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Georgia is becoming increasingly attractive to startups due to its transparent economic policies, favorable tax conditions, and developed infrastructure to support new projects. In this article, we will explore why Georgia is an excellent choice for your startup, the available sources of financing in the country, and the steps necessary for registering a startup.

Why do startups choose Georgia?

The government of Georgia, major entrepreneurs, and public organizations are equally interested in attracting foreign startups. To achieve this, they have created a comfortable business environment, various financing tools, and favorable tax regimes. The results of this strategy can be judged by the successes of innovative entrepreneurship in Georgia. Let's discuss some of the most notable examples:

Comfortable Business Environment

Georgia offers one of the most welcoming business environments in Eastern Europe. The government actively supports startups through various programs and initiatives.

GITA

Initiated by Georgia's Ministry of Economy and Sustainable Development, the Georgia's Agency of Innovations and Technologies (GITA) was established to assist interested entrepreneurs with various free services. In collaboration with the Technopark, GITA has small incubators, training centers, and laboratories. Companies can also use the agency's large offices for various purposes, as well as coworking spaces and relaxation areas. GITA has created a high-tech incubator, universal industrial innovation laboratories that help develop the high-tech industry in the country.

FabLab

For several years now, the Digital Fabrication Laboratory (FabLab) has been operational in Georgia. This concept became popular thanks to Professor Neil Gershenfeld from the Massachusetts Institute of Technology. FabLab is a network of laboratories that provide tools and resources for prototyping new products and technologies, thus supporting innovative projects at their early stages.

Two technoparks in Tbilisi and Zugdidi are available to any entrepreneur with an idea they want to implement or develop into a startup. FabLab provides everyone with free access to modern technologies.

Leadership in Global Rankings

In addition to the opportunities created by the state with the support of foreign organizations, startups are attracted to Georgia by the country's good positions in global entrepreneurship rankings and favorable tax regimes.

According to the annual global "Doing Business" report published by the World Bank in 2019, Georgia ranked 7th in the world for ease of doing business. Among the countries of the European region and Central Asia, it managed to take 1st place. It also ranked 6th in the world for the ease and accessibility of doing business for foreign nationals.

Georgia has achieved record levels and moved from 124th place in terms of economic freedom to 16th in just 13 years, and to 13th place in the world for a favorable tax system.

As for the IT sector, Georgia also shows excellent results: according to the Global Information Technology Report, its position has risen from 98th to 58th in five years.

Favorable Tax Regimes

Startups in Georgia enjoy significant tax benefits, making the country one of the most attractive for budding entrepreneurs. The tax rate for startups is one of the lowest in the region. How much tax you pay, of course, depends on the legal form of your business. For IT startups, the conditions are very favorable – almost complete exemption from corporate tax and low dividend rates of 5%, no income tax, and VAT when working with contractors from other countries.

Taxes for IT startups:

• 5% on dividends;
• 2% of the salary of Georgian citizens goes to the Pension Fund;
• 20% income tax on salaries.

The only downside is that the tax declaration must be filed every month.

Funding Sources for Startups in Georgia

As mentioned earlier, the Georgian government is keen on attracting foreign startups. Additionally, the country continually receives foreign investments from various global public organizations and other states. These investments are also directed towards funding innovative entrepreneurship in Georgia.

By registering a startup in Georgia, you can attract funding through special grant programs:

Startup Georgia

Startup Georgia is a government initiative that provides financial support and resources for both local and foreign startups, facilitating their growth and development. The "Startup Georgia" program was established in 2016 by the initiative of the Prime Minister of Georgia, the Partnership Fund, and GITA. Its aim is to support the development of startups in Georgia. This is part of the economic reform, which, in turn, is one component of the government's plan.

The co-financing amount set by Startup Georgia ranges from 15,000 to 100,000 GEL. The overall budget for an individual project is not limited. An applicant can participate in the project in both monetary and non-monetary forms, however, the monetary contribution of the applicant must be at least 10% of the total monetary budget of the project.

Areas eligible for financing include:

• Aerospace manufacturing;
• Artificial intelligence;
• Biotechnology;
• Bioinformatics;
• Computer engineering;
• Informatics;
• Information technology;
• Nanotechnology;
• Nuclear physics;
• Electromagnetic radiation;
• Robotics;
• Semiconductors;
• Telecommunications.

During the program's operation, 3000 applications have been submitted by participants.

USAID Zrda

The USAID Zrda program actively operates in Georgia, assisting startups in securing financing and accessing international markets. USAID Zrda is a new joint initiative with Startup Georgia and Project Growth, aimed at creating more businesses and jobs in Georgian villages near the borders with the self-proclaimed republics of South Ossetia and Abkhazia.

The main priority of the initiative is the funding of innovative enterprises. Beneficiaries are required to make a minimum additional payment of just 10%, with the remaining 90% being financed by Startup Georgia as a concessional long-term loan, and the growth project allows the beneficiary to double the total amount and convert this into a grant.

Example: If Startup Georgia finances a startup with 90,000 GEL and the co-beneficiary's participation amounts to 10,000 GEL, the project can finance growth in the form of a grant totaling 100,000 GEL. The total budget for the business project would be: Beneficiary: 10,000 GEL, Startup Georgia: 90,000 GEL, Growth Project: 100,000 GEL.

The maximum co-financing limit of USAID-Zrda is equivalent to 100,000 US dollars in GEL.

Produce in Georgia

In June 2014, the Ministry of Economy and Sustainable Development of Georgia, together with the Ministry of Agriculture, launched a new state program "Produce in Georgia." The goal of the program is to promote the development of an entrepreneurial culture across the country by stimulating the creation of new enterprises and supporting the expansion of existing operations.

Under the "Produce in Georgia" program, the business division promotes and supports the development of new enterprises, as well as the expansion of existing operations, by providing financial assistance to the entrepreneurial community. Some of the main rules and conditions applicable to this assistance include:

General Conditions

• Beneficiaries launching a new enterprise must begin production within 24 months from the date of the loan issuance or the signed lease agreement. Operators expanding an existing business must begin production within 12 months after the loan payment or signed lease agreement.
• Beneficiaries have access to co-financing of interest accrued on a loan or lease issued by a commercial bank or leasing company during the first 24 months.
• A guarantee of up to 50% of the loan amount for the first 48 months can be obtained (up to 2,500,000 GEL).

As of February 2019, under the "Produce in Georgia" state program, 445 enterprises have been supported with a total investment value of over 1 billion GEL, creating more than 16,750 new jobs.

Startuper TBC

TBC Bank has launched the Startuper project aimed at supporting startups and promoting entrepreneurship in Georgia. The Startuper program includes various components: operational products, such as business cards, which are available even at the idea level, non-credit products for all types of startups, loans available after an initial three-month operating period, and non-financial support such as training, consulting, and more.

Under the Startuper program, a loan of up to 200,000 GEL can be obtained for 7 years.

Bank of Georgia Female Start Upper

This initiative from the Bank of Georgia is aimed at supporting female entrepreneurs by providing them with specialized financing and resources.

Spark — Business Accelerator

Spark is a business accelerator that provides startups not only with financing but also with access to mentorship and educational programs.

Startup Grind Tbilisi Georgia

Startup Grind in Tbilisi creates a network for entrepreneurs, assisting them in networking and exchanging experiences.

How to register or transfer a startup to Georgia

The Government of Georgia has developed a system to support startups, the IT sector, and developers with the aim of increasing investment capital within the country. This is why registering and developing a business is very straightforward, with a virtual zone for the IT sector that is completely legal and the business registration permit issued by the Ministry of Finance of Georgia. All steps from the House of Justice to obtaining virtual zone status are official and maximally simplified. Additionally, the confidentiality of banking operations in Georgia is absolute. Georgian banks do not share their clients' data with tax authorities from other jurisdictions under the CRS protocol.

Registering an IT company in Georgia is a simple and fast process, consisting of four st

Registration at the House of Justice
A company can be opened remotely via power of attorney or with personal attendance.

Obtaining access to the tax cabinet of the registered company
This condition is mandatory, as the application for virtual zone status is submitted based on the login and password of the tax cabinet.

Submitting an application to the Ministry of Finance of Georgia for virtual zone resident status
Officially, the application must be reviewed within 10 business days, but in practice, the Ministry of Finance assigns virtual status within a calendar month.

Receiving the virtual zone resident certificate and submitting it to the tax service.

Transferring a Startup to Georgia

There are two ways to move an already registered startup to Georgia:

1. Close the business in the country of registration and register it in Georgia with a more favorable tax regime.
2. Open a branch of the company.

Over the last decade, Georgia has been developing a favorable ecosystem for startups from various business sectors. An abundance of programs and platforms for the development of innovative entrepreneurship allows them to obtain financing and operate productively within the country. If you are looking to take your startup to Georgia, you can leave an application and we will consult you for free on any arising questions.

In the era of digitalization and globalization of business, Georgia stands out as an attractive point on the map of the IT industry thanks to its unique virtual zone status. This status provides significant tax benefits to IT companies, fostering the development of technological innovations and attracting entrepreneurs from around the world.

Advantages of opening a company in the IT zone

The main advantage is tax optimization: companies operating in the IT sector and having the status of a virtual zone are exempt from profit tax, which significantly reduces financial burden and increases competitiveness in the global market. Moreover, the simplified registration procedure and minimal administrative barriers make Georgia an attractive place for international IT business.

Tax regime for IT companies in Georgia

A distinctive feature of the Georgian jurisdiction is the favorable tax regime for IT companies. Unlike ordinary companies, which are subject to standard taxation, IT companies registered in the virtual zone enjoy significant tax benefits, including exemption from profit tax and simplified taxation of revenue from service exports.

How can I obtain Virtual Zone status?

The process of obtaining virtual zone status in Georgia is relatively simple and includes submitting an application to the relevant state authorities, confirming compliance with IT sector activities, and fulfilling a number of administrative requirements. This status opens doors to the international market and provides access to favorable tax conditions.

To register as a subject of the virtual zone in Georgia, you initially need to:

1. Reserve a unique name.
2. Prepare and submit a package of documents.
3. Appoint a director.
4. Contribute the charter capital.
5. At registration, it is necessary to open an account for the IT company of the virtual zone, submitting a request to the Tax Service. This is necessary for reporting and tracking tax payments.
6. Obtain a Georgian license for the provision of VZE status.

Benefits for companies with Virtual Zone status

The most significant benefits for companies with virtual zone status in Georgia are tax benefits, ease of doing business, and access to developed infrastructure. These factors create optimal conditions for the growth and development of IT projects, promoting innovation and technological progress.

Collaboration with Jara Accounting opens new horizons for entrepreneurs aiming to develop their IT business in Georgia. Thanks to a deep understanding of local legislation and unique tax benefits provided by the virtual zone status, Jara Accounting becomes a reliable partner on your path to success. Opening an IT company in Georgia today is not only a matter of economic benefit but also an opportunity to become part of a fast-growing digital community where innovations and advanced technologies find fertile ground for development. 

With Jara Accounting, you not only receive comprehensive consultations and support at all stages of registration and business operation but also access to a wide network of local and international IT experts. Choosing Georgia as a venue for your IT enterprise means betting on stability, an innovative ecosystem, and an attractive tax climate. With Jara Accounting, you can be sure that your business is set up for success from the start, and your path into the Georgian IT sector will be as smooth and promising as possible. 

Opening an IT company in Georgia with the support of Jara Accounting is your step towards success on the international stage. Join the number of entrepreneurs who have already appreciated the advantages of working in Georgia, and give your business a boost to new achievements in the world of technology.

