From July 1, 2018, a preferential tax regime was introduced for small businesses in Georgia, according to which the turnover tax will be 1% instead of 5%. Preferential tax regimes in Georgia are an important incentive for small business development. In addition, the government has adopted the Estonian tax model, which does not have a corporate tax on the reinvestment of company income. It’s also possible to do business in tax-free zones. Low tax rates together with tax exemption and free industrial zones have turned Georgia into one of the most attractive and loyal tax jurisdictions in the world.
More about taxes
Before starting a business in Georgia, we recommended studying the aspect of tax payment in the state. The whole sphere of taxation is controlled by the Tax Code and regulated by legislative acts. At the moment there are 6 types of mandatory payments in the country:
- value added tax – 18%;
- profit tax – 15%;
- income (salary) tax – 20%;
- on dividends – 5%;
- import tax – 0% or 5% or 12%;
- Tax Deducted at Source (TDS) – 10 to 15%
- The excise tax is not a fixed amount.
All these taxes are regulated by the state, except for the property tax, which is set by local governments.
This approach to payments allows residents and non-residents to form a profitable business in Georgia, which was difficult earlier when 22 types of tax were levied in the country.
Free Industrial Zones of Georgia
The Government Committee decided to establish the Free Industrial and Virtual Zones, for which separate tax payment mechanisms are provided.
Preferential tax regimes in Georgia are currently available in three zones. They are Tbilisi, