Blog Jara Accounting
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Ads on aggregator sites often turn out to be outdated, a call to the specified number may simply remain unanswered.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:
- 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.
- 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;
- Make sure there are no encumbrances on this property;
- Before starting the construction of your own facility, study the procedure for issuing permits;
- 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.
The restoration of accounting is outsourced to obtain an accounting program complying with the norms of the legislation, without errors and inaccuracies.
The most important thing is to solve current problems with taxation, caused by incorrect accounting and insurance against their occurrence in the future.
What do the clients receive as a result of cooperation with a specialised accounting company?
First of all, an effective accounting policy with all the additions and annexes according to the specifics of accounting in a particular area of activity and organisation.
Secondly, an up-to-date, full, functional accounting base, the data of which reflect the information from primary documents. Transfer errors are completely out of the question.
Thirdly, a full accounting package for a particular period after the accounting restoration by specialists of an accounting company.
Fourthly, there is a full reconciliation check with the tax authorities, the submission of missing reports, and explanations of incorrect declarations.
In the fifth, there is restored primary documentation. It is restored by specialists from an accounting company. Existing documents are checked for compliance with the norms of current legislation. The service customer receives a ready-made archive, which can be submitted to inspectors during an on-site tax audit.
What does the restoration entail?
When planning to cooperate with an accounting company, you should know whether the result of its work in restoring accounting is limited to providing the documents mentioned above.
Outsourcers of expert level do not just restore data and primary accounting, but also they run analytics on a mandatory basis. The latter includes an audit of detected errors and current tax vulnerabilities. Experts also evaluate tax risks. And it is not only about current risks, but also about potential risks associated with incorrect accounting, the emergence of typical errors, and the emergence of tax arrears and overpayments.
Analytics without the formation of recommendations makes no sense.
An important feature of cooperation with a specialised accounting company is the receipt and discussion of a report on the restoration of accounting.
A competent outsourcer can provide expert advice to prevent mistakes made in the future, as well as offer solutions for optimising accounting and tax accounting.
While the subject of the peculiarities of cooperation with an accounting company, it should not go without mention of the legal topic.
Legal relations must not be simply formalised. The experience has proven that the existence of a contract is not a sign that the parties’ interests are protected.
It is very important to read a contract for services offered by an outsourcer. Particular attention should be paid to the duties and responsibilities of the parties.
If the standard contract is unacceptable for the customer for any reason, it is worth discussing with the service provider the possibility of adding additional clauses to the text, which are related, for example, to the specifics of the company which needs to restore accounting.
Trust the professionals.
There are many brief instructions on the reconstruction of accounts on the web today. Each of them contains specific steps that will take accounting to the next level, correct existing errors and minimise current tax risks.
But it’s not all that simple in practice.
Cooperating with professionals it is important to understand that there is no single scheme of profile services.
It means that the process of the reconstruction of accounts always contains nuances. It is not just about the presence or absence of part of the primary documents, errors in the electronic accounting database, or the incorrect use of accounting forms. Accordingly, it does not make sense to check your partner according to Internet instructions. If you work with a professional, trust him/her.
Reconstruction of accounts is never easy
Many people consider the reconstruction of accounts to be an exceptionally easy process.
But giving the specialists of an accounting company access to an electronic database, an archive of primary documents, and tax reports may not be enough.
The specific nature of the reconstruction of accounts is determined by the real state of such in the company. It means that cooperation with the company is always accompanied by online negotiations, the exchange of documents, and the restoration of missing documents.
As part of the reconstruction of accounts, it is necessary to restore the incoming balances of assets and liabilities. This means that unscheduled inventory accounting is necessary. And it does not make sense to conduct it through the efforts of the company.
Correct formation of inventory balances is possible only with the involvement of professionals. Inventory accounting will provide real data on the balances of products, materials, semi-finished products, raw materials, etc.
All assets and liabilities will be estimated in value terms. There is no question of data contamination. The specialists of the accounting company are interested in a qualitative reconstruction of accounts.
Prospects for further cooperation.
Each company appeals to the reconstruction of accounts for its reasons. Customers rely on qualitative results. And if the partner justifies expectations, cooperation does not end with the reconstruction of primary records and submission of reports.
Having taken advantage of one service, customers often choose another. Someone outsources part of the accounting functions, for example, payroll accounting, tax accounting, and inventory accounting. And someone chooses in favour of professional external accounting. In the latter case, cooperation becomes long-term. The accounting company provides services based on a subscription service contract or comprehensive support.
The continuation of cooperation is the logical completion of the process of reconstruction of accounts. It allows for optimising expenses for ensuring the work of an unproductive department, excluding the appearance of accounting and tax vulnerabilities, minimising risks of loss of primary documents and data in the electronic database. There are many conditions for productive long-term cooperation, as well as peculiarities. The most important thing is to choose a reliable supplier of accounting services.
Business owners sooner or later need the help of a qualified lawyer. And the sooner you apply for it, the better because preliminary legal advice is much more pleasant than resolving a dispute in court. It will be quite difficult for you to understand the legal intricacies on your own without special education, and it is doubly difficult to understand the features of the legislation of another country, especially if you and your business are in different states. In this article, we will analyze in detail what legal advice in Georgia consists of and what problems you can avoid by contacting specialists on time.
Legal services for legal entities in Georgia
Legal services may be needed by those who are just going to register their business (preparation of a package of documents), and when the business is faced with legal issues such as: creating and checking contracts and other documents, analyzing the company's activities, correcting minor mistakes made by inattention.
The main services in the field of legal consulting for business:
- Consulting on articles of civil, corporate, administrative legislation of Georgia;
- Legal opinion on a particular case (legal analysis and written opinion);
- Drafting new contracts;
- Audit of existing contracts;
- Preparation for pre-trial proceedings;
- Consulting and resolving tax disputes;
- Consulting and resolving issues on rental obligations;
- Consulting and resolving labor disputes;
- Consultations from a qualified lawyer online 24/7 on the current economic activities of the company;
How to choose a lawyer in Georgia?
Of course, some of the information on the legal aspects of doing business in Georgia is available to everyone and is even translated into English and Russian, but in order to get a correct explanation of the laws, to understand exactly how they relate to your business, you will have to seek help from a local lawyer. Because systematic attempts to independently understand all the features of legal legislation are fraught with headaches. You can, of course, hire a lawyer in the state, but if you have just started your own business or are in another country, then it is too expensive and not always relevant. In this situation, outsourcing lawyers or freelancers will come to your aid. But we advise you to be careful with freelancers because their responsibility is not backed by anything and is not insured. (We will explain about guarantees and liability a little later).
But with lawyers who work for outsourcing, things are completely different. Most often they are on the staff of law firms or registrar firms. Such organizations employ qualified and educated people, whose competence was confirmed during the interview and whose cases you can familiarize yourself with. These broad-based specialists will find the answer to a question of any complexity and any area of business, thanks to the fact that they have a chance to consult with colleagues and exchange data. An outsourcing lawyer will easily prepare documents for the registration of any legal entity, check contractors, and take on all administrative tasks, including going to the tax office, making a seal, and opening a bank account.
An outsourcing lawyer will follow your transactions to resolve the issue even before it arises.
It is especially important to choose the constant legal support from outsourcing specialists even in cases when legal issues arise constantly. One-time consultations in such cases are less effective. An undoubted plus will be the fact that you will be in constant contact with a living specialist who is 100% aware of all your legal affairs, so he will be able to give you timely advice and inform you about updates in the legislation. Will monitor your trades to solve the problem even before it arises.
Warranties and liability
Successful and bona fide law firms are generally liable to you in the event that a mistake is made. They can afford it due to the fact that their liability is insured. Individuals - freelance lawyers most often do not take any responsibility to you at all, but at the same time take 100% prepayment for services.
Choose your lawyers carefully, because the success of your business depends on them. At Jara Accounting, lawyers work in teams with accountants, so they solve issues with maximum competence in two professional areas. Business lawyer Jara Accounting will help with corporate and contract law, foreign economic activity, and everything related to legal entrepreneurship. Our specialist will also be responsible for the creation and verification of documents, consulting, business analysis, and practical advice on how to do everything in accordance with the law of Georgia. To get the first free consultation leave a request bellow.
The company's financial security is ensured by competent business accounting support, accurate report preparation, alongside timely submission to the regulatory authority. After submitting all declarations and paying taxes on the due day, the company will not be subject to tax fines in Georgia.
Penalties for Violating the Tax Legislation in Georgia
The Tax Code of Georgia is the main regulatory body of the taxation system in Georgia. There are no obligations assigned to the company that thoroughly follows taxpayers' accountability. What is more, there are no sanctions imposed on those who unintentionally violate existing rules or paid taxes before the due date.
May the negligence in tax reporting or submission term violation occur, the tax authority prepares a protocol. The person who has breached the Tax Code Requirements may leave comments or remarks in this report.
The Violation of the Tax Legislation in Georgia may result in the following sanctions:
- a warning;
- a fine or a fine in monetary terms may be imposed;
- property of the violator is arrested or confiscated.
In case of multiple violations, each misdoing is subject to sanctions. As the rest of the information, imposed sanctions are also recorded in the protocol.
A warning may be provided in writing or enclosed in the register. Cases that can evoke the written notice are as following:
- Incorrect reporting & breached deadline;
- Incorrect accounting records;
- Company's avoidance of audit.