Georgia attracts entrepreneurs from around the world with its open economy and simplified business registration procedure. The country offers significant tax benefits and minimal administrative barriers, making the process of launching and running a business as comfortable as possible.

Why is Georgia the perfect place for your business?
Georgia stands out among other countries thanks to its attractive tax policy and friendliness towards foreign investors. The country offers various legal forms for conducting business, among which individual entrepreneurship (IE) and limited liability companies (LLC) are especially popular due to their flexibility and simplicity of registration.

Advantages of registering a company in Georgia

1. Low tax rates
   They vary from 0% to 20%. The percentage depends on the tax system and type of activity. IT companies enjoy tax benefits. Businesses registered in Free Industrial Zones often are exempt from paying taxes.
    
2. Comfortable immigration policy
   Non-residents can live in the country for 365 days without a visa. After a year, they can cross the border with any state and re-enter, resetting their stay period.
    
3. Effective laws
   There are no legislative acts that are just "written on paper".
    
4. Remote administration
   Taxes can be paid and declarations submitted remotely. Banks offer convenient online banking. State services can be accessed online.
    
5. International business operations
   For other countries, Georgian firms are not considered offshore.
    
6. No corruption
   In Georgia, real business qualities are valued, not the "size of the wallet". Recommendations from former employers also carry significant weight. It is considered shameful to promote "one's own". Monetary gratitude is also frowned upon - it is considered dishonorable.
    
7. No requirements for the number of founders and the amount of authorized capital
   A company can be owned by a foreigner, a citizen, or both at once. A foreigner can simultaneously be the director of the enterprise. The authorized capital can be zero.

Legal forms of business

Registering a business in Georgia is simple. To start a business in Georgia, you first need to decide on the organizational and legal form. You will have to choose from four main types of companies:

• Limited Liability;
• Joint Liability;
• Limited Partnership;
• Joint-stock.

Additionally, you can register a cooperative or become an individual entrepreneur. The most popular form among legal entities is limited liability companies – they account for 98% of active companies and enterprises.

What documents you will need:

1. A passport or a notarially certified power of attorney of a representative who will perform registration actions on behalf of the entrepreneur;
2. An application form (filled out by a Justice House operator);
3. A charter of the company, notarially certified and signed by all founders;
4. Documents proving property ownership or lease to confirm the legal address;
5. Payment of the state duty and provision of the receipt.

Registration of an Individual Entrepreneur in Georgia

Registering an individual entrepreneur (IE) in Georgia is a simple and accessible way to start a business. To register an IE, it's necessary to decide on the type of activity, prepare the necessary documents, and apply to the Justice House or the tax service. Georgia offers favorable conditions for entrepreneurs, including a simplified registration procedure and a minimal set of documents, making the country attractive for opening an IE. Opening an IE in Georgia allows you to quickly start a business and gain access to local and international markets.

Conditions and procedure for registering an IE, small business status

The process of registering an individual entrepreneur or small business status in Georgia involves several key steps, which can be done either in person or remotely. Initially, one should apply to the Justice House to submit an application, and then to the tax service for registration and status acquisition. When registering remotely, all documents must be translated into Georgian and notarized. This process also involves preparing and submitting all necessary documents, registering in the relevant registers and tax service, as well as obtaining small business status to use the preferential tax rate.

An important aspect is the possibility of obtaining free consultation regarding the registration procedure, tax burden, and reporting, as well as assistance in opening a multi-currency card account at a bank. These measures are aimed at simplifying the business process in Georgia and making it accessible to entrepreneurs from different countries wishing to take advantage of the attractive conditions and benefits of the Georgian jurisdiction.

Taxable base, income tax rate for IE

• If the annual revenue of a small business does not exceed 500,000 GEL, the tax is 1% of the turnover;
• If the annual revenue exceeds 500,000 GEL, the Individual Entrepreneur loses the small business status, and the tax rate increases to 3% of the annual turnover.

Pros and cons of the IE ownership form in Georgia

Pros:

• Simplicity of creation processes,
• No need for a seal,
• Only one tax is paid,
• Simplified accounting procedures,
• Simplified decision-making process.

Cons:

• Cannot obtain some licenses,
• Not suitable for joint business,
• Requires constant personal participation,
• The owner's personal accounts are subject to debt recovery.

Registration of a Limited Liability Company (LLC) in Georgia

Registering an LLC in Georgia is a straightforward process designed to be maximally efficient for both residents and foreigners. The main steps include preparing the necessary documentation, such as an identity certificate and company charter, and submitting these documents for registration. Georgia's favorable business environment is highlighted by simplified registration procedures, allowing for quick establishment of LLCs, often in just a couple of days.

Process of registering a limited liability company in Georgia

Registering an LLC in Georgia involves several main steps: first, submit an application to the Justice House, and then register with the tax authority. Notably, the entire process can be completed remotely for foreign entrepreneurs, provided that all documents are accurately translated and notarially certified. This simplicity of the process underscores Georgia's desire to attract foreign investments and simplify business operations within the country.

Tax rate for a limited liability company in Georgia

In early 2019, Georgia signed 55 treaties confirming the avoidance of double taxation with countries such as Ukraine, Belarus, Singapore, Germany, China, the United Kingdom, Ireland, and many others. This certainly becomes a key advantage in terms of taxation, but there are other benefits as well. For example:

• Exemption from state duty on initial capital;
• Corporate tax rate of only 15%;
• Existence of free industrial zones, a virtual zone for IT developers - legal offshore zones within the country.

Thanks to this, Georgia becomes a country with one of the most liberal, reliable, and transparent tax regimes among other European and Central Asian countries.

In the modern world, opening your own business is one of the most important steps towards financial independence and successful development. Our company offers a full range of services aimed at supporting entrepreneurs in the process of registering and opening companies in Georgia. We deeply understand all the nuances and requirements related to the business registration process, allowing us to provide qualified assistance at every stage of creating your company, whether it's an LLC or an IE. Our specialists will thoroughly consult you on all necessary documents and procedures, simplify the registration process, and help make it as smooth and understandable as possible.

We value the time and aspirations of our clients, so our approach to each entrepreneur is individual. Whether it's questions about how to open an LLC step by step, where to start the registration process, what documents are needed to open a business, or how to register an IE in Georgia, our team is always ready to offer effective solutions and professional support. By using our services, you not only gain a reliable partner but also a valuable source of information and support on the path to the successful development of your business in Georgia.

Over the last two years, relocation and setting up a business in various countries have become very topical among entrepreneurs. When looking for the best conditions, businessmen primarily pay attention to the level of convenience in registering and doing business, the cost of taxes, as well as the degree of legal protection in the area of private property and contracting. Let's take a look at the key criteria when choosing a country to locate a business, focusing on where it is easier to open a business and which countries are the top countries for business. Using the examples of Singapore, Estonia, Ireland, Georgia, Serbia and Turkey, we will identify which is considered the best country for business.

How to choose the right jurisdiction?

First of all, it is important to consider not only the possibility of remote incorporation, but also a number of other factors. For example, it is worth analyzing the corporate tax rates and special conditions applicable to profit distribution (a detailed comparative analysis is presented in our article). On top of that, you need to consider the general aspects of running a business such as:

• Prospects for specific investor activities 
  Analyzing trends and the competitive environment to make informed investment decisions.
• Company growth and scaling prospects
  Research market opportunities and business expansion strategies.
• Restrictions for shareholders
  Terms of ownership and trading of shares, possible restrictions on transfer or sale.
• Restrictions for non-residents who own an enterprise
  Laws and regulations governing the participation of non-residents in the ownership of a company.
• Maximum cash annual turnover
  Established regulations or limits on the company's revenues during the year.
• Restrictions and prohibitions of banks on activities of non-residents
  Rules and policies of banks related to relations with non-residents.
• Restrictions for authorized capital
  Minimum and maximum values of the authorized capital established by law.
• Signed agreement to avoid double taxation
  Agreement on the prevention of double taxation between countries to protect the interests of investors.
• Company safety
  Measures to ensure the physical, information and financial security of the business.
• Confidentiality of data on turnover of funds
  Policies and technical measures to protect confidential financial transaction information.

Once you have studied all the points and conditions you can start choosing a country.

Paying taxes

Pros and cons of countries

Singapore

This country serves as an example for all countries seeking to improve business conditions. Opening a new company here is possible in one working day, completely remotely. However, it is important to take into account that the preparation of the necessary package of documents must comply with all the established rules.

Advantages of Singapore:

In addition to being an international trade and financial center, Singapore offers many opportunities for tax optimization. The corporate tax rate is one of the lowest in the world at 17%, and new companies are fully exempt from this tax for three years or until turnover exceeds $75,000.

Disadvantages of Singapore:

Opening a corporate bank account with local banks for SMEs is somewhat challenging.

Estonia

Estonia is popular among IT specialists from different countries due to its progressiveness, readiness to adapt to current global trends and, of course, due to the absence of income tax, which is 0%. In addition, it is easy to obtain licenses to work with virtual currency here, and the process of opening a company online is accelerated.

Advantages of Estonia:

No capital gains tax as it is treated as part of the company's income. The accounting filing process turns out to be very simple. An audit is only required for companies with net sales of more than 2 million euros, a balance sheet of more than 1 million euros or more than 30 employees.

Disadvantages of Estonia:

It is practically impossible to open a bank account for a company in an Estonian bank, but it is possible to open an account in EU banks.

Ireland

Ireland is home to major IT corporations such as Google, Microsoft and even Apple. This indicates that it offers a convenient business environment and low tax rates. You can register your company without having to visit Ireland.

Advantages of Ireland:

Ireland has a favorable business image and an attractive business environment. The corporate tax rate is 6.25% for IT companies with annual revenues of less than 7.5 million euros derived from patented intellectual property. In this case, 50% of the profits are tax exempt, which reduces the effective rate to 6.25%. LLC-type companies meet a positive attitude from financial institutions in other countries.

Disadvantages of Ireland:

High costs associated with the registration and subsequent maintenance of the business. Opening a bank account is only possible if the director of the company is a resident of Ireland.

Georgia

Over the last 5 years Georgia has become one of the most promising countries for business, holding leading positions in the world rankings in terms of ease of doing business. An additional advantage is the absence of Georgia's participation in the automatic exchange of tax information according to the CRS standard, which facilitates the process of opening an account in a local bank for non-residents who have confirmed the existence of the necessary activities.

Georgia Advantages:

A company can be registered in Georgia without personal presence by providing a power of attorney, and the process of accelerated registration takes no more than 10 working days. Profit tax for company owners is 15%, while individual entrepreneurs with small business status can benefit from simplified taxation levied at 1% of revenue limited to 120,000 euros per year.

Georgia Disadvantages:

In 2021, the requirements for Virtual Zone status were adjusted. Now, for tax benefits it is necessary to demonstrate the existence of substance (presence) in the country, including administrative costs such as office rent or the presence of Georgian citizens in the staff. The benefits apply only to companies actually conducting production in the country.

Serbia

If you are looking to enter the international market, especially in Europe and the USA, Serbia provides ideal conditions. Low electricity prices are available in the country, and there are special economic zones that facilitate the development of production.

Advantages of Serbia:

Открытие компании с банковским счетом возможно без необходимости личного присутствия в стране. Сербия предлагает хорошо развитую систему банковских учреждений, включая как локальные, так и международные компании. Также существует множество программ, стимулирующих инвестиции и внесение в бюджет страны.

