for the development of the IT sector and the provision of services in the field of maritime transportation have the right to conduct activities with a preferential tax rate in Georgia and optimize taxation as much as possible. Also eligible are financial companies or banking institutions that are exempt from tax on dividends and other types of income from securities.
To apply the special tax rate, you must submit an application to the Revenue Service under the Ministry of Finance of Georgia. A preferential tax regime will be assigned to an LLC within 10 days.
In order to take advantage of preferential tax regimes, it is necessary to meet a number of conditions, among which is the conduct of activities in the territory of Georgia. At the same time, companies with a preferential tax status retain the right to export products.
Foreigners receive the status of a tax resident in the country if they stay in Georgia for a total of 183 days during a year. Doing business in the territory of the state is one of the grounds for obtaining a residence. Thanks to this, a non-resident will no longer have to leave after a continuous stay for a year and re-enter.
Conclusion
Registering a business in Georgia is a worthy alternative to popular offshore jurisdictions and an opportunity for business relocation, entering the international level, and working in a developed and stable market. Everyone can open an LLC in the country, it does not take much time. But if an entrepreneur cannot be present in state bodies in person, for such cases it is possible to register a company by proxy.