When breaching the deadline for payment, accrual composes of the payable tax amount. From 2015 a fine of 0.05% is established from the tax arrears to each delayed day.Enforcement of the monetary fine can occur in the following offenses:
- Incorrect reporting and violation of the established deadlines;
- Incorrect accounting;
- Company's avoidance of audit.
The Company should pay a fine to the state budget within 30 days from the date it was imposed.
The company’s property can be seized or confiscated to pay off the outstanding tax debts. Property confiscation is lawful under the act issued by the Tax Authority. Subject to seizure can be the property solely or the whole company.The act includes an inventory of property in the presence of the business owner and witnesses.
If the business owner can pay off the tax arrears, he should be entitled to dispose of the property. Otherwise, the property will be sold to pay off outstanding debt. Within five working days, the owner will get a refund of funds remaining from the property trading and the closure of tax arrears.
How to Avoid Penalties?
Sanctions of any kind constitute an obstruction for the company.It may lead to decreased balance and, in the worst-case scenario, dispose of the company's progress and finally its termination.Avoiding penalties is a very straightforward process if the company complies with the requirements of the Tax Code of Georgia, namely:
- Keeping accounting records, complying with the requirements established by law;
- Submitting reports to the controlling authorities on the due date;
- Paying taxes in full and on the due date.
There is no necessity to hire an extra staff member - an accountant, or personally manage the timely completion of the monthly declaration process and payable tax obligations. Our Company will spare you the fear of forgetting and/or misconducting monthly tax obligations and declaration procedures. With our assistance, you can devote all your time to business development without thinking of the taxation process.
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.
In-house accountant (as in the case of Jara Accounting)
The cost of accountancy
On average GEL 1500 per month. This is the salary of the specialist, as well as taxes and contributions to the pension fund (461.55), which you will pay for him/her.
From GEL 318 per month for individual entrepreneurs, and from GEL 600 per month for LLCs.
Responsibility for mistakes
Absent. You will have to pay fines and penalties. You can bring the employee to compensate for expenses only through the court, but in most cases, entrepreneurs are denied such claims.
We insure each client for USD 65,000 and we are responsible for the possible consequences of our employees' mistakes to the extent of this amount.
Approximately GEL 500 per month
Is not necessary
Payment for accounting software licence
GEL 1080 annually
GEL 875 annually
Payment for EDF system
GEL 485 annually
Is not necessary
Paying for an accounting licence
Payment for certification courses
An accountant may or may not upgrade his/her qualifications. Most likely you will have to pay for it.
Our specialists are constantly studying, following the changes in the legislation, and have an independent certification once a quarter. You shall not pay for it.
Who will substitute an accountant during vacation or absence due to illness
An assistant, if any. Otherwise, you will have to wait for the accountant’s return.
An assistant, if any. Otherwise, you will have to wait for the accountant’s return.
Who is responsible for meeting the reporting deadlines?
An employee. You can rely on his/her responsibility or personally supervise the execution of tasks
Client manager and specialised software
How many tasks can be assigned?
As many as you want, but they will be performed in their order, taking into account the priority. Anything that is not critical in the reporting periods will be kept for later.
As many as you like and all of them will be performed in parallel. With us, you get a team of three accountants at your disposal: for payroll, taxes, and supporting documents.
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.
The financial and tax reporting in Georgia presents a very convenient system of submitting documents, at the same time it meets every modern international and European standard. Since 2000 the Georgian Government has introduced several reforms to ease the accounting and tax scheme in Georgia. Firstly the government approved the standards of accounting and financial audit soon after, they have reduced the tax burden.
Entrepreneurs and large companies are in the primary use of a reporting system. Given the low tax rate, Georgia attracts progressively more foreign capital, which raises the demand of entrepreneurs to have a thorough knowledge of what the tax and other regulatory authorities rely upon. In this article, we will look at how to pay taxes in Georgia and how to submit a current financial report correctly.
Specifics of the Financial Reporting in Georgia
The state constantly controls the activities of organizations to prevent cases of money laundering, capital smuggling, or financing terrorism.
The Law on Accounting and Audit of Financial Statements regulates the submission of the annual financial report of the company, which is processed in strict compliance with the legislation and the requirements of personal data protection. Financial reporting in Georgia is administered by the International Financial Reporting Standards (IFRS).
Based on the Georgian legislation, companies are required to submit annual financial statements. All necessary data submission is processed electronically. According to the normative documents, financial statements must be published before 1 October of the year following the reporting.
The annual financial report includes:
- account balance-sheet;
- A statement of profits and losses;
- clarification of the fund movement in the company’s accounts;
- The Results of the company’s economic activity for the year;
- The company's current financial status;explanatory note;
4 Categories of Enterprise in Georgia
1. The Enterprise of the first category - an entity whose indicators by the end of the reporting period meet at least two of the following three criteria:
- the total value of assets exceeds GEL 50 million;
- income exceeds GEL 100 million;
- an average number of employees exceeds 250 people for the reporting period;
2. The Enterprise of the second category - a subject that is not an enterprise of the third or fourth category, whose indicators by the end of the reporting period meet at least two of the following three criteria:
- the total value of assets does not exceed GEL 50 million;
- income not exceeding GEL 100 million;
- the average number of employees for the reporting period does not exceed 250 people;
3. The Enterprise of the third category - an entity which is not an enterprise of the fourth category, whose indicators by the end of the reporting period meet at least two of the following three criteria:
- the total value of assets does not exceed GEL 10 million;
- income does not exceed GEL 20 million;
- the average number of employees for the reporting period does not exceed 50;
4. The Enterprise of the fourth category - an entity whose indicators by the end of the reporting period meet at least two of the following three criteria:
- the total value of assets does not exceed GEL 1 million;
- income does not exceed GEL 2 million;
- the average number of employees for the reporting period does not exceed 10;
The entities from categories three and four are granted a deferral in submitting an annual financial statement until the 1st of October 2021. An annual financial report is submitted to the Accounting, Reporting and Audit Oversight Service.
Submission of the Financial and Tax Reporting for small and medium businesses in Georgia ran under a simplified scheme. The volume of reporting may vary from two to several hundred pages, Depending on the extent of the enterprise.Conveniently, reports are submitted electronically. What is more, the information is publicly available and is transparent for all citizens. For the document to be accepted, the following company details must be specified:
- The organizational and legal form of the enterprise;
- Legal and Physical Address;
- Name of the Organization;
- The registering Body;
- Registration Number.
The detailed information on the financial status of an enterprise, the company's creditworthiness, and financial reports of its activity are available through the financial and tax reporting in Georgia. Financial auditing is also a mandatory procedure that compares the company’s performance against the annual financial report. Beginning from January 2019, all companies, except the organizations of the third and fourth categories, must be audited. In this case, the audit envisages that the same of the reporting of small and medium-sized businesses will be confidential.
Specifics of Tax Reporting in Georgia
Georgian jurisdiction is not entirely free from taxes, but they are comparatively low, in addition, the tax regime is considered to be one of the most transparent, liberal, reliable, and simple among other countries in the world. According to the Global Competitiveness Report, Georgia was ranked 9th in the list of countries with a lowered taxation scheme.
Given the past several years' reforms, the tax reporting in Georgia reduced the tax burden on legal entities and simplified collection procedures. From this today taxes are reported as follows:
- all amounts in the report are indicated in the GEL;
- declaration submission for the reporting month processed on a monthly basis, by the 15th of the next month; declarations are filled based on primary documents, which in most cases are available on the tax service portal in electronic form.
In Georgia, taxes are gathered at the local and State (national) level. There are six main taxes:
- Profit Tax (on dividends (5%)) – 15%
- Income tax on the population (dividends 5 per cent) - 20 percent
- Value added tax (except for medical care, education and export) – 18%
- Import tax (customs duties) – 0%, 5% or 12%
- Excise tax
- Property tax – up to 1%
From 1 January 2019, a compulsory universal pension fee for individuals and businesses was introduced (self-employed persons have the right to waive the charge). The pension Tax rate is 2% of the wage, the same amount is paid for an employee by the enterprise. The pension fee is mandatory for persons under the age of 40 as of August 6, 2018, individuals older may refuse to pay the pension tax.
All taxes in Georgia, except property tax, are national. Under the Economic Freedom Act, the Government has no legal right to raise domestic taxes (except for excise) or introduce new taxes without public approval backed by a referendum.
To attract more foreign entrepreneurs and expand the sphere of businesses, the taxes in Georgia are paid by a very convenient scheme. To avoid bureaucracy and speed up the process of controlling the activities of a legal entity, all documents are submitted electronically.
How to Submit a Report
The more accurate and detailed the financial and tax disclosure statements are the chances to violate the law and face severe charges are less likely. Therefore, before independently composing documents, two normative provisions should be carefully studied: the Tax Code of Georgia and articles of the law “On Accounting, Reporting, and Audit”.
In the past several years, the Georgian government has notably simplified business registration procedures for foreigners. The promotion of new enterprise establishment had driven the country into several changes. As a result, risks associated with currency control, passport issuing, and other corporate procedures have been eradicated.That is why a distinguished number of entrepreneurs from all over the world consider Georgia to move their existing business or set up a new company to get preferential bonuses in the form of asset protection and reduce the tax burden.