Serbian disadvantages:

There is considerable bureaucracy and it can be difficult to understand all aspects without language skills. Extensive documentation is required for the registration process. The ability to register a business in a convenient jurisdiction without physical presence allows you to increase revenues, minimize tax liabilities and effectively invest in the development of your enterprise. Choosing the right jurisdiction becomes key in this process. If you have additional questions, feel free to ask and get a free consultation from our experts.

Turkey

Starting a business in Turkey opens up a wide range of opportunities for foreign entrepreneurs, including access to the global market. Turkish authorities actively support initiatives to establish new foreign companies, providing comfortable conditions for foreigners wishing to invest in the country's economy.

Advantages of Turkey :

Turkey has special economic zones that provide tax incentives. However, access to them is limited to entrepreneurs from countries that are not on the sanctions lists.
Business in Turkey is supported by a well-developed system of legal protection, including such laws as the Civil Code, the Law on Intellectual Property, the Law on Competition, and the Law on Bankruptcy.

Disadvantages of Turkey:

When hiring foreign workers, the enterprise needs to ensure an equal number of Turkish citizens (5 Turkish citizens for each foreigner). A residence permit and a special work permit are required for foreign workers. Social contributions for employees are 20.5% and unemployment insurance premiums are 2%.
Turkey faces some corruption problems (ranked 109th out of 180 countries by Transparency International), which may have a negative impact on the business environment.
 

Choosing a country to start a business is a strategic decision that can determine the future success of your enterprise. Various factors such as tax policies, bureaucratic processes and the overall business environment become key criteria when deciding where to register.

When searching for the best country for business, many entrepreneurs evaluate various aspects such as the level of accessibility, tax incentives and remote registration options. Georgia stands out among the top countries for business, providing an ideal combination of these factors.

So, by choosing Georgia to register your business, you are investing in the successful future of your enterprise while enjoying the benefits of registering your business abroad.
If you need assistance in registering your business in Georgia, please leave an application on our website or follow this link to research an article on the subject.

Filing a tax return in Georgia is a mandatory requirement for conducting business. Tax returns are filed for all types of taxes in a company. The deadline for submission depends on the chosen legal form of the business and the tax system.

Types of declaration 

In Georgia, there are several types of tax returns, depending on the type of tax and the tax status of the company.

The main types of tax returns in Georgia include: 

Value Added Tax (VAT) 18%: VAT tax returns are filed monthly and contain information about purchases, sales, and other VAT-related operations.

Personal Income Tax (PIT) / Corporate Income Tax 20%: PIT returns are filed monthly for small business owners and annually for individuals and owners without small business status.

Profit Tax (Corporate Tax) 15%: Legal entities must file returns by the 15th of the month following the profit distribution.

Property Tax (not exceeding 1% of the value of the taxable property): Tax returns are filed annually.

Excise Tax: Paid by manufacturers, importers, and exporters of excisable goods. The tax rate depends on the product and is determined by the Tax Code. The declaration is filed no later than the 15th of the month following the tax period.

Dividend Tax 5%: Tax returns are filed by the 15th of the month following the reporting period.

What is the process of filing a declaration?

Any tax return is filed electronically on the Revenue Service website, rs.ge.

To file a return, one must log in to their account on the website and follow the link to the relevant declaration. In the window that opens, fill in all necessary fields, including the amount and date of money received, and information on tax deductions. After filling out, a field appears showing the tax amount to be paid. The declaration is then “sent”, followed by a notification of successful submission.

After filing the return, the tax must be paid through a bank, citing the registration number of the LLC or sole proprietorship.

Common mistakes in declarations

When filing tax returns independently on the portal rs.ge, business owners often make several common mistakes:

• Incorrectly filled in information, including incorrect data on income, expenses, taxes, and other financial information.
• Not utilizing all available tax deductions and benefits. It is essential to thoroughly study the possibilities of one's tax status in the Georgian Tax Code to avoid unnecessary tax payments.
• Not adhering to submission deadlines, which can lead to fines and other sanctions.
• Lack of supporting documents, which may be required during tax audits.

To avoid these errors, carefully study the instructions for filling out declarations or seek advice from professionals in taxation.

Fine for failure to submit a tax return 

The penalty for non-submission of a declaration for a legal entity in Georgia is 100 Lari per declaration. For late payment of taxes, the business owner will be charged a penalty of 0.05% per day of the amount of tax not paid on time. For non-payment of tax within up to 2 months, the taxpayer is obliged to pay a fine of 5% of the unpaid tax amount. If the delay is more than 2 months, the fine is 10% of the unpaid tax amount.

We strongly advise clients to file zero declarations with our assistance if there is insufficient information about the company's financial movements, and then adjust it later.

Conclusion

With the services of Jara Accounting specialists, you can be confident in the correct filing of your tax return. We help avoid potential fines and provide professional support in accounting. By consulting our experts, you will receive quality document processing and a guarantee of compliance with Georgian legislation. Trust the experience and knowledge of the Jara Accounting team.

The closure of a company is a challenging phase in the life of every entrepreneur. Beyond the emotional toll, this process brings numerous complexities, especially in preparing the necessary documents. Business owners often seek expert assistance in this matter. Services for company liquidation in Georgia significantly simplify the annulment procedure for Sole Proprietorships (IE) and Limited Liability Companies (LLC).

Where to start?

The journey to liquidating a company begins with the decision to dissolve the business. For LLCs, this decision must be made at a general meeting of the founders. The initial steps in the preparatory phase include:

• Verifying the absence of debts. Existing debts must be fully settled;
• Ceasing production;
• Terminating contracts with employees;
• Filing a liquidation process initiation with the Justice Department;
• Undergoing a tax audit (usually a desk audit).

How is the procedure of liquidation of LLC?

In the absence of debts, the liquidation procedure for legal entities in Georgia takes four months. During this period, the tax service verifies the accuracy of tax and other mandatory payments by the company. It's also necessary to submit a declaration for profit tax for the last month and property tax for the last year. Another crucial step is conducting an inventory of all LLC assets. The proceeds from their sale are used to settle debts or are distributed among the founders.

How does the procedure of liquidation of a IE proceed?

Closing a sole proprietorship in Georgia takes approximately three working days. The process involves:

• Submitting a closure statement to the tax service, completing a questionnaire, and arranging for the settlement of any tax liabilities at the end of the business liquidation;
• Annulment of the sole proprietorship's registration with the Justice Department, which takes one working day;
• De-registering from the tax service, settling any tax liabilities, followed by the annulment of the sole proprietorship status.
• After 30 working days, submitting a final tax declaration and deactivating the personal account on the tax service portal rs.ge.

Is it possible to liquidate a business remotely?

Remote liquidation of a company differs from in-person procedures only in that an official representative, authorized by power of attorney, acts on behalf of the general director at each stage, whether it be debt verification, document submission to the Justice Department, tax audit, or company liquidation in the Public Registry. The presence or absence of the actual business owner does not affect the duration of the liquidation process.

Conclusion

Jara Accounting provides high-quality assistance in the liquidation process of IE and LLC in Georgia. We help our clients close their company in accordance with Georgian legislation, including remote procedures. Our services include expert consulting, thorough document preparation for company liquidation, representation in government bodies, and support through all legal procedures. Turning to Jara Accounting ensures a swift, efficient, and legally compliant closure of your IE and LLC in Georgia.

Every entrepreneur strives to find the most advantageous solutions for their business, including in the matter of accounting. Modern companies are increasingly moving to remote accounting, considering this method more convenient and economical. And this is quite justified. An outsourced accountant is cheaper than a full-time employee, does not take up a workspace in the office, and all paperwork is carried out electronically.

This practice in Georgia is just beginning to gain popularity. Some entrepreneurs are still wary of outsourcing, preferring to keep accounting the old-fashioned way: with a full-time accountant, archive shelves, seals, and contracts in a metal safe.

To dispel doubts about the need for modern approaches, we decided to examine the main fears associated with remote accounting.

It's difficult to track a remote accountant

Some entrepreneurs believe it is safer to have an accountant at the workplace. When the employee is close by, it's easier to control their work, and in case of a mistake, it's easier to punish, fine, or fire them.

In practice, things turn out differently:

• you cannot fine a full-time employee due to restrictions in the Labor Code;
• you cannot fire without serious grounds;
• costs for imposed fines can only be recovered through a court process. The manager will spend a lot of time and money with no guarantee of a result;
• the only lever to impact the accountant remains the deprivation of a bonus for committed errors. However, the company still has to pay fines and penalties.

When connecting to remote accounting services, you do not have to worry about fines as a result of checks. The outsourcing company has insurance in case of an accounting error, covering the amount of recovery. For example, Jara Accounting's liability is insured for 65,000 dollars.

The accountant's work will be as clear as day with online access to a specialized program. You will always be able to track account movement and also control the submission of reports in due time.

The electronic archive can be deleted from the computer

This misconception arises due to a lack of knowledge about software. The company's accounting documentation is securely stored on a cloud service. Even if there is a technical failure in the software, all data about financial transactions and counterparties will be preserved. With electronic document management, there's no need to collect a paper archive and worry about lost letters. You also save on courier and postal services. It's convenient, environmentally friendly, and profitable.

It's quite risky to give the accountant the right to electronic signature and access to the client-bank

For signing company reports and decrypting letters from government bodies, Jara's accountant uses an additional electronic signature, issued in the name of the manager. In addition to this, the specialist uses guest access to the company's client-bank to form payment orders. However, only the manager of the company has the right to sign payment orders and manage the funds in the account. After the cooperation with the outsourcing company is terminated, the additional digital signature and guest access to the client-bank are withdrawn.

Thus, remote accounting is an absolutely safe method of keeping accounts. The main thing is to choose a reliable outsourcer. We recommend thoroughly studying the reviews of the company's current and previous clients, as well as making sure there is insurance liability in case of accounting errors made.

Why should you turn to us to open a PayPal business account from Georgia?

In the age of business digitization, PayPal becomes a key tool for facilitating global online payments. If you run a business in Georgia and want to expand your capabilities, opening a PayPal business account will be an excellent solution. In this article, we will explain why you should trust this process to our company.

PayPal plays a significant role in business, offering numerous advantages that contribute to the growth and success of an organization. Here are some of them:

International payments: PayPal allows you to accept payments from customers all over the world, expanding the reach of your business and giving you access to the global market.

Security: PayPal uses advanced encryption and data protection technologies, ensuring transaction safety and protection from fraud.

Ease of use: The payment process through PayPal is simple and understandable for customers, enhancing their shopping experience and possibly encouraging repeat sales.

Increased trust: PayPal is a well-known and respected brand, and associating your business with PayPal can increase customers’ trust in your company.

Flexibility: PayPal offers various solutions for accepting payments, including website payments, online invoicing, and automated payments. This allows you to choose what is most suitable for your business and adjust options as it grows and evolves.

Details of Account Registration

Registering a PayPal business account involves adhering to a strict set of rules. You will need to provide verified information about your business, including company details, personal information, and bank account details.

Risks of Self-Registration

Incorrect or incomplete information can lead to delays or even refusal to open an account. Also, non-compliance with all of PayPal’s requirements can lead to account blocking, which in turn can lead to the loss of funds.

Advantages of Working with Us

Confidence in the process: our team of experts knows all the nuances of the registration process and will follow step by step, ensuring the smoothness and accuracy of the entire process. This will reduce the time spent on registration and eliminate the fear of making a mistake.

