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:
- Close the business in the country of registration and register it in Georgia with a more favorable tax regime.
- 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.