The Law “About Entrepreneurs” of Georgia makes the business registration process for foreigners as simple as it can be for Georgians.For example, there are no requirements for a minimum amount of authorized capital for an organization. In addition, entrepreneurs are not obliged to provide this information to the state. Similar preconditions applied for both residents and non-residents. The only difference is that a non-resident needs to have a legal address while citizens of Georgia are permitted to use their residence address.Anyone, despite their citizenship and place of registration, can hold a company director's position in Georgia. Foreign companies with local bank accounts can sell and buy foreign currency without any restrictions. What are the main aspects of doing business in this country, and what attracts entrepreneurs? This article addresses all aspects of business registration for foreigners in Georgia with all its procedures.
Anyone who wants to start a business in Georgia can do it within one or two working days, just by visiting the Justice House of Georgia.The following documents are required to proceed with a registration process:
- An electronic application, which is filled in by an operator on-site;
- Copy/scan of the ID card;
- Charter or agreement signed by all founders;
- State duty payment receipt;
- Notarized legal address;
- Translator in case you do not know Georgian language.
This list proves that the required documents to set up the business in Georgia are minimal. What is more, the state charges for legal entity registration are reasonably low - about 100 GEL for the next day registration and about 200 GEL to get registered on the same day.
There are five legal forms of Enterprises in Georgia: Limited Liability Company (LLC), Joint Stock Company (JSC), General Partnership (GP), Limited Partnership (LP), Cooperative. Once the company registration process is over, it must be registered with the tax service, which is also happening very swiftly. Though, it is not always necessary to open a legal entity to start a business operation. Many ex-pats in Georgia either get the status of an Individual Entrepreneur or Micro Business.
The definition of self-employed lies in the concept of Micro Business in Georgia, on the assumption of such clarification this status has its limitations:
- Have no right to hire employees;
- Annual turnover can not exceed GEL 30,000;
- Can only engage in certain types of activities that do not require a license.
If any of these requirements are in breach, a person will lose the status of Micro Business and will be automatically assigned to a Self Employed.There is no need to visit the House of Justice to register a Micro Business in Georgia. Registration of this status can be processed in any branch of the Tax Service within thirty minutes by providing only an ID Card.This form of conducting business is very helpful for foreigners at the beginning of their business journey in Georgia.
Individual Entrepreneur - 1% Tax for Freelancers
In recent years acquiring an Individual Entrepreneur with a lower status in Tbilisi or registering a small business in Batumi became very attractive due to its preferential Tax burden. If an annual turnover is less than 30,000 GEL (9 000 USD) per year, the tax rate is 0%. The Small Business owners are responsible for income and expense monthly declarations.
When an annual turnover varies between 30,000 to 500,000 GEL (~ 145,000 dollars) - tax is only 1% of the turnover. Alongside payable tax, business owners with Lower Status are also responsible for submitting income and expense declarations monthly.
If an annual turnover exceeds 500,000 GEL, the turnover tax is 3% of the exceeded amount. But when the turnover for two executive years exceeds the 1,000,000 threshold, the status of the lower business will automatically be removed, and the tax rate will be 20% on the net profit.
Registering an Individual Entrepreneur in Georgia is possible by visiting any branch of the Justice House. The document submission requires only a few minutes. The registration can be obtained on the same day for 50 GEL or the next day for 20 GEL, an additional fee of 20 GEL required for the translation and notarized permission of the Legal Address - another 25 GEL.
During IE registration, a person has to provide a passport and rental agreement. While registering an IE, not at the residence address, the notarized legal address will be asked instead, alongside a foreign citizen's passport.After completing the registration and an identification number assigned, IE has to register with the tax service.
Taxes in Georgia
The Georgian Tax Code has been known for its loyal taxation system. The country offers low taxes and a limited number of activities requiring a license. For most types of activities, taxes are as following:
- Individual entrepreneur – 1% of revenue or 20% of net profit;
- Legal entity – 18% VAT, 15% income tax;
- Microbusinesses do not pay taxes;
- Value Added Tax – 18%;
- Corporate profit – 15%;
- Dividends – 5%;Income (salary) Tax – 20%;
- Import Tax – 0% or 5% or 12%;
- The property – up to 1%;
- Tax at Source – from 10 to 15%;
- Excise tax – not a fixed amount.
Opening and doing business for foreigners in Georgia is possible within a couple of days. Still, we advise referring to professionals in the field for accurate determination of business activity forehead.Company Jara Accounting has been providing assistance and support in business registration, accounting, and tax consulting since 2017 and is ready to share this experience with you. Send a request to get help making the right choice.
Outsourcing to professionals and delegating non-key business functions, such as remote accounting and tax consulting, is no longer just a necessity, it is often the only right solution in a total transition to remote work. Problems with finding a company do not usually arise. By entering the necessary service in the search box hundreds of proposals will fall on you, but how to choose the right company to meet all your requirements. And most importantly, what are the requirements to choose an accounting company working remotely, we will try to explain in this article.
Freelancer or an accounting company to outsource?
First you need to understand the quality difference between a freelancer at a distance from a company that provides remote accounting services. A natural person in the role of a remote accountant usually works without an agreement, respectively, does not take and does not bear any responsibility. Given the specifics of accounting activities and the fact that this area is directly related to your money is a very risky option. Security, which should not be disregarded when it comes to the financial well-being of your business.
A working relationship with a freelancer is not backed up by anything, payment is often made past the cash register, which a priori relieves you of responsibility for the work you have done. If you are lucky, you will find a dedicated accountant who will prepare and submit reports, maintain documentation, help with tax optimization, and advise you on issues that arise. But without a contract, you are not insured against the human factor in the form of sudden illness at the time of filing a declaration or 10 weddings/funerals for one month.
A company that provides remote accounting services inspires much more confidence if the contract is drawn up correctly and all requirements are taken into account. Usually, there is more than one accountant in such companies - they share experience and help each other, so you will definitely not find yourself in a desperate situation during the reporting week when one of them will be incapable (or will go into creative work).
How do you know the company is right for you?
In order to choose the right company you need to pay attention to these indicators:
- Positioning of the company in the market (information about clients, website, social networks). The more competent information is presented, the more the company is trusted;
- Learn in detail about the company's employees and their experience. Usually this information is presented on the site;
- Understand what the company specializes in. The list of services provided by the company within the framework of accounting and its relationship with the tool;
- To learn about software accounting, in which tool the company works and how it organizes accounting. For example, we use the program Balance.ge. In addition to accounting and tax accounting, there is a possibility to make a management record, where you can track information about cash flow and upload financial reports online. This function helps customers to know all the necessary information at any time;
- Cloud storage and the ability to sign contracts in electronic format. Personal meetings with the client are absolutely unnecessary and any questions can be solved online with the help of a messenger (in our case Telegram) or with the help of a video conference (Google meeting, Zoom) it is possible to solve any disputed tax issues;
- Related services: audit, contractual work, family office, legal issues. It is important that the company is not limited to one accounting, but provides a full range of services and support in the form of advice on all arising issues;
- The financial responsibility of the company should be set out in the contract for all calculations and declarations. This is very important and must be taken into account;
- Company liability insurance is also very important and it should be checked whether the company's liability as an accounting agency is insured. If an error is made, all damage will be compensated within the insurance amount;
- Communication in convenient messengers, quick response and prompt resolution of all arising issues.
What's the contract worth checking out?
Now let's find out what requirements should meet the accounting company working remotely and what must be included in the contract:
- Good faith performance of obligations assumed in accordance with applicable law;
- Keeping records of economic and other operations of the client on the basis of the provided primary documents;
- Delivery of work in due time;
- Absolute confidentiality;
- Return of documents after the contract expires;
- Financial liability for the consequences of late submission of necessary declarations or incorrectly submitted information, expressed as compensation for penalties or fines imposed by tax authorities, which arose through the fault of the accounting company.
Setting up a business remotely in Georgia is a fairly straightforward process. Georgia offers a preferential taxation system and safe environment for doing business, alongside the country's drastically lowered level of corruption and reduced bureaucratic procedures. For the present day, the degree of economic freedom and tax administration makes Georgia one of the most attractive countries for doing business in Europe.
Set up a Company Remotely in Georgia - Key points
Based on the Law about Entrepreneurs of Georgia, anyone irrespective of his/her residency status can set up and conduct business in Georgia under the same regulations. Hence, any person can become the Company Owner in the country.A company of any legal form of ownership undergoes registration processes with the Public Registry of the House of Justice of Georgia, where all Company Charters remain. That ensures access to information about the company's performance and its participants, for all without exception, shall the necessity arise.
The Revenue Services of Georgia controls the whole taxation process. The registration of the taxpayer will be processed through this authority as well as obtaining E-Taxpayer's Status. Georgian legislation does not compel business owners to disclose their charter capital.
The legislative document “About the Licenses and Permits” provides an exhaustive list of all activities for which a relevant permit may require.
How to Set up a Business in Georgia Remotely?
Working in Georgia for non-residents is very convenient, coming from the idea of a lower taxation system in addition to a non-existent bureaucracy scheme. Although Georgia is attracting foreign investors, many still hesitate to start their entrepreneurial activity coming from the possible predicament. To avoid complications, it is advised to refer to the functional company in the country of request. A company that specializes in the registration process and can effortlessly set up a business remotely on time
For instance, specialists from the company Jara Accounting will assist in choosing the appropriate legal form of the company, provide thorough consultation on taxation, the preferential and simplified tax payment regimes, tax avoidance possibilities, as some legal entities are exempt from certain liabilities on taxation.
The registration process requires minimal client involvement. Acting with the Power of Attorney provisions, our specialists take every necessary measure to ensure that all requirements for successful company registration are met.
Set up a company in Georgia remotely - Step by Step:
- Fill out an application on the website;
- Complete and certify a Power of Attorney by authorized Notary Bureau, as well as apostille in your country of residence, based on the example we provide. For CIS countries an apostille is not required;
- Provide copies of owner’s passport, physical address (in any country), name of the future company in English.
After receiving the Charter by e-mail, our employees will certify and notarize the legal address in Georgia.
Company Remote Registration process on the territory of Georgia consists of the following steps:
- Translation into Georgian and notarization of all provided documents;
- Submission of an application to the Public Registry for the company registration and payment of necessary fees;
- Obtaining a registration certificate from the House of Justice;
- Registering the company with the Revenue Service;Upon request, we provide services to open a current bank account.
Fill out the form on our website and get a free consultation. We will address any inquiries you may have regarding the remote registration of the company in Georgia.
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.
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.
Nobody wants to pay high taxes, much less twice. If you are a non-resident of the country and receive income in Georgia, it may happen that you will need to pay taxes here and in the country of residence. To prevent this from happening, there is an agreement between the countries aimed at avoiding double taxation. Georgia has signed relevant international treaties with more than 50 states. Read this article to find out what will help to confirm your preferential status, and how to correctly draw up a certificate from a non-resident of Georgia to avoid double taxation.
What is Double Taxation Avoidance Agreement
The main purpose of the double taxation treaty is to control tax evasion and to promote trade cooperation between countries, as well as to stimulate foreign investment. The standard agreement concluded by Georgia with friendly countries is based on the model agreement of the OECD tax convention, according to which tax rights are distributed among partners depending on the agreed conditions. Namely, a resident of one country receiving income from another country may be taxed both in the state of the source of income and in the country of residence. In order to avoid double taxation, income received by a resident of one country from another country will be credited to the tax account of the source state. The Double Taxation Treaty also regulates issues related to the prevention of tax evasion and the means of applying internationally recognized standards for the exchange of information for tax purposes.
How to avoid tax problems during a transaction with foreign counterparties
When importing / receiving services from non-residents, there is a tax at the source. If Georgia has an agreement on the avoidance of double taxation with the country where the counterparty is registered, then this tax can be avoided. But the agreement avoids only the withholding tax. As for the reverse VAT that arises when purchasing services from a non-resident - with the help of this agreement, you will not be able to avoid paying.
What documents are the official confirmation of the possibility of avoiding double taxation
In order not to pay tax at the source, you need to submit twice to the Tax Certificate stating that the counterparty who provides the service is a tax resident of the country with which Georgia has an agreement. You can find out the entire list of countries by clicking on the link given above. This certificate is issued by various authorities in different countries, in Georgia, it is the Revenue Service.
Certificate form to avoid double taxation
Practically all over the world, a unified form of the certificate has been adopted in order to avoid double taxation, the so-called 'Certificate of Residence'. It is filled indifferently, but the essence is the same. It indicates that an individual or legal entity is tax residents of a particular country. The certificate is valid for 1 calendar year.
How to prove the authenticity of the certificate for the state
It is mandatory that a certificate of tax residency, which avoids double taxation, is legalized in some countries, and in some, it is apostilled. There are countries that have signed a special agreement for the CIS, according to which documents are accepted without legalization and apostille. These include all CIS countries, except for the Baltic states.
Apostille is a state procedure for legalizing documents issued by anybody or certified by a notary, a special form adopted by the countries that signed the Hague Convention in 1961. This procedure is considered a more simplified document legalization system. The Hague International Convention abolishes the requirements for the legalization of foreign documents for the participating countries but requires a mandatory apostille.
The rest of the countries accept the document of another country only after legalization. Therefore, apostille or legalization depends only on the country of residence. Georgia is included in the list of countries that have signed the Hague Convention.
An official translation is required. In Georgia, the certificate must be submitted in the Georgian language, because the state authorities of the country do not accept documents in a foreign language. The translation must be notarized. The certificate may not be legalized and not apostilled (for example, issued by Ukraine, which does not require these procedures in Georgia), but the translation must be notarized and made by a certified translator.
We will give an example from the experience of our clients in order to clearly show the procedure for avoiding double taxation in Georgia:
Our client is a resident of Slovakia, but at the same time, he is the founder of a company in Georgia. When the founder distributes profits and receives dividends, he pays tax on dividends not in Georgia, but in Slovakia, where he is a tax resident. In Slovakia, the tax on dividends is 7%, in Georgia, it is 5%, so the beneficiary does not have any obligation to declare the difference in tax downward. Every year he provides a standard certificate of his tax residency, which will be translated into Georgian and notarized.
Important! Payments to non-residents are declared monthly in the income tax return. It is necessary to indicate that this person is a non-resident and is a resident of another country with which Georgia has an agreement on the avoidance of double taxation. But evidence of this (in the form of a certificate) is submitted only once a year - until April 1 of the year following the reporting year.
If you have any questions or need a certificate from a non-resident of Georgia to avoid double taxation, leave a request to get a free consultation.
A double taxation agreement is usually concluded between the two countries. The agreement prescribes the rules for the collection of taxes on the income of a resident of one country received in another. The agreement specifies the types of taxes subject to the document and the legal entities to which they apply.
What is a Double Taxation Agreement
The main purpose of the Double Taxation Treaty is to control tax evasion and to promote trade cooperation between countries, as well as to stimulate foreign investment. The standard agreement concluded by Georgia with friendly countries is based on the model agreement of the OECD tax convention, according to which tax rights are distributed among partners depending on the agreed conditions. Namely, a resident of one country receiving income from another country may be taxed both in the state of the source of income and in the country of residence. In order to avoid double taxation, income received by a resident of one country from another country will be credited to the tax account in the source country. The Double Taxation Treaty also regulates issues related to the prevention of tax evasion and the means of applying internationally recognized standards for the exchange of information for tax purposes.
Georgia has 56 double taxation treaties for 2020.
|Country||Permanent establishment||Dividend tax||Interest tax||Royalty tax|
The remaining 46 countries can be found here.
How does the double tax treatment work
All agreements on the avoidance of double taxation are different, that is, each country has its own specifics. It is clear from the name itself that the tax must be paid in one of the countries, that is, in one place, so that taxes are not paid in two countries for the same service, under the same contract.
Let's give an example based on our work to make it clear. We act as a contractor outside the customer's country, for example, we conclude an agreement with a Belarusian company, on whose behalf we open a company or carry out some actions in the interests of this company. Georgia has an agreement with Belarus to avoid double taxation. So that a resident of Belarus does not pay tax at the source for the services provided by a Georgian company - we are asked for a certificate confirming that we are a tax resident of Georgia. In the electronic tax office, we request a certificate of the state for the current year on tax residence and we send this certificate in English to Belarus, where it is translated, attached to the tax office, or physically submitted to the tax office so that it becomes an official reason not to pay tax.
Withholding tax on services rendered by a non-resident exists in many countries. Our many clients have outsourced contractors from completely different countries. With countries from the list given in the table above, everything works exactly according to the same scheme as described. If the company is Georgian and the contractor has concluded an Agreement, for example, with Turkey, we see that money has gone under such a contract and immediately ask our clients for a certificate from the Turkish side. We attach this certificate in English that the Turkish company is a tax resident of Turkey to the declaration. That is, the declaration is filed as usual, but the tax base is zero. This certificate is attached to the tax office and is the basis for reducing the tax base to zero. This only works with countries from the list.
In some cases, the agreement also applies to income tax.
In some cases, the agreement also applies to income tax. For example, we had a client, a Georgian company that hired several employees of citizens of Turkmenistan. Employees were paid under a contract to their personal accounts in Turkmenistan. The employees worked outside their home country, but pay taxes as individuals in Turkmenistan. After several months, when it was discovered, in order not to pay tax in Georgia, we requested a certificate of tax residency from Turkmenistan. The agreement on avoidance of double taxation between Georgia and Turkmenistan allows these amounts to be offset even though it is a salary tax. If one of the parties has already paid the tax, this allows the other party to avoid it. We requested an explanation of this nuance and received it from the tax service.
The United States is probably the toughest jurisdiction in terms of taxes because there is no agreement with Georgia on the absence of double taxation. A US citizen opening a company in Georgia is obliged to pay taxes in accordance with the laws of the United States of America. If you are opening a company in Georgia, then you definitely need an account in Georgian bank. When you open a bank account, you will be issued a special form for American residents. After filling out, this form is transferred to the tax service of America, that is, the Georgian bank immediately transmits all information about you. The United States has full access to and is aware of all the income that comes even from foreign business to American residents. Failure to pay taxes in America faces criminal prosecution.
The situation with Russia is slightly different. Although the Agreement between Russia and Georgia has not been concluded, Russian citizens can bypass the tax legislation of Russia not to report to the tax service of their country about their business abroad. Information about Russian citizens is not sent automatically without a request from the state.
That is why it is so important to thoroughly study all the nuances of taxation of the countries with which you work or to entrust it to professionals. This will allow you to significantly save on paying taxes in an absolutely legal way. If you want to receive a detailed and free consultation on your case, then leave a request on the website.
Over the past few years, free industrial zones in Georgia have been a promising destination for businessmen from the CIS and Europe. One of the factors of such interest is undoubtedly a loyal tax policy. In addition, foreign direct investment in Georgia's FIZs attracts a convenient location between Europe and Asia, direct access to sea routes, developed infrastructure, and low operating costs.
What kind of FIZ are there in Georgia?
In total there are 3 free industrial zones in Georgia. They are located in the two largest cities of the country - Tbilisi, Kutaisi, as well as in the port city of Poti.
Hualing Kutaisi Free Industrial Zone
Hualing FIZ is located in Kutaisi, the second-largest city in Georgia, on the territory of 36 hectares owned by the company. Hualing Kutaisi Free Industrial Zone is an important industrial and commercial center in the country. All transportation infrastructures are quite close: the international airport is 19 km away, the seaport of Poti is 95 km away and the autobahn connecting the company with Tbilisi.
Poti Free Industrial Zone
The company is located in Poti, which is a port city. The total area of Poti FIZ is 300 hectares. From its foundation in 2010 to the present day, Poti FIZ remains the largest in the country.A big plus of this area is the direct access to the railway, it is possible to unload cars without vehicles. In addition, Poti has the largest list of licenses and opportunities for investors.
Tbilisi Free Industrial Zone
The only FIZ in the capital city covers an area of 170,000 sq.m. It appeared in 2015 and consists of virtual office locations, and 28 industrial, free plots of land, which are designed to meet the requirements of tenant companies.
What tax rates are valid Free industrial zones in Georgia?
On the territory of free economic zones of Georgia 2 main taxes are levied. The first one is the revenue tax on sales of goods/services to residents of Georgia, which is 4%. The second tax is the income tax - on a salary of 20%. At the same time, if the salary is paid to non-residents - income tax is paid by the company if citizens of Georgia pay income tax, and pension contribution is paid by the employee himself. Also, the company has an obligation to pay tax at source after buying services from non-residents of Georgia, and if the supplier country has an agreement with Georgia on avoidance of double taxation - no tax is paid.
All other taxes such as income tax, dividend distribution tax (unlimited, during the year), VAT, the import tax on raw materials or finished products from a foreign country to FIZ, the export tax on raw materials or finished products from FIZ to foreign countries and property tax is - 0%.
What types of activities can be implemented in FIZ?
- The location of Georgia is perfect for international trade, so export and import is one of the most important directions for FIZ;
- It is possible to manufacture and process products. It will receive the certificate 'Made in Georgia' and it can be imported through a duty free system. It is important to know that only countries that have signed a free trade agreement with Georgia can be imported;
- It is possible to provide services especially in IT technologies and consulting.
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 preferential taxation scheme for Small businesses in Georgia came into force on 1 July 2018. Following the changes, the usual 5% of income tax has been reduced to 1%. The preferential tax regimes in Georgia are considered as an essential incentive for small business development. What is more, the Georgian government has adopted the Estonian tax model, which does not have a corporate tax on the reinvestment of company income. This regime also makes it possible to do business in tax-free zones. The lowered taxation rates, alongside tax exemption incentives and free industrial zone in the country - have turned Georgia into one of the most attractive and loyal tax jurisdictions worldwide.
Before starting a business in Georgia, it is advisable to examine all aspects of the taxation in the state. The Tax Code and Legislative Acts are the main regulatory bodies of the taxation system in Georgia. At the given moment, there are six types of mandatory Taxes in the country, that are regulated by the State:
- Value Added Tax (VAT) – 18%;
- Profit Tax – 15%;
- Income (salary) Tax – 20%;
- Dividends – 5%;
- Import Tax – 0% or 5% or 12%;
- Tax Deducted at Source (TDS) – 10 to 15%;
- The Excise Tax - not a fixed amount.
This list does not include the property tax 1%, which is set and controlled by the local government.The updated Taxation Scheme allows residents and non-residents to develop a successful business in Georgia, which was very difficult in the past, considering 22 different types of tax.
Free Industrial Zones of Georgia
To encourage enterprise development and tackle unemployment, the Government Committee of Georgia had established the Free Industrial and Virtual Zones, which offers an entirely different Taxation mechanism.The Preferential Tax regimes in Georgia are currently available in three zones: Tbilisi, Kutaisi and Poti.The main advantages:
- Companies are exempt from the profit tax;
- Companies do not pay additional fees for dividends and interest;
- All trade agreements between Free Zone enterprises are exempt from Value Added Tax (VAT);
- Organizations are exempt from property tax;
- For all trading operations between enterprises, there is a fixed tax – 4% of the tax invoice.
The Virtual Zone in Georgia
An enterprise that directly operates in developing IT technologies can apply for the Virtual Zone Status by submitting an application to the Ministry of Finance in the Republic of Georgia. Within ten working days from the submission date, the company obtains the Virtual Zone status. During another two working days, the company will receive a special certificate ascertaining the rights to the privilege of preferential taxation.
According to the current legislation, the Virtual Zone Status holders are exempt from:
- Profit Tax - Distribution of goods and services abroad;
- Value Added Tax (VAT) - Established outside Georgia;
- Customs Duty - Export transactions.
The company pays only 5% tax on dividends.
The Tax Burden certainly depends on the legal form of the business. The Georgian government consistently operates to accumulate the best possible way of supporting entrepreneurs and creating favorable conditions for business within the Free Industrial and Virtual Zones. All this undeniably attracts foreign investors and improves the country's reliability in the international financial arena.
In 2021 the Revenue Services of Georgia introduced adjustments of an interpretation to the Article on activities in the Virtual zone. According to which, among other conditions, the subsistence (presence) on the territory of Georgia became a mandatory requirement for the Virtual Zone Status. It can be conveyed through an administrative expense, for example, renting an office or local specialist hiring.
International Company Status
A Georgian resident company, which is subject to an income tax (in accordance with Part 1 of Article 97 of the Tax Code of Georgia) can qualify for the status of an international company. But, the company must perform only an authorized activity (the list of permitted activities is specified in the government decree No. 619).One of the requirements is also for the company or the company shareholder (at least 50%) to have experience in the field no less than two years.The information technology services should be provided to an individual whose registration and management point is outside Georgia.These services may include any of the following:
- Software release;
- Publishing computer games;
- Release of other software;
- Computer programming, consulting and related activities.
The following tax incentives will apply to these companies:
- Income tax rate of 5% (instead of 15%);
- The payroll tax will be set at the rate of 5% instead of 20%;
- In addition, the withholding tax on dividend payments will be 0% instead of 5%.
An international company is liable for only 5% of the withdrawn profit (Georgia operates based on the Estonian model of capital reinvestment, there is no mandatory monthly payment) and 5% for payrolls, which significantly decreases the tax burden on business.
In addition, international companies in Georgia are partially exempted from property tax and are able to reduce bases for the corporate income tax.
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.
An investment company is a fairly popular way to increase capital among entrepreneurs. Experienced and successful businessmen prefer profitable money invested to generate income. But the requirements for such organizations from the state are much greater due to the risk of fraud. Foreign investment companies or funds are checked especially carefully. Therefore, the registration of an investment company in Georgia is suitable for professionals who have some experience in the stock market. In this article, we will analyze in detail the registration process and taxation features applicable to investment companies in this country.
Investment company registration process in Georgia
By registering an investment company in Georgia, you will begin to profitably manage your money and will be able to attract funds from partners or even third-party investors. It makes sense to use Georgian jurisdiction to increase investment opportunities and to avoid difficulties associated with currency control. In addition, investment companies and funds in Georgia have a number of tax advantages in accordance with Article 23.1 of the Tax Code of Georgia.
The main problems that foreigners face when setting up an investment company in Georgia are the overestimated requirements for key figures in the company and maintenance costs when compared with ordinary companies.
The registration of an investment company itself consists of the following stages:
- Registration of a legal entity in one of the acceptable forms, namely: joint stock company (JSC) or limited liability company (LLC). When registering, you need to take into account the fact that you need to obtain a special license;
- Raising a sufficient amount of funds established by law for your field of activity;
- Hiring the necessary qualified highly qualified specialists in the staff;
- Collecting the necessary documents for obtaining a license;
- Licensing procedure.
Investment companies in Georgia are allowed to conduct absolutely legally:
- Dealer activity, which consists in the sale or purchase of equity securities for their own funds;
- Management of authorized securities;
- Brokerage, which consists in the sale and purchase of securities under an agreement with a client;
- Depository professional activities, registers of owners of registered securities and other work.
Classification of companies
Investment companies are mainly divided by purpose:
- Accumulation of funds that belong to clients for subsequent profitable investment in successful enterprises in order to make a profit;
- Investment of existing funds in various assets in order to diversify risks.
Obtaining a license
An investment license is required for an investment company to conduct permitted activities on the territory of Georgia.
Licenses can be:
- professional participant of the securities market;
- to carry out brokerage, dealer activities;
- securities management activities;
- depository activities.
If you have a license, you can:
- Be a financial advisor;
- Charge commissions for operations with securities;
- Accumulate cash by managing other people's assets.