Saving time and resources: submitting an application to open an account is a relatively complex and labor-intensive process. By turning to us, you save your time and focus on running a business.

Help in case of problems: if there are problems or questions during the registration process, we will be ready to help. We will provide support at every stage of the business account opening process.

Data protection is one of the most important tasks in the era of digital development. Like in many other countries, Georgia has legislation regulating the collection, storage, and use of personal customer information by companies. The main method capable of ensuring the safety of personal data is the development of a company's privacy policy.

What does a privacy policy consist of?

Any company's website that has a feedback form, user registration, or application acceptance dedicates a separate block to the privacy policy. This block indicates the procedure for storing and transferring personal customer data to third parties only with their consent. To competently develop a privacy policy, the following aspects must be considered:

1. Studying Georgian personal data legislation

The main legal act regulating this sphere in Georgia is the "Law on Personal Data Protection". The privacy policy necessarily includes information about legal liability for non-compliance with existing legislation, as well as the procedure for resolving disputes in case of conflict situations. The legality of processing citizens' personal data is controlled by the Personal Data Protection Service of Georgia. In case of violation found during the check, the company awaits administrative punishment or a fine.

It is important to familiarize yourself with the main principles and requirements for the processing of personal information in order to competently implement them in the privacy policy.

2. Procedure for processing, transferring, and storing personal data

Each company has its own specifics when collecting personal data. It is important to clearly define the scope of the privacy policy, indicating what data is collected, how it is transferred, and how long it is stored. All explanations should be as transparent and understandable as possible so that users do not distrust the company.

In firms engaged in online sales, the privacy policy must necessarily contain information about the protection of the client's payment details: bank card numbers and bank account details.

3. Description of the purposes of data collection and use

The privacy policy should contain information about what exactly the company plans to use the collected data for in the future and for what purposes. This can be data processing for the purpose of fulfilling a contract, providing a service, analytics, marketing, and other legal purposes. It is important to indicate that the data will be used only within the agreed framework and will not be transferred to third parties without the client's consent.

Lawyers specializing in data protection can help to correctly compose information about the privacy policy taking into account the specifics of the company and in accordance with local legislation.

The Rules of Registration in Georgia

Not every business owner in Georgia needs a trademark. Typically, it is used by entrepreneurs who wish to distinguish their unique brand among other conventional names such as "Bakery", "Barbershop", or "Atelier".

An exclusive business name can be registered in the shortest possible time thanks to the Georgian law "On Trademarks". It allows an accelerated registration procedure to be arranged within 10 working days, after which the company name will be protected both on the local and international market. In other countries, this process can take months or even years.

What is a Trademark and What Does it Consist of?

A trademark is a unique sign indicating the affiliation of a product or service to a specific company. It is expressed in the form of a word, phrase, symbol, logo, image, color combination, or their combination. The official registration of a trademark gives the owner the right to use the mark for commercial purposes, and also protects it from being used by other parties without permission.

Registration Procedure

Before starting the trademark registration procedure, it is necessary to ensure its originality. This can be done on the website of Sakpatenti - the National Intellectual Property Center of Georgia.

The registration procedure itself takes place in several stages:

1. Filing an application in Georgian at Sakpatenti. At this stage, the state fee is paid. 
   Also, when submitting an application, it is necessary to provide 3 quality images of the trademark, an electronic medium with information about the trademark, its exact dimensions, shape and volume, as well as a list of goods and services on which this trademark will be applied.
2. Conducting a formal examination. Sakpatenti specialists check the package of documents and, if necessary, may request additional information. With the standard registration procedure, this stage takes 2 months, with accelerated registration - 3 days.
3. Carrying out an examination on the merits of the application. It lasts about 6 months and is aimed at finding reasons for refusing registration. With accelerated registration, the procedure is given 7 days.
4. Publishing the image of the trademark and applicant data. This stage is carried out within 1 month after passing the examinations and approving the application.
5. Filing a claim. In case of a decision to appeal the actions of Sakpatenti or cancel the registration, a claim can be filed within 3 months after the publication of the trademark. 
   If there are no claims against Sakpatenti, after paying the fees for the trademark registration, a certificate of registration is issued within the next 3 months. From this moment, the trademark is considered officially registered and will be valid for 10 years. After the expiration of the term, it can be extended for another 10 years an unlimited number of times.

Punishment for using someone else's trademark

Unauthorized use of someone else's trademark in Georgia is punishable by a criminal term - up to 2 years of imprisonment, and the minimum that can be obtained is an administrative fine from 500 lari, which will increase with repeated violation.

It's Important to Know

Applications for trademark registration in Georgia can be submitted independently only by citizens or residents of the country with permanent residence. Other entrepreneurs can do this through trusted persons or certified patent attorneys who have a Sakpatenti certificate.

In 2023, cryptocurrencies have become more popular than ever. Major companies and private investors are actively investing in blockchain, and despite the 2022 crisis, this is leading to the growth of cryptocurrencies. Virtual currencies are now more frequently used in various industries, such as online shopping, gambling, and real estate.

How do people make money with cryptocurrency?

The main operations with cryptocurrency can be considered the purchase of goods and services, trading on exchanges, investing, exchanging for other cryptocurrencies or money, storing and transferring, as well as production or mining.
In addition to this, there are modern ways of working with virtual currency that allow you to generate additional income, increase the liquidity of cryptocurrency, improve the security and stability of the blockchain network, and increase its popularity:

• staking - freezing cryptocurrency to support the operation of the blockchain network in exchange for a reward;
• forging - creating new blocks in the blockchain network using special algorithms, allowing participants to receive rewards for their work;
• airdrop - free distribution of cryptocurrency or tokens as part of a marketing campaign, sometimes for completing certain tasks.

When using these tools, it is important to remember that cryptocurrency is not yet a fully regulated and stable financial instrument, and therefore investing in it can be associated with risks.

Legislative regulation of cryptocurrency in the world

The initial idea of cryptocurrency as free money, capable of decentralizing the global financial system, did not turn out as well as hoped, and has convinced digital market participants of the need for clear regulation.

In countries like China, India, Algeria, and Ecuador, there is a ban on the use of cryptocurrency. At the same time, many states see virtual currency as the future of the global economy and strive to integrate it into their financial system, assigning it the status of an official currency, as was done in El Salvador and the Central African Republic.

In most Western European countries and the United States, there is fairly transparent regulation of the digital currency market. In the United States, cryptocurrency is regulated by the Securities and Exchange Commission.

In Western Europe, cryptocurrency regulation may vary depending on the country. For example, Germany, France, and the United Kingdom have financial supervisory authorities that set strict rules for cryptocurrency exchanges. In Switzerland and the Netherlands, regulation is more liberal.

What is the situation with cryptocurrency in Georgia?

Georgia is considered one of the most loyal countries towards virtual currency. There are crypto ATMs on the streets, and mining is actively operating. Cryptocurrency here is not considered legal tender but is seen as a digital asset. To buy or sell, there is no need to obtain a special license. However, if some digital assets can be perceived by the National Bank as securities, in this case, a blockchain company must obtain a financial license in Georgia.

Interaction with cryptocurrency is not regulated at the legislative level, and all operations are carried out without a supervisory authority. The only regulatory act defining interaction with crypto assets is the public decision of the Minister of Finance of Georgia No. 201 of June 28, 2019. According to this document, taxation in the cryptocurrency market is carried out as follows:

• individuals are exempt from paying personal income tax on income from the supply of crypto assets;
• exchange of cryptocurrency for official currency (national or foreign) is exempt from VAT.

When buying cryptocurrency on a foreign exchange, it is important to consider the tax rules of the country in which the transaction takes place, as well as the rules of one's country of residence, as profits from the purchase and sale of cryptocurrency may be subject to taxes.

If you buy cryptocurrency using money located in an offshore zone and make a profit from the sale of this cryptocurrency, you are subject to a 15% profit tax in accordance with tax legislation.

Cryptocurrency mining in Georgia

The production of virtual currency is very popular here due to low electricity tariffs. To engage in mining within the framework of the law, it is necessary to register a company in the form of an individual entrepreneur or legal entity. During the production process, a commercial tariff for electricity must be used.

Cryptocurrency production activities are subject to the following taxes:

• income tax - 20%
• profit tax - 15%
• dividend tax - 5%
• VAT - 18% (if considering cryptocurrency as a product or service).

Given that the Tax Code of Georgia defines crypto assets as something identical to money and not being a product or service, following this logic, it can be assumed that the collection of VAT remains a controversial issue in the field of cryptocurrency mining.

Many virtual currency production enterprises are located in the free industrial zones of Georgia (Tbilisi, Kutaisi, and Poti). These companies enjoy a special tax regime, exempting them from paying profit tax, dividend tax, and VAT. Thus, this activity can be attributed to the production or processing of goods.

Risks in the field of cryptocurrency circulation

Cryptocurrency in Georgia is still in a gray area, and its use is not officially recognized as a means of payment. Tax authorities and banks consider it an unregulated financial instrument, which can be used for serious abuses, such as money laundering.

At the same time, the use of cryptocurrency is not illegal in Georgia. Business owners increasingly use cryptocurrency as a tool for developing their business.

However, one should be aware of the existence of certain risks associated with the possible blocking of accounts or company activities based on security and crime-fighting considerations.

As long as the legislative regulation of cryptocurrency in Georgia has not been finalized, its use in business requires special attention and caution.

Over 2022, the Georgian economy has grown by 10.1%, according to Sakstat. The country welcomed the registration of a record number of new companies, many of them owned by foreigners. Those planning to start their operations in Georgia might be wondering why entrepreneurs from across the world come to this sunny country to develop their businesses. 

Read about the 10 most popular tax incentives actively employed by company owners to alleviate their tax burden and see if your business is eligible for preferential treatment.

1. 0% VAT for companies with annual turnover below 100,000 GEL

The value-added tax in Georgia is 18% of the turnover or import of goods and services. However, with low annual turnover, VAT might not be charged.
How to get the incentive: if your company's turnover over the past 12 months doesn't exceed 100,000 GEL, you don't have to pay VAT. 
(art. 165 of the Tax Code of Georgia).

2.  0% TAV for services rendered by a Georgian company abroad

Value-added tax in Georgia is not paid on the export of services.   
How to get the incentive: if the buyer of the goods or services is located outside of Georgia, VAT is 0%. 
(art. 172 and art. 161 of Chapter 1 of the Tax Code of Georgia).

3. Tax preferences for international companies

The International Company status significantly reduces tax payments and might interest businesses with a high tax burden:
- 5% profit tax (instead of 15%)
- 5% personal income tax (instead of 15%)
- 0% dividend tax (instead of 5%)
(art. 23 of the Tax Code of Georgia).
How to get the incentive: to receive the International Company status, the business must be registered in Georgia with 50% of its shareholders not being Georgian residents. Restrictions on the minimum operation period of the company and its line of activity apply.

4. Tax preferences for IT companies

Georgia-operating companies in the sphere of information technology can receive a special status of a Virtual Zone. This status allows the IT company to stop paying a number of taxes:
-  0% tax on income from the sale of products or services abroad
- 0% VAT on products sold abroad
- 0% customs duty on export operations
The company only has to pay a 5% dividend tax.
How to get the incentive: to register as a Virtual Zone, the company has to receive a special electronic certificate granting the right to preferential payment of taxes. 
(art. 99 and art. 162 of Chapter 1 of the Tax Code of Georgia).

5. Tax preferences for Free Industrial Zone companies

Georgia has three Free Industrial Zones: Tbilisi, Kutaisi, and Poti. Companies based in them receive the following preferences:
- 0% VAT
- 0% profit tax
- 0% dividend tax
- 0% property tax
- 4% tax on proceeds from goods turnover in the territory of Georgia
How to get the incentive: to receive the status, the company must be registered in one of Georgian Free Industrial Zones (art. 9 and art. 10 of the Law of Georgia "On Free Industrial Zone").

6. Tax preferences for Micro Businesses

Individual entrepreneurs working without employees may be completely exempted from the tax burden.
How to get the incentive: to qualify as a Micro Business with a 0% tax rate, the individual entrepreneur's income must not exceed 30,000 GEL. 
(art. 84 of the Tax Code of Georgia).

7. Tax preferences for Small Businesses

The most popular tax status when registering is an individual entrepreneur with the status of a Small Business. Such entrepreneurs have the right to hire employees, and the tax rate will be only 1%.
How to get the incentive: to qualify as a Small Business, the individual entrepreneur's income must not exceed 500,000 GEL. 
(art. 88 of the Tax Code of Georgia).

8. 0% profit tax when reinvesting into business development

Georgia has an economic model of capital reinvestment, in which the income tax is not levied.
How to get the incentive: the profit tax is 0%, as long as the company invests its capital gains in business development. 
(art. 88 of Chapter 1 of the Tax Code of Georgia).

9. 0% personal income tax on income received outside of Georgia

The personal income tax in Georgia is 20%. However, tax residents must pay the income tax only on income received from domestic sources.
How to get the incentive: The personal income tax will be 0%, as long as it's received from foreign sources.
(art. 80 and art. 82 of the Tax Code of Georgia).

10. Pension contributions for employees are only 2%

When registering an employee in a Georgian company, the employer pays insurance premiums to the pension fund equal to 2%. The employee deducts an additional 2% from their salary. 
How to get it: for the employer to pay the 2% pension contributions, the employee must be a Georgian citizen or permanent resident.  Foreign citizens don't require an official work permit, but they will have to take care of their pension savings on their own.
(Law of Georgia "On Pension Savings"). 

Today, entrepreneurs from across the world are choosing to open their companies in Georgia. The country has low tax rates and a variety of government programs promoting business growth. In the World Bank's Ease of Doing Business ranking, Georgia ranks 7th in the world. Such a high result is largely due to the favorable system of taxation.

In 2005, Georgia held a tax reform, retaining only 6 mandatory payments out of 22:

Personal income tax - 20%
Value-added tax - 18%
Profit (corporate) tax - 15%
Import tax - 0%, 5%, or 12%
Property tax - up to 1%
Excise duty - variable amount depending on the type of goods and services

In addition to low tax rates, Georgian companies are actively using preferential taxation statuses to optimize their tax burden. The statuses are assigned by the revenue service depending on the company's legal form, type of activity, and annual turnover.

Preferential tax treatment for individual entrepreneurs

Micro Business Status. If the individual entrepreneur doesn't have any employees, and their annual income doesn't exceed 30,000 GEL, they may receive the status of micro business, meaning complete exemption from the tax burden. An individual entrepreneur with the status of a micro business is required to keep accounting records and file an annual tax return by the due date.

Small Business Status. This tax status is considered the most in-demand and is assigned to an individual entrepreneur with an annual income of up to 500,000 GEL. The tax rate is only 1%.

Unlike micro businesses, small business owners are allowed to hire employees. They are required to keep proper accounting and file a monthly tax return by the 15th day of the month following the reporting one.

If the entrepreneur's annual income exceeds 500,000 GEL, they will retain the small business status for the next 2 years but with a 3% tax rate.

Flat Taxpayer Status. Another special tax regime is intended for entrepreneurs engaged in specific lines of business (nail artist, stylist, massage therapist, hairdresser, car service specialist, baker), each of which has a flat tax rate. A flat taxpayer is required to pay taxes by the 15th day of each month. If the entrepreneur is temporarily not working, they should apply to the revenue service with a request for tax exemption for this period.  

Tax declaration registration. Business owners in Georgia often have difficulty filling out tax declarations. Jara Accounting helps to prepare and file a tax declaration on time and also offers services training entrepreneurs to file tax declarations, allowing them to independently submit correct data on the first try and without penalties.

Company opening by foreign nationals. Georgia is one of the most attractive countries for registering as individual entrepreneur by a foreign citizen. You can live anywhere in the world while running a Georgian company, and even your bank account can be registered in another jurisdiction. Such a company will be able to pay taxes via third parties. In this case, the bank fills in the identification code of the organization for which the tax is paid.

The preferential taxation system for small businesses allows Georgian companies to take leading positions in terms of annual income compared to other European representatives.

Сomparison table showing the net annual income of entrepreneurs in several European countries with annual revenue of $30,000. 

A

Preferential tax treatment for LLCs

Free Industrial Zones. Free industrial zones operate in Georgia with a special tax regime. At the moment, such zones are open in three regions: Tbilisi, Kutaisi, and Poti. Companies based in Free Industrial Zones receive the following benefits:

Profit tax - 0%
Additional dividend payments - 0%
Value-added tax - 0%
Property tax - 0%
When purchasing and selling goods in Georgia, the tax will be 4% of the actual revenue.

Virtual Zone Status. Georgia-operating companies in the sphere of information technology can receive a special status of a Virtual Zone. After that, the business will be exempt from paying profit tax and VAT on selling products or services outside of Georgia, as well as the export customs duty.

The company will also be issued an electronic certificate confirming its right to preferential tax payment. In fact, the company will only need to pay a tax on dividends equal to 5%.

International Company Status. This preferential program will be of interest to companies with a high amount of taxation. To receive the International Company Status, the business must be registered in Georgia with 50% of its shareholders not being Georgian residents. At the same time, restrictions on the minimum operation period of the company and its line of activity should be considered. The International Company Status grants the following benefits:

Tax withholding on employee income - 15% (instead of 20%)
Profit tax - 5% (instead of 15%)
Dividend tax - 0% (instead of 5%)

Moreover, Georgia has an economic model of capital reinvestment, in which the income tax is not levied if capital gains are reinvested in business development.

Low tax rates, supportive legislation, and preferential government programs make Georgia one of the most attractive countries for growing your company. Doing business here is simple, and all the efforts of the government are aimed at further developing entrepreneurship in the country.

If you've decided to open a company in Georgia or have questions concerning finances and taxation, the experts at Jara Accounting will help you understand the intricacies of Georgian legislation and take care of the burdens of registering and supporting your business.

Outsourced accounting, widespread in the Western world, is winning ground slowly in Georgia.

Many businessmen are still confident that the accountant should sit in the next room - it seems safer and more reliable.

Let's analyse the advantages of outsourcing accounting that you deprive yourself of by following the usual format.

Outsource your accounting: the benefits of refusal of an in-house bookkeeper

When it comes to outsourced accounting, the first thing that usually comes to mind is the price.

That is a fact - remote accounting is cheaper than a full-time employee by ten folds. Here's why:

The cost of the outsorcerer's service is lower than the accountant's salary.
No need to make deductions to funds, or pay for sick leave and vacations. 
No need to allocate space in the office, equip it, buy office supplies, to maintain office equipment. 
Document flow with counterparties is conducted electronically, which eliminates the cost of couriers and postal services.

Saving is an important, but not the only advantage.

The decision to outsource your accounting will also allow you to:

• Forget about paying penalties out of your pocket. Serious firms have insurance against mistakes by any of their employees. At Jara Accounting, for example, we ensure everyone we serve is at the amount of USD 65,000.
• Don't get attached to one person. A lot happened in the practice of our customers: in-house accountants moved to other cities and countries, outsourced accountants stopped answering the phone after making a mistake, and so on. And just an accountant on vacation or sick leave can be a disaster - if all the processes are tied with him/her, you have to wait, which can affect relationships with clients and partners. If you work with a firm, there is nothing to worry about - a specialist who falls ill or goes on vacation will be replaced by a colleague with similar qualifications.
• Get better services. No matter how professional an accountant is, he can't know everything. We have a team of three specialists working with each client: tax, payroll, and supporting documents. If an accountant is not sure about something, he/she can always consult with colleagues and find a solution. 
• Do not worry about missing deadlines and problems with the tax authorities. First, as we wrote above, the outsourcer- company must have insurance. Second, compliance with deadlines is strictly monitored. At Jara Accounting, each customer is assigned a client manager who makes sure that the reports are submitted on time.
• Additional control is provided by the software. Communicate with an accountant seldom, quickly, and only on business. We don't force entrepreneurs to bring in documents, meet with accountants, or talk to them on the phone. Interaction happens in the chat of the mobile application and by mail: it is enough to send scans and confirm payments in due time. We sign everything with an electronic signature. 
• Adjust accounting expenses. If activities have stopped or turnovers have fallen dramatically, you should pay a salary to an in-house accountant. The cost of outsourcing company services depends on the volume of tasks - if they grow less, you can choose another rate and reduce costs.

If you decide to outsource your accounting, you must take responsibility for the selection of the person to whom you entrust your company's finances. Let's see what's worth special attention.

Who to trust the outsourced accounting

Ask all candidates these questions:

Is there any insurance against errors and for what amount?

Does the team consist of accountants with experience in your field (e.g., online stores or restaurants)?

What does the cost of services depend on? It is important that in the event of a business interruption (for example, seasonal) you do not have to pay the outsourcer in full.

How is the process of interaction with the accountant? Think about whether it is convenient for you.

Look for feedback from those who have worked with the chosen companies. If you can't find anything in the public domain, ask the manager if you can contact any of the customers. Usually, it is possible to talk to other customers, with their permission, of course.

Outsourcing or in-house accountant - this is the choice facing both newcomers to business and entrepreneurs who have already burned their fingers and are looking for a replacement for the one who got them wrong. 

We have prepared a comparison of the options according to the main criteria - we hope it will help you to make a weighted decision. 

What makes a remote accountant better than a full-time (in-house) one?

We collected the main advantages of accounting outsourcing over an in-house accountant in the table for easy reference to compare them.

As you can see, a remote accountant is better than an in-house accountant by many criteria: 

• Costs less. 
• Is financially responsible for mistakes. 
• He/she can be replaced by a specialist with a similar profile and qualifications.  
• You don't have to supervise the delivery of reports and other tasks - there is a client manager for this.

Have you been refused an account opening or service?

Your company may have been put on the bank's stop list.

What to do and why might this have happened?

Stop list of companies at the bank: what is it and how do companies get to the list?

The stop list is a list of companies which were refused to be served by a bank if they are suspected of violating the law. Under the law, banks are obliged to monitor the activities of clients to prevent money laundering, tax evasion, and assistance in evading sanctions imposed by the European Union and the United States of America on certain individuals and legal entities. Also, if the company is a transit company, i.e. its activities are not connected with Georgia, and the account is used only to receive and send money.

Inspections are made both before opening an account and afterward, during its service.

If the results of the inspection are not satisfactory to the bank, it may refuse to open an account, perform a transaction, or terminate the contract unilaterally.

In this case, your company will find itself on the stop list.

Some restrictions do not result in being put on the stop list. For example, if the account was blocked due to underpayment or late payment of taxes, you would not get into it.

To avoid blocking the account, it is necessary to pay taxes and fees on time and in full.

Jara Accounting has been operating in the accounting services market for more than 4 years. We will take reports, presentation, calculation of deductions, and deal with regulatory agencies upon ourselves. 

What happens if you get on the stop list?

