Corporate and Administrative Legal Service Providers

Corporate and Administrative Legal Service Providers


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Limited Liability Company (LLC)

In Georgia, there are many different types of legal entities for doing business. One of the most popular is a Limited Liability Company ( LLC).
Taxes for various types of activities are as follows:

– Corporate Income Tax – 15%;
– Dividend Tax – 5%;
– PersonaI Income Tax – 20%;
– VAT – 18%;
– Property tax – 1%;
– Pension tax (if the employee is a citizen of Georgia or has permanent residence) – 2% of the company and 2% of the employee’s salary ( or the company takes full responsibility for paying 4%).

The advantage of the Estonian tax system is that corporate income tax arises only when profits are distributed between shareholders in the form of dividends. From the moment of withdrawing dividends, the company has to pay 15%corporate income tax and 5% tax on dividends. However, if the profits are not taken out by the company founder(s), but instead left in the company deposit for its further development, profit tax is not due for payment. This model is ideal for the enterprise that wishes to develop its start-up project in a gradual framework.

A Limited Liability Company can be formed within two working days. You should take into account that this period includes only the registration of the company in the National Agency of Public Registry.

While most people do make an initial capital contribution, according to the legislation of Georgia it is not required, thus initial capital is solely an optional investment.

Since the beginning of 2021, there are certain limitations for non-residents while presenting the corporate interests of Georgian LLC in every Georgian Bank. Since Georgia has signed the BEPS (Base Erosion and Profit Shifting) agreement, Georgian companies are required to have the operational side of the business also present in the country. Thus, before opening an account in any bank institution in Georgia it is advised to present evidence of physical as well as economic presence in Georgia.

Before submitting your application to the Bank, we strongly recommend that you accustom yourself to the main requirement announced by that Bank. It is important to fill out the application form correctly since the bank pays a lot of attention to the information stated in this form. The representatives of the legal department in the bank will make decisions for, or against your application, based on the information you provide. For this reason, it is preferable to get ready all necessary documentation prior to submission, for example, office rental agreement, drafts of contracts with contractors/suppliers, drafts of employment contracts with employees, etc.

There are several beneficial schemes for an IT business in Georgia. If you are actively engaged in software development, IT engineering, java development and so on, you can enjoy one of the following:

– 1% Individual Entrepreneur Freelancer;
– Status of the Virtual Zone (LLC);
– Status of an International Company ( daughter company);

All three structures differ from each other in the compositional and structural manner, as well as with their taxation system. To get more information, please contact one of our specialists and book your free case evaluation time.

The Status of Virtual Zone does not imply virtual services provided remotely, on the contrary, obtaining this status requires physical presence in Georgia.
The status of Virtual Zone is a preferential regime strictly for IT businesses and can be granted to Georgian companies that provide various services in the informational technology field.
The company that is registered in the National Agency of the Public Registry of Georgia can apply for the Status of Virtual Zone if:

– Has a representative office and employees in the territory of Georgia;
– Operates in the field of IT;
– Distributes the product outside Georgian Jurisdiction.

The status of the Virtual Zone suggests exemption from income tax of 15% and VAT of 18%.
For more information contact our specialist or read the article – Status of Virtual Zone.

International IT and maritime companies can benefit from tax incentives introduced by the Georgian Government, namely the Status of an International Company. To qualify for this status, an LLC must first be established in Georgia and 50% or more of the company’s shares must be held by a non-resident company with special requirements of at least 2 years of experience in the permitted field.
The status of an international company implies the following tax burden:

– Corporate Income Tax – 5%;
– PersonaI Income Tax – 20%;
– Dividend Tax – 0
– Tax on the property (except land) – exempt if the property is used only for activities permitted under the status. For more information.

For more information, please contact one of our specialists and book your free case evaluation time.

By entrusting someone in Georgia to operate on your behalf by the Power of Attorney you have the possibility to register a company in Georgia without even being here.
We can offer you the service of opening a company by proxy. Our specialists will qualitatively and promptly register your business as soon as possible after receiving the documents.
The status of an international company implies the following tax burden:

– Corporate Income Tax – 5%;
– PersonaI Income Tax – 20%;
– Dividend Tax – 0
– Tax on the property (except land) – exempt if the property is used only for activities permitted under the status. For more information.

For more information, please contact one of our specialists and book your free case evaluation time.

Individual Entrepreneur

If you have registered as an Individual Entrepreneur (IE) and acquired Small Business Status (SBS), you can only work based on service agreement provisions. In the service agreement with your client, offered services should be clearly defined and identical to the code of activity that was granted to you as an IE with a SBS. To avoid inspection and further investigation from the Revenue Service Inspectors, so they do not consider that you are employed in this company, it is advised to have several customers and different sources of income. But this does not exclude the possibility of being employed as an individual and taxing your income at 20% withholding Tax.

