Georgia nowadays is becoming an increasingly popular jurisdiction for investments and export – import transactions with CIS and EU countries. Among other factors, the attractiveness is also due to the absence of strict currency control rules and the availability of free trade regimes with European and other foreign countries. Additional advantages include the absence of corruption, the transparent conditions of conducting business, the signed association agreement with the EU, the introduction of a visa-free regime with the EU, the 6 fixed taxes and lowered tax rates, the significantly shortened list of licenses and permits, as well as simplified administration procedures. Georgia is among the top ranked countries in the World Bank`s list on ease of doing business. In addition, Georgia has significantly succeeded in establishing a business-friendly environment and maintaining a healthy, comfortable and attractive investment climate for foreign investors. In this regard, it is specifically worth mentioning the attractive investment opportunities in the Georgian Free Industrial Zones (FIZ) regulated by the Law of Georgia “On Free Industrial Zones”, which aims to promote economic growth, enhance industrial competitiveness and attract foreign direct investments.
The Free Industrial Zones create such tax, legal and administrative environments that tenant companies can compete successfully on global markets. The FIZ is a free zone envisaged by the Georgian Tax Code where business-friendly regulations and favorable tax and customs regimes apply. In particular, payments within FIZ can be carried out in any currency, there are no foreign exchange controls and trade barriers or quotas; some types of activities – which normally require license/permit – are relieved from such restrictions in the FIZ or can be obtained in simplified procedures. Additionally, there are a number of operational advantages in the FIZ, given their location and infrastructure.
A FIZ can be created under the initiative of either the Government of Georgia, or any legal entity or individual. An entity can operate in a FIZ by means of registration therein. According to the Georgian legislation, there are no restrictions on foreign ownership of companies or the form of ownership itself.
The most important advantage of operating a business in a Georgian FIZ is the myriad of tax incentives. In particular, among others, the following incentives are applicable:
- FIZ incorporated entities are exempt from property tax;
- Goods imported into FIZ are not subject to VAT and import tax;
- Transactions among FIZ incorporated companies are not subject to VAT;
- The profit of a FIZ company is exempted from corporate profit tax on certain conditions envisaged by the Tax Code of Georgia;
- There is no restriction on capital repatriation.
For the majority of other issues, FIZ companies are subject to the standard Georgian legislation, including the double tax treaties entered into by Georgia with other countries. Accordingly, relevant withholding taxes on dividends, interests and other payments made abroad to a foreign shareholder, apply to such FIZ companies as well.
Currently, Georgia has industrial zones in Tbilisi, the capital of Georgia; Kutaisi – an important connecting hub between Tbilisi (capital of Georgia) and Black Sea Ports and Poti – the First Free Industrial Zone in the Caucasus Region. Several other free industrial zones are in procedure of being planned or built.
We at Eurofast will be happy to analyze upon your request all relevant issues which may arise in case you decide to create a Georgian FIZ or to establish a company therein and carry out export-import operations with the use of such companies. We will provide you with relevant tailor-made solutions for your business and financial needs; as well as with all necessary legal and consulting support and represent you with state authorities during all stages of FIZ establishment in Georgia.
Anna Pushkaryova, Country Director,
Eurofast Georgia
T. +995 595 100 517
E. anna.pushkaryova@eurofast.eu