The bank will refuse to serve you. If you decide to challenge the refusal in a court of law or the Central Bank, the bank will have to explain what the criteria were for decision–making. 

How do you know if a company has been put on the stop list? 

There is likely no way because only the bank has access to it. If you have been refused an account or service, it can be assumed that the company has been put on the list.

Refuse can be related to many other factors:

• The appearance of a new counterparty that does not match the firm's line of business. 
• The bank's security service considered the operation to be suspicious. This happens if the purpose of the payment is not specified or it does not correspond to the company's activity. 
• You have withdrawn a large amount of money. 
• There are no payments related to the company's activities: payment of wages, rent, and purchase of goods.

The bank may initiate an audit, and you will need to prove that everything is in order - for example, if you pay these expense items from an account at another bank, you have several accounts. Other banks do not have access to the transactions you make at one bank. So there may be questions concerning, for example, tax payments - be ready to provide payment demand orders.

How to get out of the bank’s stop list?

According to the law, you have the right to try to prove to the bank that you conduct legal activities, and the bank is obliged to conduct a repeated inspection.

It may review its decision if it considers the evidence to be strong.

After a refusal to carry out an operation, bank employees can request documents to clarify the situation, for example, a contract with a counterparty or payment order confirming the payment of taxes in due time and in full. If you provide the documents, the bank shall be obliged to analyse them and inform you about its decision within 10 working days.

If it becomes known that the company is not involved in anything illegal, the matter will be settled.

If the bank repeatedly denied service based on the results of the inspection and you don't agree, file a complaint with the Central Bank of Georgia.

The regulator will ask the bank for an explanation, conduct an inspection, and make a final decision. This can take up to 20 business days.

If the Central Bank also refuses, all that is left to do is the court. Are you confident of your rightness? Enlist the support of an experienced lawyer and file a lawsuit.

Giving up on the denial and approaching a bank that will agree to render service is not the best solution. The company will always remain on the stop list until the bank, which caused it, withdraws the refusal. 

Conclusions: 

Banks have the right not to open an account for you and to deny service at any time. The law obliges them to monitor customer activity and track suspicious transactions.

Companies that have been denied service are put on the stop list, which is accessed only by banks.

You can only guess whether your firm is on it, as there is no way to check the banks' stop list.

You have the right to initiate an inspection by providing the bank with documents related to the transaction. If it turns out that the company has not violated anything, the bank will revoke the denial and financial monitoring will remove you from the stop list.

If the bank repeatedly denies it and you are confident of your rightness, file a complaint to the Central Bank of Georgia. After the Central Bank's refusal, all that is left to do is the court.

If nothing is done, the company will remain on the stop list, even if another bank agreed to take it for service. To avoid being put on the stop list by banks, study the law and understand what operations you should avoid. And be sure to enlist the support of a professional accountant who will help you work safely.

Accounting in the catering industry is quite complex since within one establishment it is necessary to keep records of different types of activities: production, sale of products, and provision of services.

How to keep records of the production of the finished products

You buy products, process them, and get dishes that you sell to your customers. 
To correctly calculate the cost of each item for visitors, you need to make calculations.

The procedure is as follows: 

• Think through the menu - a list of dishes that you plan to offer your guests.
• Develop a technological chart for each dish. The flow technology is a document containing detailed information about the item: shelf life, recipe, portion weight, and description of appearance. It may be requested by inspectors to make sure that you comply with all the requirements.
• Find out the cost of each product from the suppliers you plan to work with. If you use processed foods (boiled, fried) in your calculations, consider a loss factor.
• Calculate the target prime cost per serving for each dish based on the technological chart and the purchase price of the products.
• If the delivery and unloading of food are paid for separately, include these costs in the calculations. 
• Accounting in the catering industry usually uses the batch method - accounting for the production and sale of a batch of goods, for example, 10 cakes or 25 servings of salad. A certain amount of products is allocated for each batch. 
• In addition to the cost of ingredients, you need to account for the salaries/wages of employees (administrators, cooks, waiters, dishwashers, cleaners, etc.), equipment depreciation, rent, utility bills, and other expenses. Do not forget to account for taxes in the calculations, both related to salaries/wages and depending on the chosen taxation system. Also note that you will also have to pay taxes for some contractors (micro businesses, individuals (non-employees), etc.).
• To simplify the process and minimise the risk of errors, we recommend creating costing templates or using specialised services.

How to account for salaries/wages

When opening a restaurant, cafe, or bar, decide at the start how many employees you need in each area: in the kitchen, in the hall, and at the warehouse. 

Setting the duration of shifts and the amount of remuneration, remember the need to comply with the Labour Code of Georgia. 
Hourly payment scheme (wage) is applied most often in eating establishments.  
There is an hourly rate or wage, based on which the amount payable is calculated based on the actual time worked. 
Sometimes once a month or quarter, a bonus is paid for quality work.
In addition to the accrual of wages, vacations and sick leave of employees are to be officially recorded.

How to account for stock balances.

You need to keep track of:

• Receipts. In addition to goods, you will receive documents from the supplier: contracts, statutory documents, price lists, and certificates. Be sure to keep them: they may be needed during inspections.
• Write-offs. Products transferred from the warehouse to the kitchen can be used to prepare dishes ordered by guests, feed employees, develop a new recipe and create a technological chart, etc.

Sometimes products spoil - they have to be written off and disposed of. Please note that the write-off of the utilised goods occurs as follows: in the tax account an application "Confirmation of the document on the expired and/or useless inventory write-off " must be filled out; if you do not receive any feedback from the tax office within 2 working days after sending, you shall dispose of it without their presence, if you receive any message - act on its basis.

We hope that this material helped you and that after reading it you know how to keep accounting for the catering industry. We recommend you entrust accounting to specialists with experience in restaurants, cafes, and bars, who know all the nuances, which means that they will insure you against unnecessary inspections and fines.
 

Stocktaking in a restaurant is an obligatory part of work in public catering. 
Stocktaking helps to compare the balances in the accounting program with the actual, to detect shortages on time and find their cause. 

To avoid overspending in the kitchen and stop losing profits we prepared an article for you, where we shall tell you how often you need to inventory in a cafe or restaurant, who should conduct it, how to correctly record its results, and what kind of conclusions can be drawn by a manager.

How often should restaurants and other catering establishments carry out an inventory?

Inventory in a cafe, restaurant, or bar can be routine or unscheduled. 
Routine inventory is carried out with a certain frequency known to the employees: 

• Once a month. As a rule, it applies to food, as well as household chemicals and other household goods used in the establishment; 
• Once a week. Usually, it is the frequency of checking product remainders;
• Once a day. This may be, for example, a check of alcohol remainders in the bar after the shift closes. It is rarely used because it is very labour-consuming.

Unscheduled inventories can be arranged at any time without warning, for example, if one of the employees is suspected of theft. 
During the inventory, both individual items and remainders ,in general, are verified, depending on the objectives. 

Who conducts the inventory? 

The manager, chef, or barmen - the one who supervises the employees and controls their work - may be responsible for checking the remainder. A member of the accounting department must also be present. 

Before the inventory control, there shall be created a commission, shall be issued an order to conduct an inventory, and shall be printed statements in which the results of the inventory shall be recorded.

Upon completion of the inventory, all employees who participated in it must sign it confirming that they agree with the data recorded in the statement.

Later on, the statement shall be submitted to the accounting department for the accountant to draw up an act of discrepancies based on the results of the inventory.

What can reveal an inventory in a bar, cafe, or restaurant?

Here are the most common accounting errors that are discovered during an inventory: 

• Discrepancies in accounting units. It happens, for example, that disposable cutlery for food is entered in records in packs, but is written off by the piece. 
• Duplication of items. While accepting the products it is called "coffee Nescafe ", and when writing off - "Nescafe coffee", during inventory you will receive discrepancies between balances according to documents and actual. 
• Cooks and bartenders violate the food and drinks technology. One quantity of ingredients is used per serving according to the technological chart, but in reality, another quantity is used, resulting in overconsumption.
• Errors in the technological chart. If remainders of the same positions do not coincide often, check the technological chart of the dishes for which these products are used. Maybe you have miscalculated the number of ingredients needed. 
• Theft. Periodic unscheduled checks of product remainder that are used to prepare the most popular menu items help to fight it.

How to proceed if discrepancies are identified

It is necessary to analyse the results together with the manager or other responsible employees and decide what to do next. 
When there is a regrading of piece products (food trays, disposable dishes, mineral water, beer, etc.), the first thing to do is to check the consignment notes from the supplier. 

If everything is correct, the discrepancies can arise for several reasons: someone steals; an employee had removed expired or damaged goods, but did not write them off; someone was inattentive when entering the batch of products in the books.

If there is a problem with the ingredients: double-check the technological charts of the dishes in which they are used. Make sure the cooks and bartenders understand how to read the technical charts and follow the recipe. Provide additional training if needed. Any shortage is indicative of a problem and needs to be thoroughly investigated.

If a culprit has not been identified, the amount is usually distributed among the materially responsible persons: cooks, bartenders, waiters, and administrators. 

It is rarely possible to do without writing off expired and damaged goods: for coffee shops and fast food, the norm is 5% of the total volume of purchases, for restaurants and cafes, where meals are prepared to order - 3%. 

If the percentage is higher, it is necessary to figure out a reason and take measures to improve the situation. 
You cannot write off expired and damaged goods independently. You need to invite a representative of the tax authority to perform the rejection and disposal of expired and damaged goods in his/her presence.

Disposable goods are written off as follows: in the tax account an application "Confirmation of the document on the expired and/or useless inventory write off " must be filled out; if you do not receive any feedback from the tax office within 2 working days after sending, you shall dispose of it without their presence, if you receive any message - act on its basis.

We hope that our explanations will help to conduct inventory faster and easier in a restaurant, cafe, or bar, and shortages will become rare. 
 

Collusion with counterparties, money transfer to front accounts, checks on personal expenses, payroll accounting to "deadheads"- this is just a small list of how an accountant can deceive and steal from a business owner.
 

Loss of the base

One of the main risks for the owner happens in a situation where the accountant keeps records on his/her personal computer and only he/she has access to the database.

If an accountant’s work does not suit you and you decide to part with him/her, he/she may not give you the archive base or start demanding money from you. In this situation, you will be forced to restore the entire accountancy. If the volume of transactions was not very large, it would take a little while, but just imagine how long it would take if a company had hundreds of transactions worth several tens of millions a year.

How can you prevent this? 

You need to use cloud accounting and not lock the whole process into one employee: a password should be kept both by him/her and you, and all notifications should be sent to your email.

Tax overpayments and other mistakes

All too often business suffers not only from the bad-faith actions of the accountant, but also from his/her inattention, incompetence, laziness, or fear. As a result, the company may pay much more tax than it should.

Sometimes accountants just miscalculate taxes. But, quite often, they consciously act according to the principle «it is better to overpay, anyway, when the tax agency comes it will find something and charge it». 

Very often, despite all available documents, accountants prefer not to apply to a tax agency for a VAT refund, just fearing «what if they find something when inspecting».

They may refuse to formalise travel or hospitality expenses such as going to a restaurant for a business meeting if the payment is made in cash.

Sometimes just tiredness or family problems can lead to trivial mistakes in payment orders or to the double sending of the same payment.

What is to be done?

Problems often arise from the accountant’s lack of information on planned and incurred expenditures. Therefore, it is important to develop proper working relationships/communication with all employees of the company and to introduce electronic document flow as a standard of work.