You have an opportunity to choose up to 2 forms of activity ( preferably related). It also has a special line for the third code of activity. For instance, if you are engaged in industries like science, art, or writing.

If you provide services while being in Georgia, you have an obligation to register for VAT from the moment you exceed the gross turnover threshold of 100 000 Georgian Lari. If you provide services electronically to non-resident legal entities, you are exempt from VAT. Additionally, services provided outside Georgian jurisdiction are also exempt from VAT charge. For more details read article on VAT Regulations in Georgia.

Individual Entrepreneur (IE) with Small Business Status (SBS) do not have to pay a withholding tax of 20%, but since you have a preferential tax regime, you are required to pay 1% of your total gross turnover.

Tax Residency and Taxpayer status are two separate notions and obtained with completely different procedures. While registering any form of enterprise in Georgia you may only obtain a taxpayer’s special number, however, to become a Tax Residence you have to either stay in Georgia for more than 183 days during a calendar year, or through High Net Worth Individual(HNWI) program, when the value of your confirmer property is more than 3 000 000 Georgian lari ( ≈ 1 100 000 euros), and/or when your annual income for each of the last three years is more than 200,000 Georgian lari ( ≈ 60,000 euros) plus annual income from sources in Georgia is at least 25,000 Georgian lari (≈ 8,000 euros), for more details read article about Tax Residency In Georgia.

The advantages of registering as an Individual Entrepreneur (IE), especially if you have submitted to the preferential taxation regime of a Small Business Status (SBS), gives you freedom of movement within the countries and get paid for provided services In Georgia. But, nevertheless, it is advisable to have some connection with Georgia, namely crossing the border and entering Georgian Jurisdiction at least two times per year.

Closing an Individual Entrepreneur is quite a straightforward and easy process and can be completed within 10 working days from the day of submission. What is more, the procedures of Individual Entrepreneur closure can be processed both with your personal presence and remotely by proxy.

An Individual Entrepreneur with small business status has a turnover threshold of 500 000 Georgian lari per calendar year. You have the possibility to exceed this amount for two years up to 1 000 000 Georgian lari. In this case, you will pay 3% of the exceeded amount. However, when the total income from economic activities exceeds 500,000 Georgian lari for more than two executive years during each calendar year, the status of a small business will be revoked. The good news is that the Standard Individual Entrepreneur does not have such a limitation.

If you have the status of a IE Small Business, the filing of tax returns is conducted on the portal of the Internal Revenue Service (IRS) from the 1st to the 15th of every month. Although, there is an absence of transactions, a zero declaration should be submitted. As for the standard form of the individual entrepreneur, the amount is declared once a year. Our experts will be happy to offer you accounting training or accounting support to facilitate this task. The good news is that the Standard Individual Entrepreneur does not have such a limitation.

Residence Permits in Georgia

The work residence permit is one of the most sought-after benefits that Georgia offers to small and medium-sized business representatives. There are different grounds for obtaining legal residency status in Georgia, the most popular of which is employment and legal income. The key factor in this regard is the annual turnover. Small and medium-sized enterprises (SMEs) can apply for work residence permits when their annual turnover reaches 50,000 Georgian lari per person.

If you have an IE registered in Georgia and have already reached the threshold amount and declared it to the Revenue Services of Georgia, you have every reason to apply for a work residence permit in Georgia.

A legal entity registered in Georgia can provide the basis for applying for a residence permit based on your employment status. To obtain a work residence permit as a foreign citizen, the company must have an annual income of at least 50,000 Georgian Lari per employed foreigner. If the company has not reached the specified turnover necessary per non-resident, you do not have the right to apply for a residence permit at this moment.

An individual who has already applied for the residence permit and is only awaiting an answer is not obligated to stay in Georgia. Even though it is not considered a vicious violation, we advise you not to leave the country until you get a response from the National Agency of the Public Registry.

Once your child receives a student residence permit, the parents also have the opportunity to apply for a residence permit based on family reunification.

The initial step is to check rather the academic institution your child enrolled in is officially accredited – it is the main criterion for a residence permit obtainment.

The role of the guarantor is given to a parent if a child is underage. Having said that, the parent must show an annual living wage for both – the child and him/herself.

Recalling, the annual minimum living wage in Georgia is now about 16 thousand Georgian lari.

It is noteworthy that from 2024, accreditation for kindergartens will be introduced. From next year, it will be possible to apply for a residence permit based on preschool institutions.

It is not prohibited for both parents to apply simultaneously for a family reunification resident permit, based on their child’s student residence permit. Please bear in mind, in this case, each parent has to have a minimum living wage amount on their account.

A Georgian registration address is also the registration of a citizen in a residential area. The rental agreement is not suitable here, registration is required.