To obtain a license, you need to prepare the following:
- Company official name and abbreviation;
- Desired form of legal entity;
- Legal address;
- Information on the amount of the authorized capital and shares;
- Detailed information about the founders;
- Registered scheme of company management.
Taxes and incentives for investment companies in Georgia
The taxation of your company will directly depend on the chosen form of legal entity and tax benefits applied in accordance with Article 23.1 of the Tax Code of Georgia.
LLC taxes in Georgia:
- Value Added Tax - 18%;
- * On the income of the organization - 15%;
- * Income tax - 20%;
- * For dividends - 5%;
- * Withholding tax - from 10 to 15%.
Taxes for JSCs in Georgia:
- * Income tax - 15%;
- * Income tax - 20%;
- VAT - 0-18%.
* Dividends paid by an investment company to individuals or non-resident enterprises are not subject to withholding tax and are not included in the total income of the recipient of income.
* And also the distribution of profits by an investment company to a non-resident or an individual is exempt from income tax if the income from which dividends are paid:
- does not apply to income received from a source in Georgia;
- refer to income from the sale of equity securities issued by a resident legal entity through a public offer in Georgia and admitted to trading on an organized market recognized by the National Bank of Georgia;
- refer to income from the sale of borrowed securities issued by a resident legal entity through a public offer in Georgia and admitted to trading on an organized market recognized by the National Bank of Georgia, or income received as a percentage of these securities;
- refer to excess income from the sale of borrowed securities issued by the Government of Georgia or an international financial institution, or income received as a percentage of these securities or a deposit placed with a commercial bank.
Income received from the following are exempt from income tax and income tax:
- from the sale of an investment fund unit issued through a public offer in Georgia and admitted to trading on an organized market recognized by the National Bank of Georgia;
- from the sale of an investment fund unit or by repurchasing an investment fund unit, if the investment fund invests only in deposits placed with commercial banks of Georgia, or in securities issued by the Government of Georgia and / or an international financial institution, or in debt securities issued by a resident legal entity through a public offer in Georgia and admitted to trading on an organized market recognized by the National Bank of Georgia.
The easiest way to register an investment company in Georgia
Going through all the stages of registering an investment company in Georgia on your own without knowing the features of the legislation applicable specifically to your case is quite problematic, especially at the stage of obtaining a license. To avoid unforeseen difficulties and the likelihood of a license refusal, it is better to seek professional advice. Jara Accounting lawyers will assist you in obtaining a license and will accompany you throughout the entire registration process. Leave a request to get a free consultation on all your questions.
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.
Setting up a business in a foreign country may bring to life many procedural matters that require thorough consideration. One of such could be getting professional accounting services in Georgia.
It is rather difficult for an individual independently, without a specialized education and experience to comprehend the specifics of each country. Regardless of business owners' endeavor to acquit themselves with all forms of financial reporting, periodic modification of normative-legal bases can lead to unexpected fines.
Professional accounting support can help to determine the following:
- Conserving time of the study the legal and regulatory framework;
- Timely submission of documents, submission of tax reports;
- Immaculate electronic accounting assistance;
- Timely notification of all changes, optimizing the tax burden on business;
- Spare time for business development.
Accounting belongs to a completely independent sphere of activity, which is always better to entrust to the professionals in the field. At that, the time spared from accounting support is better to exploit for business promotion and development.
Features of Tax and Financial Reporting in Georgia
Not long ago the Georgian Accounting system was introduced with the new features of reporting. All companies must submit their data to the Revenue Service, the information should be stored by the company for six years. Every submitted document must be composed in compliance with international standards and specific features of reporting:
- Reporting must be submitted once a year. Most legal forms are eligible for electronic submission on the monthly basis through the tax portal /rs.ge/. Operating with scans and electronic primary documents with signatures has the same authority as standard forms with wet stamps;
- All information about the company must be available to the public;
- The documents must reflect the financial position, cash flows, and operating results. With regard to the company, the name, legal form, registration number, legal address and type of activity should be indicated;
- The tax period starts on 1 January, but for newly registered companies from the date of registration. The end of the tax period falls on December 31;
- All declarations must be submitted before the 15th day of the month following the reporting month and accrued taxes paid within the specified period.
Simplified administrative procedures introduced in 2007 made the declarations submission process available from an online personal tax office. The online personal tax office contains basic information about the company and all movements of funds and accrued taxes. The accessibility of the online personal office eases the report submission process.
The violation of report filing requirements and delayed taxes may result in fines, ranging from a warning to property seizure and imprisonment. Audit evasion is also a punishable act, and the amount of penalty can increase if the company does not provide necessary documents within a month.
The ex-pats operating in a foreign country have to apprehend the importance of compliance with the existing taxation rules and regulations and avoid the slightest mistakes that attract the excessive attention of the inspection authorities.The specifics of submitting documents may vary depending on the area and form of company incorporation. Therefore one should thoroughly study the regulations before submitting any documents, along with every tax exemption during the state emergency.
An ideal version for sparing time and effort is to use the assistance of an acknowledged accounting agency. Qualified professionals not only accurately and timely will submit all the necessary reports but also will provide legal support. The Jara Accounting Agency endorses a wide range of accounting services for ex-pats in Georgia.
The purchase of a real estate in the form of land in Georgia by foreigners is a promising and profitable investment for a number of reasons: the value of land in the country is growing steadily from year to year, for investments of $ 100,000 or more you can get a residence permit, agriculture and tourism are the most profitable spheres of the country's economy. A land plot in Georgia does not require additional investments for maintenance in the form of payment for utilities or rent, which will allow you to take your time after purchase and wait for the best moment to build or implement other plans. The sale of land for foreigners in Georgia is not directly possible, but land can be leased.
Since 2018, it is no longer possible for foreigners to buy agricultural land in Georgia on a general basis. In this article, we will analyze in which cases a non-resident can still buy land in Georgia and explain in more detail the nuances of leasing land plots.
Purchase and lease of agricultural land in Georgia
According to the Law of Georgia “On Ownership of Agricultural Land”, an individual citizen of any country other than Georgia has no right to buy agricultural land but can lease it. In addition, foreigners who marry Georgian citizens do not receive the right to purchase and register land.
A non-resident of Georgia can obtain the right to own agricultural land if inherited. But in this case, requirements for cultivating the land are imposed on him, if this is not met, then the land will need to be sold within 3 years. If the land is not sold, then it will become the property of the state.
As for legal entities, agricultural land can be bought by a company founded by a foreigner, but the share of Georgian citizens-partners must be 51% or more.
If we are talking about large projects, such as hydroelectric power plants, a port, or resource-extracting enterprises, where the cost is several hundred million from foreign companies, then the decision to sell the land remains with the Georgian government.
How to rent agricultural land in Georgia
As we mentioned earlier, tourism and agriculture are the main spheres of the Georgian economy, in this regard, the issues of leasing land by foreigners for processing or for the construction of hotels are given close attention, both by the state and by the public. But despite this, the process of registration itself after obtaining permission is quite simple.
In total, there are 2 forms of land ownership in Georgia:
- Private property;
- The right of use, which includes the possibility of construction, usufruct and lease (up to 49 years).
Land owned by the state can be leased or purchased:
- On the auction;
- Redeem, receive for use directly;
- Through tenders, competitions.
To conclude a sale and purchase transaction, lease of real estate in Georgia, a non-resident must provide a passport and pay a fee when registering property rights in the National Public Register. The very procedure for registering a land plot from the moment of selection to the moment of registration can take from 6 months. It consists of:
- Cadastral registration;
- Appeals to the owner with a request for purchase / lease;
- Coordination and formation by the owner of the rights and procedures for the disposal of the land plot;
- Passing the procedures for the provision of land within the established norms through an auction or through a competitive selection;
- Conclusion and registration of the contract.
In Georgia, there are types of land plots that cannot be privatized:
- Water bodies and subsoil;
- Car roads;
- Religious buildings;
- Pastures, places for driving livestock.
If you want to buy real estate in Georgia or rent agricultural land, leave a request to receive a paid legal opinion and detailed advice on all issues of interest to you.
Accounting is not associated with a bunch of papers and documents for a long time now. Instead, all accounting operations have shifted to the electronic format. In this day and age, an accountant will only require a computer and an appropriate accounting program. This article will review mostly utilized accounting programs in Georgia.
The task of an accounting record is to have thorough knowledge about the company, that can be calculated and evaluated. The record includes information: the amount of funds in the cash register, funds in the current account, monetary assets of stored goods in the warehouse and in the store, the company's debt with suppliers, and vice versa, an amount of an obligatory tax. In short – the accounting of everything that can be counted in money and quantity. All this data must be recorded and stored.
The managing accounting program requires a precise selection, depending on the sphere of activity and volume of operations. The choice lies from a basic one to manage micro-business and more progressive for companies with larger operations.The appropriate program contributes to establish the correct settings and automate the processes of preparing and sending reports, maintaining documentation, tax optimization, etc.
An Accounting Program Used in the Past in Georgia
ORIS Accounting is the most popular accounting program in Georgia. The ORIS includes all aspects of accurate accounting:
- The actual Georgian chart of accounts with the right to change into any type of account of another structure, for example, the International Accounting Standard;
- The ability to execute any multi-currency transaction or set of transactions, while calculating all necessary amounts or values simultaneously. Every action is recorded in the transaction log;
- Automatic report generation. It is enough just to specify the period: year, quarter, month or any time interval from date to date, so the system can recalculate any required report for a given period: turnovers, balances, statements of accounts;
- Multi-user mode. For example, the same user can only participate in transactions, payroll, balance sheets, statements and other forms. The main user can allow or deny access to the intersection of functions;
- Ongoing updates and technical support.