To minimise risks of mistakes in payment orders or double payments, it is better not to provide the accountant with an access key to the system «Client-Bank» and to sign the documents yourself.

Another useful measure is an external audit, which can be carried out quarterly to be sure that there is nothing the matter (or timely identify and correct errors), or the conclusion of a contract for the provision of accounting services with the agency whose liability is insured. In this case, the insurance will cover the losses in case of overpayment or additional taxes.

Outright theft

Unfortunately, in real practice most often steal those who are directly connected with counterparties. However, if an employee colludes with an accountant who independently makes all the payments and submits statements, he/she will have an opportunity to withdraw part of funds to his/her individual entrepreneur or LLC, "make a drawing of" a statement and falsify issues to prevent you from finding out about anything. 

Ways to avoid this:

Set up a receipt of notifications about the submission of reports.

Independently sign documents (contracts, orders for the payment of bonuses).

Do not provide the accountant with the right to sign in the Internet Bank.

Use of information about your business

An accountant is a person who knows almost everything about your business, so many fear that he/she can transfer information to competitors or use information about the company's activities by writing a complaint to the regulatory authorities.

How do you know if the candidate is good when hiring

You should not invite a person whose resume contains mistakes to an interview. If there are not enough dots or letters, there are inaccuracies in dates and names - this is a confirmation of inattention, lack of commitment, and lack of pedantry, which is very important for an accountant. 

If a candidate is unpleasant and it is difficult to communicate with him/her, it is unlikely that you will be able to build a trusting relationship, in which you will be respectful of him/her and his/her work and he/she will always act in the best interests of the company.

Concluding observations:

Be scrupulous about hiring an accountant. Remember, if an accountant makes gross mistakes in the resume or is unpleasant to you as a person - you should not entrust him/her bookkeeping.

Discuss planned transactions with your accountant and provide information about the transactions on time. If you treat your accountant and his/her responsibilities just formally and present him/her with faith, it is highly unlikely that he/she will have any incentive to act in your best interest. 

You should not afford an opportunity and give a reason to steal, do not give your accountant full access to the "Bank-Client" system. 

Remember about outside scrutiny. Do reconciliations with a tax authority to make sure you are not in debt or overpaid, and contact consultants for an external audit. 

If you can't find and supervise a general accountant yourself, contact a trusted accounting firm (Info about Jara Accounting).

The main complexity of accountancy in a restaurant lies in the fact one establishment includes production, retail, and service rendering. 
When registering a business it is important to choose the right system of taxation, as it determines the amount and complexity of accounts to be kept.
Let's analyse the nuances of the accounting procedure in a restaurant, which you will have to take into account in your work. 

Production records in a restaurant

Public catering bookkeeping is more related not to trade, but to production: the purchase of products, their processing, and sale in finished form as a separate commodity. 

Production accountancy in a restaurant is complex. Batch production is the most commonly used method where products are made and finished products are sold in batches, for example, 15 pizzas or 10 salads, where a certain amount of separate ingredients is written off for each batch. 

The difficulty is that you have to keep track of all these costs, and also not forget about staff work, equipment maintenance, rent, taxes, and so on.

Automation of accounting work in restaurants and cafes helps to simplify the process. To keep such detailed track of the establishments’ work in real-time, you need to implement an automation system that will transfer all the data to your accounting program. 

Accounting applications can't provide that kind of detailed accountability, you have to enter full information manually - it's a long and painstaking process, and there's a good chance that the data will be entered inaccurately. 

If you do not implement an automation system at the very beginning, it will be extremely difficult to organise correct and reliable accounting. 
The better and more functional your system is, the less accounting work you will have to do. 

Financial liability agreement

It is an agreement between an employee and a food establishment where: 

• The duties of the administration and an employee to keep safe the property of the establishment with which an employee works are stipulated; 
• Material responsibility of an employee for failure to provide safety of this property is established. 

At the same time, the undeceived income (lost income) is not subject to recovery from the employee. Financial liability agreement is important not only for the employer, which gives confidence that the products or equipment will not be spoiled but also for the employee, as it protects him/her from unfounded suspicions and claims. 
In addition to the financial liability agreement, the bookkeeping and accounting in the restaurant can include commodity reports.

Commodity report of materially responsible persons

It is a report on stocks, goods, and tare movement. It is drawn up in two copies by the materially responsible persons. One copy is attached to all receipts notes and delivery notes and is submitted to the accounting department, and the second copy is kept by them.

An order establishes the periodicity and timing of the report. In practice, it is drawn up separately for each day in a food establishment. 

Before the report preparation, all documents must be sorted as "receipt" and "disposal" of goods. 
The commodity report consists of the receipt part, which is filled out by a materially responsible person based on the primary documents confirming the receipt of goods. 
Before the report preparation, all documents must be sorted as "receipt" and "disposal" of goods.

The procedure for filling out the report:

• Amounts of goods and tare balances at the beginning of the day. 
• Remainders must match the data at the end of the day from the previous report. Data on the receipt and disposal of goods for the day should be filled out in chronological order, by the primary documents based on which the transactions were made. 
• The amount of the balance at the end of the day.
• Remuneration.
• Accounting in restaurants and cafes includes an account for the number of employees, hours worked, and output. 

First, you need to determine the number of workers employed in each area, based on the area and occupancy of the establishment. In addition, do not forget about compliance with health and safety standards. As a rule, it is two days on, two days off shift, and 40 hours a week with separate payment for evenings, nights, holidays, and weekends by the Labour Code of Georgia.

There are two forms of remuneration most commonly used in the catering industry: 

• Time-based: wages are calculated based on the remuneration or tariff rate for the time worked. 
• Time- bonus based: the wage consists of remuneration for actual time worked and a bonus (monthly or quarterly) for quality work and services. 

A separate topic is the execution of vacations and sick leave.
For convenience and control, a vacation schedule should be drawn up for each employee and a vacation order should be issued.
It is necessary to pay wages and calculate mandatory contributions to the Pension Fund.
 

If you submit reports and pay taxes in due time is this a guarantee that the tax inspectorate may have no questions for your company? 

For more than 4 years we have been working with companies from different industries. It has been our experience that it is not enough to transfer money to the budget on time and in full.

We have collected recommendations from our experts, following which you will reduce the likelihood of an inspection of your company.

We've also compiled a checklist for a scheduled audit in case it can’t be avoided. It contains practical advice based on the experience of Jara Accounting experts.

Ways to avoid unnecessary tax inspections

Prepare and keep documents confirming expenses in a correct and timely manner. 

The tax authorities may find the expenses unreasonable and recalculate the amount of tax payable if an auditor has doubts.

It is important to have clear wording of the purpose of payment in payment orders that corresponds to the kind of activity of the company and the agreement concluded between the contracting parties. 

If you pay for a service, be sure to obtain a report of work performed by the contractor, signed by authorised persons. If the report is signed under power of attorney, a copy of this power of attorney must also be attached to the documents.

If you bought goods, you need a waybill. Also, do not forget to check whether the counterparty issued an invoice and uploaded it (an invoice and a waybill) on the tax portal. 

If the counterparty is not a VAT payer, an invoice must be uploaded to the portal.

Monitor your business performance

Too low profitability, salary not corresponding to the average salary in the business and low tax burden, expenses significantly higher than the income for which VAT reimbursement is required - all this is subject to inspection by the tax inspectorate.

Check your counterparties

If you carry out calculations between related companies at prices inconsistent with market prices or use companies with preferential tax treatment to obtain a tax benefit, you may be suspected of tax evasion that is fraught with audits and blocking of the company's accounts currently.

Before entering into contracts, carefully check the counterparties with which you plan to do business. 

Respond to the demands of tax authorities

You must respond to all tax inquiries on time, otherwise, you are in danger of worsening the situation. 

Entrusting the accounting of your company to specialists of Jara Accounting, you don’t need to worry - we handle requests from tax authorities and prepare replies to the demands, thereby reducing the probability of inspection.

A checklist for a routine inspection: what to do if they came to you

Designate a separate room for the inspectors to work in to prevent them from meeting with employees and customers. 

Instruct employees on how to behave with the inspectors, and what they are allowed to say and not say. You do not hide anything, but employees may not understand any question, get scared and give an incomplete answer, which may necessitate a rebuttal. 

Ideally, only the director, lawyer, and accountant communicate with tax authorities. 

Provide the inspectors only with the documents requested by them. Providing more documents, more often than not, leads to additional questions.  Before providing them with documents, check for all necessary signatures and stamps.

Try not to be nervous, and communicate calmly with the inspectors. They carry out their job and are generally very loyal to the company. 

Do not sign blank forms and documents if you do not agree with their texts. Be sure to indicate the clauses you disagree with and the basis for your refusal to sign.

The ideal situation is when the tax authority does not come with an audit. This can be achieved by paying taxes on time and in full, by ensuring order in document flow and bookkeeping. Professionals with experience in your field can help with this.

A real estate deal is a serious decision that requires a balanced analysis and careful exploration of the details. The cost of error can be quite high. 
In order to reduce all possible risks and to protect all participants of the deal as much as possible, we will review several effective tools that have proved themselves effectively in practice.

Carefully explore the real estate market

The search for a suitable placement can take quite a long time. In order not to get lost in the variety of choices and speed up the process, try all possible ways of selecting a real estate object. There may be several options here:

• explore real estate search sites by yourself (for example, myhome.ge, ss.ge);
• use the services of an agent (in Georgia they are called “brokers”);
• contact the developer directly (if you want to purchase an object at the construction stage);
• search for a placement in the city, paying attention to outdoor ads on windows and buildings

During the process of searching, certain difficulties may arise, one way or another, you will have to be patient.
Ads on aggregator sites often turn out to be outdated, a call to the specified number may simply remain unanswered. A similar situation frequently occurs when checking outdoor ads pasted on buildings. Without the help of an interpreter, the conversation may not take place at all, because the owners of the premises mostly communicate only in Georgian. Firstly, it is necessary to carefully check the information received here, and also, if possible, to get contacts of reliable real estate agents, preferably with knowledge of the Georgian language.
Contacting agents will save you from a number of problems, but cooperation with them does not guarantee a quick solution to the issue. The work standards of real estate agents in Georgia may not always meet your high requirements.
When buying real estate at the construction stage, additional risks also arise that require a thorough check of both the object itself and the developer.
Before you start looking for a place to buy or rent, we recommend you to take a few steps.

Get professional consultation about the state of the real estate market

This will help immediately at the search stage to abandon dubious options with illegal registration of the deal, as well as to learn more about the state of the real estate market in Georgia as a whole, about pricing, about the practice of transactions and the specifics of their registration.

Estimate the additional costs when closing the deal

Clarify in advance the issues related to taxation, when the rights to real estate appear and the deal is carried out. There are a number of additional costs in the process of making a deal, the main of which are:

• assessment of the real estate object with the participation of the bank;
• payment for the services of a technical specialist to explore the object for its readiness for operation (checking engineering systems and communications, the correctness of their connection in the objects of the secondary and primary real estate markets);
• payment of registration fees;
• remuneration of the agent/consultant;
• additional costs when concluding a real estate lease agreement. It is necessary to remember about the collection of rent immediately for the first and last month of rent, as well as about the possible additional amount as an insurance deposit. An important fact when concluding a lease agreement is the legal status of the landlord. It can significantly affect taxation. For example, if you rent an office from an individual, and the lease agreement is concluded with your company, then in accordance with Georgian law, it is you who will be required to pay personal income tax (25%);
• legal services.