Trademark Registration

According to the Law of Georgia on Trademarks, a non-resident who does not have a permanent residence permit in Georgia or who does not own a local legal entity can not submit an application to the National Intellectual Property Center of Georgia “Sakpatenti”. Instead, these functions are entrusted to certified patent attorneys.

Standard registration takes about a year, and expedited registration – 10 working days. 

There are several options to register your trademark in Georgia on an international level. First through the Madrid Protocol, and second through the Paris Convention ( used by 117 countries throughout the world) or you can file a trademark application on the national level to the National Intellectual Property Center of Georgia “Sakpatenti.

Registering trademark applications online is possible through the official website of the National Intellectual Property Center of Georgia “Sakpatenti”. Taking advantage of the “Sakpatenti” online service provides a 20% discount on officially announced standard fees.

The cost depends on many factors, including the number of countries in which you want to register a trademark, the product classes, and the registration period. It is recommended to consult with qualified professionals to calculate the potential cost.

LLC with Virtual Zone Status

The Virtual Zone Status (VZS) was established as a mechanism for providing preferential treatment to companies operating within the IT sector. According to Ordenance 49, a company with Virtual Zone status can only engage in activities related to  information technology, such as:

– creation;

– maintenance;

– management of software products and computer hardware, by studying, designing, developing, implementing and providing support.

Compared to other countries, having in mind methods and conditions of a legal entity registration and acquisition of license and permissions, procedures of obtaining the Virtual Zone Status in Georgia is relatively simple and efficient process. The initial step involves the preparation of the necessary founding documents in adherence to Georgian legislation. The process of obtaining Virtual Zone Status consists of :

    • LLC registration.
    • Tax profile activation in the Revenue Service portal.
    • Applying for Virtual Zone Status.
    • Opening a corporate business account.

The duration of the application review process for entrepreneurs seeking to establish businesses in Georgia and obtain VZS has increased due to their growing numbers. Although the Georgian legislation requires a 10-day timeline for obtaining virtual zone status, our empirical research reveals that it may take between 20 working days to one month from submission to the Tax Service of Georgia. If the virtual zone status is approved, a certificate will be issued by the Internal Revenue Service within two working days, which is valid indefinitely.

It is worth the common misconception surrounding the VZS, with many erroneously assuming that it is associated with remote work or virtual business models. On the contrary, the key prerequisites for obtaining Virtual Zone status is the development of a product in Georigia. In other words, the employees who participate in the creation of this product must also be located in the same territory.. However, this does not oblige you to hire only Georgian residents, you are free to hire non-residents.

The Georgian government has set its sights on the creation of a conducive environment for businesses in the information technology sector, with a view to attracting investments and driving industry growth. This is the reason for the creation of the Virtual Zone Status, which offers the following benefits to companies:

    • Exemption from corporate income tax ( 15%).
    • Exemption from value-added tax (VAT) on their exports of goods and services (18%).
    • No statutory limit on the number of employees (the founder of the company can be both a director and work on the creation of the product).
    • Ability to hire both residents and non-residents of Georgia.

LLC with International Company Status

Georgia has implemented various policies and regulations aimed at attracting foreign investment, making it a favourable destination for international companies seeking to expand their operations in the technology sector. Of particular interest are the two preferential regimes offered to companies operating in the IT sector: International Company Status and Virtual Zone Status. Compared to VZS, International Company Status is available to companies engaged as in information technology as maritime shipping. Notably, the ICS offers a number of benefits over the Virtual Zone Status, including lower tax rates on dividends (0% compared to 5%), personal income tax (5% compared to 20%), and property (0% compared to 1%). However, an income tax of 5% must still be paid by companies under this regime.

There are no restrictions on establishing a new legal entity in Georgia. However, if you plan to apply for International Company Status, it is important to note that a Georgian company can apply for this status if it meets certain criteria. These include:

  • Being engaged in the permitted type of activity for more than two years.
  • Having a non-resident legal person as the founder with at least two years of experience in the authorised field of activity.
  • Having a legal person with a share of more than 50% and at least two years of experience in the authorised field of activity as the founder.

The process of obtaining international company status involves several steps, including:

  1.  The registration of a Georgian company;
  2.  Tax portal activation in the Revenue Service portal;
  3.  Opening a corporate account;
  4.  Submitting an application (in writing or electronically) to the Tax Service for submitting an international company status. The application must include relevant information and documents that confirm the implementation of the relevant activity and, in the case of activities,  that require permission – an appropriate approval. Additionally, the Revenue Service reserves the right to request additional information from the applicant, as needed. The Ministry of Finance and Government of Georgia will then consider the application on a case-by-case basis. While Georgian legislation specifies terms for consideration by the Revenue Service, namely 10 days. No such terms are defined for consideration by the Ministry of Finance or Government of Georgia.