ORIS has a large set of features, but it is still not fully suitable for today’s needs. Modern accounting involves almost complete automation of balance sheet processes, which allows observation of the whole business process in a single system, understanding the real value of projects, purchase planning, optimal margin determination, and protection from legal sanctions.
An Accounting Software Currently Used in Georgia
At the present, an ideal version for any business is a cloud-based accounting solution. A cloud solution is software, without network infrastructure and IT support. There are plenty of similar programs available worldwide, yet there is a scarcity of such programs in the Georgian market. One of such is ‒ Balance.ge
- Balance is the only cloud accounting software where employees work remotely at the same time without any network infrastructure and IT support, which is especially relevant in today's reality;
- Automated reporting – all the necessary management and financial reports in one click;
- Balance allows high-speed operation, preparation of all necessary reports in the program and daily monitoring of the company's financial situation in real-time;
- Multilingualism allows the use of the program without the knowledge of the Georgian language.
To master and certify the basic knowledge of accounting programs special training is required. However, you can avoid all this, simply by contacting us. The Jara Accounting team will provide you with a personalized approach and a unique solution to your accounting needs.
The Government of Georgia is taking active measures to attract foreign investments in promising business areas. This is done in order to accelerate economic growth, increase exports, and reduce vulnerability to external factors. That is why Georgia is now known not only as of the most popular tourist destination but also as a country for profitable investments. Why investors choose Georgia will be explained in more detail in this article.
According to the National Statistics Service of Georgia 'Sakstat' in 2019 the volume of direct foreign investments in Georgia has increased significantly compared to previous years and according to preliminary estimates amounted to 1.3 billion USD.Such countries as Great Britain, Turkey, and Ireland invested the most - 48.7% of the total amount. Popular sectors for investment are the financial sector, energy, restaurant, and hotel business.
The main advantages of investing in Georgia
A weighty argument to prove that it is worthwhile to make profitable investments in Georgia is, first of all, a practical geoposition of the state that allows us to take a convenient strategic position. Oil transportation routes leading Caucasian oil to Europe pass through the country. Georgia has direct access to the sea, namely, a developed system of sea routes, which allows easy export and import. The country has a well-thought-out system of railways and highways.But in addition to geographic factors, investors and analysts pay attention to the list of other positive characteristics of the state, which allow to safely call it profitable for investments:
- a small rate of corporate tax;
- simplicity and accessibility of registration of foreign companies in the state;
- the system of preferential taxation in free economic zones and the possibility of creating a company in a virtual zone;
- the trust of the world economic community in Georgia;
- the government of the state promptly develops new mechanisms to simplify the procedure for introducing foreign deposits in the country, which attracts investors.
In order to attract investors who want to invest in the economy of Georgia, the governing side of the state has developed a large number of legislative and tax incentives. That’s why investors are choosing Georgia.A number of measures have been taken in the country now, the main goal of which is to stimulate the growth of direct foreign investments in the economy of the country for its progress:
- the possibility of privatization of state enterprises;
- successful fight against corruption in the country;
- equal rights for residents and non-residents in the sphere of entrepreneurship;
- simplification of bureaucratic procedures in the country;constant work on reducing tax rates;
- simplification of labour legislation.
What are the risks for investors?
Certainly, the Georgian system of economy has a number of drawbacks and risks, which can cause failures on the business market in this country:
- imposed limits and restrictions on the domestic market;
- unstable relations with neighboring states;
- low level of regional development.
All this can have a negative impact on the intentions of entrepreneurs to invest in business in Georgia. Inadequacy of the domestic market leads to problematic imports of goods in the state, so it is more profitable to choose the strategy of exporting manufactured products. This does not apply to travel agencies and hotel companies, as Georgia is the leading state at this level and of course, this sphere brings good profit.Sufficiently unstable relations with the Russian Federation and the military conflict in South Ossetia and Abkhazia also have a negative impact on the economic situation in the state. This issue has been raised several times recently, so now experts believe that the fears may be minimal, as the situation has normalized.Georgia, like other post-Soviet countries, has largely felt the impact of corruption movements. Georgia has the lowest corruption rate in the region. At the same time, compared to last year, the country scored two points less (56) and its rating dropped by three points (from 41 to 44). This is an important step towards attracting investors.
If you have been looking for a suitable country to invest or start a long-term business, Georgia is an excellent option with great potential in the future. Our experts can answer all your questions regarding any topic related to business in Georgia.
Living in a pandemic and uncertainty, many began to think about moving to another country, transferring their business to more profitable jurisdictions, and competently planning their finances. There are several fairly obvious reasons for this - the massive transition to remote work, the unstable situation in most areas of business, the lack of the possibility of long-term travel due to closed borders.
This is what drives entrepreneurs who are thinking about the possibility of changing citizenship in order to reduce taxes. But obtaining citizenship is not a tax optimization tool. This is a long and complicated process, and in a crisis, it is necessary to resolve issues as quickly as possible. Therefore, it is better to consider the possibilities and benefits of changing tax residency. Much low tax and offshore jurisdictions offer affordable options to help with proper tax and financial planning.
Georgia is just such a place where, in addition to a comfortable climate, there are extremely attractive tax conditions and the best environment for business development. In this article, we will analyze the issues of obtaining tax residency in Georgia and its benefits in 2021.
How to obtain tax residency in Georgia?
On a general basis, you become a tax resident of Georgia after you have lived in the country for more than 183 days continuously for one year.
It is important to understand that this rule only works if you really lived in the territory, and were not located for the reason:
- A diplomatic mission with consul status or were a family member of such person;
- Worked for an international organization or were a family member of such person;
- Work on the territory of Georgia in the status of a civil servant of another state or were a family member of such a person;
- Transit movement through the territory of the country to other states.
- Vacation or treatment.
Among other things, obtaining tax residency in Georgia in this way is a rather long process and it is not suitable for promptly solving business problems related to tax optimization. In this regard, you can consider other methods of obtaining. If you are a person who owns the significant property and can confirm this with documents, then the period is reduced to one month. To do this, you need to provide confirmation:
- On the condition of your assets, which must exceed 3 million GEL ($ 909,090);
- Your income for the last 3 years, which must exceed 200 thousand GEL (about $ 65,040);
- If you have a temporary residence permit in Georgia;
- Your income from a Georgian source is more than 25 thousand GEL ($ 8 130);
The Georgian law regarding companies registered in the country or managed from it states that such companies are automatically considered tax residents. Therefore, you can consider options for registering your business on preferential terms, which we talked about in more detail here in this article.
Documents required for obtaining tax residency in Georgia
To obtain tax residency in Georgia, you need to submit an application and the following documents to the Service Agency of the Ministry of Finance:
- Passport and residence permit;
- Documents confirming your capital that meets the above requirements;
- The statement itself.
All documents submitted by you are checked by the Revenue Service. If no errors and inaccuracies were found, then within 7 working days your application is sent to the Ministry of Finance. If errors are found, you are given 30 calendar days to correct them.
A nine-digit taxpayer identification number is provided for foreigners and stateless persons. Further tax accounting is carried out at the place of residence indicated in the application.
Main advantages of Georgia tax residency
- According to Article 82 of the Tax Code of Georgia, income that is received from sources outside the territory of the country is not taxed. That is why foreign entrepreneurs are interested in Georgia's tax residency.
- A Georgian tax resident who does not have a residence permit pays only income tax of 20% and only on income received from a source in Georgia. There are no pension or any other social contributions.
- If you have a residence permit, permanent residence or Georgian citizenship, you are required to pay an additional 2% of the specified income to the pension fund. Such income includes a salary, a bonus from a Georgian source, and, for example, when leasing Georgian real estate, a tax resident of Georgia does not pay a pension contribution. By the way, when concluding such a contract with a lessor company, it is the company that is obliged to pay income tax for you.
- Thanks to the double taxation agreement, you can be exempted from paying taxes on income received from a source in Georgia, in the country of which you are a citizen. At the moment, Georgia has signed agreements with 56 countries, including Ukraine, Belarus, Kazakhstan, the United Arab Emirates and Cyprus.
If you are considering options for obtaining tax residency in Georgia in order to optimize taxes or options for registering your business in the country, it is better to consult in advance with Jara Accounting tax specialists who will help you develop a tax plan for years to come and explain all the advantages and disadvantages. Having received advice, you will be sure of the correctness of your actions and can legally save on taxes.
When choosing a country for registering a business, you need to determine your priorities, do not forget about operating costs, and understand the peculiarities of the legislation and the country's taxation system. In countries with the most favorable business environment, a balance of stability and costs is maintained. Key indicators of ease of doing business are taken into account in the annual Doing Business ranking, thanks to which entrepreneurs from all over the world can evaluate and choose the countries that are suitable for their companies. In this article, we will analyze what is the position of Georgia in the Doing Business 2020 rating and why.
Georgia is on the 7th place in the Doing business rating, what does this mean?
The Doing Business rating is an analysis of data on the state of favorable conditions for doing business, which is organized by the team of The World Bank Group. The following indicators are taken as data for analysis:
- The general state of business in the country, including the average growth of small businesses and the number of open and closed companies. The simplicity of the registration process and the variety of industries are also taken into account.
