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%);
- 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.