Think through all the legal aspects of a real deal in advance

To avoid fraud and safely register a real estate deal, strictly adhere to the following rules:

1. Thoroughly study the documentation to make sure that the seller / landlord is the true owner of the property. The data on the ownership of real estate registered with the national public registry agency must correspond to reality.
2. Make sure that the property itself is correctly registered in the register, and the boundaries and area of the object correspond to the actual ones. Quite often in Georgia, extensions and additional floors remain unregistered;
3. Make sure there are no encumbrances on this property;
4. Before starting the construction of your own facility, study the procedure for issuing permits;
5. Take care of the competent drafting of the contract, collecting the documents necessary for successful registration.

To minimize all possible risks in real estate deal, you can take just one step.

Contact Jara Accounting to conduct a secure real estate deal in Georgia

We will support you at all stages of preparation and execution of a real estate deal. We will conduct a detailed check of the object, its legal status, and collect the information necessary to identify contradictions.
Based on the results of a detailed analysis, you will be able to make an informed decision about buying or renting property, you will be warned about possible risks.
We consult on the main parameters of the real estate market practice in Georgia, talk about the local peculiarities of deals.
Jara Accounting company provides full deal support when making a purchase of real estate, prepares the necessary documentation, registers your right to own property.
We also provide legal services necessary for the purchase, lease, lease or transfer of real estate in another form.
With Jara Accounting, you can be sure of the legal protection of your property.

What are dividends?

Dividends are any income (including – in the form of interest from preferred shares) of the shareholder from the shares or rights (shares) received as a result of the distribution of profits and distributed by the legal entity to shareholders in proportion to the shares/rights in the capital owned by them. 

Shareholders can make different decisions about what to do with the profits. They can use it for development, to buy assets, or they can pay dividends.

Dividends are taxable. Also, if a company decides to pay dividends for the current year the company must have profits.

What taxes must be paid?

The dividend tax amounts to 5% and is calculated based on of the Estonian accrual model. It is paid by the company (LLC). The payment is levied at the same time as the income tax when the company withdraws the income to the personal account of the beneficiary (company founder, co-founder). 

Dividend tax is subject to a monthly declaration. The tax agent is a company, not an individual.

Do the tax rates change if the shareholder is a non-resident?

If a shareholder is a tax resident of another state, the tax rate amounts to 5%.

Dividends paid to foreign companies are taxed at the rate of 5% unless an agreement on avoidance of double taxation provides otherwise.

It is possible to set off paid taxes from the income received by the beneficiary – non-resident in the country of residence in the presence of an agreement on avoiding double taxation between Georgia and the country of residence.

Non-standard situations with payment and taxation of dividends

Dividends can be paid in different ways. This also affects the taxation of dividend income.
The main examples of such difficult situations are:

• Payment of past dividends;
• Payment of dividends upon withdrawal of a recipient from the founders;
• Payment of dividends in kind (non-monetary) form.

Payment of past dividends

Can a company pay dividends out of profits earned in previous years but not paid or distributed? The law allows such payments. It is not necessary to wait until the end of the reporting period to make such payments. The year for which dividends are distributed must be specified in the decision on payment.

Dividends upon withdrawal of a recipient from the founders

The Tax Code provides for the payment of dividends in proportion to shares in the authorised capital stock. Non-proportional payment before distribution of profit share among the remaining founders is possible only if it is stipulated by the charter or such a decision is made by the founders themselves.

The amount which exceeds the amount of payment proportional to the share of participation in the authorised capital stock shall not be recognized as dividends for the calculation of taxes. Other rates of personal income tax are applied for such amounts as:

• income of a resident individual will be taxed at the rate of 20%;
• The income of a non-resident individual will be taxed at 20%.

Payment in non-monetary form

The law does not prohibit companies from paying dividends in property form. 
However, when such payments are made, it is necessary to draw up everything correctly to avoid disputes arising with the tax inspectorate. 

To avoid disputes, it is recommended to provide for the non-monetary payment of dividends in the authorised capital stock or to approve it by the decision of the general meeting of participants. 

In this case, the value of the transferred property must be clearly defined in monetary terms to accurately calculate income tax on its basis. Personal income tax in this form of dividends is paid by the recipient himself.

When is dividend tax not payable?

Dividends received by persons defined by the first paragraph of Article 2 of the Law of Georgia "On Entrepreneurs" (except for an individual enterprise) shall not be subject to withholding tax and shall not be included in the total income of the enterprise receiving the dividends.

Dividends received by persons under paragraph 3 of Article 2 of the Law of Georgia "On Entrepreneurs" (except for an individual enterprise) shall not be subject to withholding tax and shall not be contributed to the total income of the enterprise receiving the dividends.

Dividends received by a resident individual subject to withholding tax shall not be included in that individual's total income and shall not be subject to further taxation.

Until 1 January 2023, dividends received by members of agricultural cooperatives from these cooperatives (except for dividends from profits derived from activities under paragraph 2 of Article 6 of the Law of Georgia on Agricultural Cooperatives) shall not be subject to withholding tax and shall not be included in the total income of the persons receiving the dividends.

Dividends paid to the state by a resident enterprise shall not be subject to withholding tax.
Dividends from a FIZ enterprise in a free industrial zone shall not be subject to withholding tax and shall not be included in the total income of the person receiving the said dividends.
 

Legal entities and individual entrepreneurs of Georgia registered before 2022 are obliged to undergo the procedure of registration in justice again. This requirement is specified in the Law on Entrepreneurs, which came into force on January 1, 2022.

Companies and individual entrepreneurs need to update their registration data and submit the updated Charter of the organization and the approved form of the memorandum of association.

How does the business or individual entrepreneur re-registration process work?

The updated charter and founder agreement are adopted at the general assembly of the organization. These documents are approved by signing the minutes of the general meeting.

Thus, a package of documents for re-registration of the company is formed:

• updated charter
• founder agreement, completed in accordance with the established format
• minutes of the general assembly

Then these documents are sent to the justice for registration. For individual entrepreneurs there is a different list of documents, the procedure is similar.

What awaits a company or individual entrepreneur if they do not undergo the re-registration procedure?

Legal entities are obliged to update their founding documents, and individual entrepreneurs must update their information within 2 years from the enactment of this law, which means by the end of 2023. If the re-registration is not completed within this period, the judiciary will send a notice demanding that the violation be rectified within a 3-month period. Otherwise, the registration of the legal entity or individual entrepreneur will be canceled, and the company or individual entrepreneur will be liquidated.

How to avoid the annulment of your company's or individual entrepreneur's registration?

To avoid annulment, you must complete the updated registration by December 31, 2023. Jara Accounting can assist you in this process. We will provide legal support at every stage of the procedure:

• We will prepare the necessary documents for individual entrepreneurs or organizations;
• We will provide support when submitting the documents to the justice;
• In case the individual entrepreneur or company founders are located abroad, we can facilitate this process remotely based on power of attorney.

One of the key aspects of Jara Accounting's customer support is our interaction with government authorities in the Georgian language, ewhich allows us to solve the existing problems in the shortest possible time.

If you have any questions about the re-registration of your company, Jara Accounting specialists will offer you a detailed consultation and help you understand the requirements of the Georgian "Entrepreneurs Law."

To successfully run your business, you need to be well versed in Georgian taxation and fill out the declarations correctly. The entire area of taxation is controlled by the Tax Code and regulated by legislative acts.

BASIC TAXES OF GEORGIA

At the moment, there are 8 types of basic mandatory payments in the country:

• value added tax - 18%;
• corporate income tax – 15%; 
• dividends - 5%;
• income tax - 20%;
• import tax - 0% or 5% or 12%; 
• tax at source - from 10 to 15%;
• on property - up to 1%;
• excise tax - not a fixed amount.

All of these types of taxes are regulated by the state, except for property tax, which is also regulated by the state, but it must be paid to the local budget of the region. This approach to payments allows residents and non-residents to form a profitable business in Georgia.

The Government Committee of Georgia made a decision to create Free Industrial and Virtual Zones - absolutely legal systems of preferential taxation, for which there are separate mechanisms for paying taxes, which you can read in more detail here.

VALUE ADDED TAX

After the formation of modern taxation, VAT in Georgia has not undergone any significant changes. The collection rate has been and remains at 18% for over 13 years. To understand how VAT is calculated in Georgia, you need to study the current code in more detail. It is especially important to know which goods and services are not subject to VAT. You can read more in this article.

CORPORATE INCOME TAX

Taxable profits of a business are taxed at a rate of 15 percent. If the profit is withdrawn to the personal account of the founder of the company, at the same time there is an obligation to pay tax on distributed dividends in the amount of 5%.

In accordance with the amendments to the Tax Code of Georgia, if the founders reinvest profits, then they are exempt from this tax, that is, if, for example, at the beginning of the journey you do not withdraw dividends, but send funds to develop your business, you do not pay any monthly taxes.

DIVIDENDS TAX

It is 5% and is calculated according to the Estonian accrual model. His company pays (ShPS, LLC, JSC). The payment is collected simultaneously with income tax when the company withdraws the profit to the personal account of the beneficiary (founder, co-founder of the company). When the profit is withdrawn, 15% of the withdrawn amount is paid first, and the dividend from the interest paid is 5%. The dividend tax is subject to a monthly declaration. A company, not an individual, acts as a tax agent.

To summarize, taking profit from the company, you are obliged to pay two taxes on its behalf at the same time - on profit and on dividends. If you leave funds in the company's account, invest them in development - there are no mandatory payments.

CALCULATION ON EXAMPLE OF 1000 GEL

Calculation based on the example of 1000 GEL:

1000 / 0.85 = 1176.47 withdrawn profit

1176.47 / 0.95 = 1238.39 withdrew dividends

Total 238.39 payable to the budget,

1238.39 * 15% = 185.76 income tax,

238.39-185.76 = 52.63 dividend tax

INCOME TAX FOR INDIVIDUALS IN GEORGIA

Income tax in Georgia is 20% on the accrued amount. The tax is the same both for citizens of other countries who receive salaries from a Georgian company - for example, expats with the status of a tax resident of the country and for citizens of Georgia. At the same time, there are no social payments, and the pension contribution is only 4% and is paid only in case of remuneration of the citizens of Georgia.It is important to understand that this tax is also calculated according to the Estonian accrual system, for example, paying GEL 1000 as a salary, the tax amount will be GEL 250 (according to the formula 1000 * 1.25). That is, the actual tax burden is 25%.

TAX AT SOURCE

Income received by a non-resident from a source other than a permanent establishment is subject to tax at the source of payment without tax deductions at the following rates:

• royalties - 5%;

• for services of international communication, telecommunications, and international transport - 10%;

• income from transactions with oil and gas - 4%;

• for all other payments (marketing, etc.) - 10%;

• when paying offshore - 15%.

Let's give a simple example:

Suppose your Georgian company has a contract with a Russian company to provide services. All payments to a Russian company are subject to withholding tax at source of 10%. It is worth considering this important aspect when calculating the marginality of entrepreneurial activity.

In terms of taxes in Georgia, it is imperative to know that the country has concluded a number of agreements to avoid double taxation with more than 50 countries. That is, for a number of taxes, upon receipt of appropriate confirmation of their payment in such a country, the tax base of a Georgian company will be equal to 0.

Contact Jara Accounting specialists who not only know all the intricacies of tax legislation, but also know the requirements of the tax office for the relevant documentation, which allows you to absolutely legally reduce the tax burden of your business.

If you still have questions regarding taxes in Georgia, then fill out the form below to get a free consultation.