- Having equitable access to finance and other resources for doing business.
- The costs of running a business, including the level of salaries and prices for renting office space, and, importantly, taxes.
In a new World Bank report, Georgia was ranked 7th in terms of ease of doing business among 190 countries of the world, and in 2019 it was ranked 6th. Let's take a closer look at what indicators this is calculated.
Ease of the company registration process
For Georgia, this graph of the rating is the most advantageous for the second year in a row, because the country lags behind the first place, which belongs to New Zealand, by only one position. According to the World Bank experts, Georgia has practically the maximum allowable number of points - 99.6.
This was achieved thanks to the government reforms according to which:
- The process of registering a company in Georgia for any person, regardless of citizenship, will take 1 one day;
- The price for payment of state fees is quite low. 60 USD - for an expedited procedure on the day of application and 30 USD - for documents the next day after application;
- Lack of bureaucracy. All registration actions are performed in the House of Justice in a “one-stop shop” mode;
- There are no requirements for the authorized capital.
All this creates the most comfortable conditions that attract foreign investors to open a business in Georgia and stimulate the country's economic development.
The main reason for starting a business in Georgia, in addition to the ease of registration, is of course taxes. In order to optimize taxation, entrepreneurs from the CIS countries and Europe register their companies with the status of a Virtual Zone or in the Free Industrial Zones of Georgia.
The main indicators used by the World Bank to assess taxation in Georgia are:
|Indicator||Doing business 2020||Doing business 2019||Changes|
|Number of taxes to be paid per year||5||5||no|
|Time required to pay payments, prepare and submit tax reports (hours per year)||216||220||-4,0|
|Total rate of mandatory payments||9,9||9,9||no|
|Post-tax and post-tax procedures index||85,9||85,9||no|
We wrote more about taxes in Georgia here. Now we will just give the basic data:
- value added tax - 18%;
- on the profit of the organization - 15%;
- for dividends - 5%;
- income tax - 20%;
- import tax - 0% or 5% or 12%;
- withholding tax - from 10 to 15%;
- on property - up to 1%;
- excise tax is a non-fixed amount.
Also in Georgia, there are special preferential tax regimes that we wrote about here. If you briefly describe them, it turns out:
- corporate income tax - 0%;
- additional payments for dividends - 0%;
- VAT - 0%;
- property tax - 0%;
- when selling goods on the territory of Georgia, the tax is equal to 4% of the actual proceeds.
- Corporate income tax 0% (instead of 15%);
- Dividend tax 5%;
- VAT 0%.
- Corporate income tax 5% (instead of 15%);
- Dividend tax 0% (instead of 5%);
- Payroll tax 5% (instead of 20%);
- VAT 0%;
- 0% property tax for assets used in activities carried out in the status of 'International company' (instead of about 1%);
Individual entrepreneurship, small business, microbusiness.
- Depends on the turnover from 0% to 20% of the net profit.
All of these types of taxes are regulated by the state, except for property tax, which is also regulated by the state, but you have to pay it to the local budget. This approach to payments allows residents and non-residents to form a profitable business in Georgia. According to the analysis by the World Bank, Georgia in 2020 rose to 14th place from 16th in terms of the quality of the taxation system.
Ease of doing international trade
Trade and ease of export-import of products is an important aspect of doing business. Georgia is lucky in this with the location, because the country is located exactly between Europe and Asia and, moreover, has direct access to sea routes. All this greatly simplifies the process of transporting goods and raw materials. In addition, Georgia has concluded free trade agreements with many countries, including the countries of the European Union and the CIS, Great Britain, Switzerland, Liechtenstein, Iceland, Norway, China, and Hong Kong, Turkey. This is a total market with over 1 billion potential consumers.
But the indicators of international trade in Georgia are not so promising yet if compared with the previous points, and it occupies only 45th place.
Here are the main indicators for which the assessment was carried out:
|Indicator||Doing business 2020||Doing business 2019||Changes|
|Export time: border and customs control (in hours)||6||6||no|
|Export value: control (USD)||112||112||no|
|Time for export: paperwork (in hours)||2||2||no|
|Export value: clearance (USD)||0||0||no|
|Time for import: border and customs control (in hours)||15||15||no|
|Import cost: control (USD)||396||396||no|
|Import cost: clearance (USD)||189||189||no|
The main indicators that hinder Georgia's advancement in the international trade ranking are high prices for the import of goods into the country, namely, almost 100% obligation to pay the so-called import VAT.
Every year the Georgian government strives to make the country's business environment favorable for foreign investors and entrepreneurs. Thanks to the Doing Business rating, we can see that it works. If you decide to register a company in Georgia or want to learn more about taxation and preferential statuses, leave a request to get the first free consultation from our specialists, who will select for you the best option for doing business through the Georgian jurisdiction.
E-commerce and payment systems have become practically the main way of doing business in 2020. Even those who were far from the Internet and technology were forced to master remote payment technologies. There are many methods of money transfer that are available on the Internet, but the safest and most reliable are payment systems. They offer a service similar to banking. The payment process is often faster, more convenient, and cheaper. Therefore, more and more companies prefer to work with payment systems. In this article, we will analyze the main payment systems and their benefits for business in Georgia, as well as explain how to use them without the risk of closing an account.
How to choose an electronic payment system
Payment systems provide a personalized service system that is better suited for modern business, and is maximally focused on online projects. In addition, thanks to the use of new technologies, opening an account, accepting and processing payments is possible in a shorter time frame. The advantages of payment systems also include:
- Simple procedure for confirming the identity of clients;
- Availability of various currencies;
- Fast international payments;
- Remote account management via Internet banking from anywhere in the world.
How to choose an electronic payment system
When deciding which electronic payment system to choose for your business, first of all, you should pay attention to its functionality, methods of receiving and withdrawing funds, and, most importantly, the size of commissions. There is a huge number of payment systems on the market, and there is an ideal one for any type of business.
When choosing a payment system, you should pay attention to the following parameters:
- Countries in which the payment system is legal and the service is fully functional.
- The types of activities with which the system works.
- Payment Methods.
- Terms and conditions for withdrawing money.
- The ability to open an account for legal entities and document requirements.
- Technical features (if you need to connect the site).
Below are some of the popular payment systems offering the opening of corporate accounts to Georgian legal entities, regardless of the residence of the beneficiaries.
Paypal payment system
Connection period: 1-2 days
Payment methods: bank cards, instant messengers, payment using a QR code, invoice by email, and others.
Who can access: clients of the Bank of Georgia and TBS with an active current account.
Commission: from 2.9% to 5% of the cost of goods (services). The exact amount of the commission depends on your sales volume, as well as on whether you sell goods (services) domestically or abroad.
Technical implementation: modules for CMS, SDK, solutions in different programming languages.
Withdrawal of funds: to a bank card account.
Transferwise payment system
Connection period: 1-2 days
Payment methods: bank cards, instant messengers, payment using a QR code, invoice by email, and others.
Who can access: clients of the Bank of Georgia and TBS with an active current account.
Countries where you can make payments: bank cards from all over the world.
Commission: from 0.35% to 5%
Technical implementation: modules for CMS, SDK, solutions in different programming languages.
Withdrawal of funds: to a bank account in a currency convenient for the owner.
Payoneer payment system
Connection period: 1-2 days
Payment methods: bank cards, instant messengers, payment using a QR code, invoice by email, and others.
Who can access: clients of the Bank of Georgia and TBS with an active current account.
Countries where you can make payments: bank cards from all over the world (except Russia).
Commission: from 0 to 3%
Technical implementation: modules for CMS, SDK, solutions in different programming languages.
Withdrawal of funds: to a bank account in a currency convenient for the owner.
How to work with the payment system so that the account is not closed?
Unlike banks, where everything is clearly spelled out, sometimes difficulties arise with payment systems. How and what should be done so that the account is saved and your work continues, and the money is not frozen in the account? The process can be divided into two conditional stages: selection of a suitable payment system (see above) and daily work with it.
Daily work with the payment system
When the payment system is selected and the account is open, the workflow can be started. But some of your actions can lead to the closure of the account and it is better to play it safe. Here are some guidelines to help you get started:
- You need to keep documents for each transaction. Even if the security system works, you will be able to provide the necessary documents and continue working further;
- Notify in advance about all planned changes. Whether it's a new partner, too large a transfer, changes in the structure of the company or a new director;
- Respond promptly to requests. If you have chosen a good payment system, the support service will communicate with you and ask questions. Answer quickly and thoroughly. Better - no more than a day.
Tip: The more accounts and payment systems, the better. So you and your business will not be left without the necessary funds at the right time. If you depend on one account, then any change for you is a risk or even a business failure. Having 2 and 3 reserve accounts is a diversification of risks.
The more ways you can accept payment payments, the better. So there is a guarantee that your client will find a suitable option for himself and will not go to a competitor. Choose the right payment system and get more profit. Use the services of professionals and we will select a payment system that meets the needs of your Georgian business. You will answer a list of questions: about the type of business, about the main partners, the country of registration of the company and the country of residence of clients, the planned turnover, and so on. Based on this information, we will offer a list of payment systems that are most suitable for you. To get a free consultation on payment systems and their benefits for business in Georgia leave a request bellow.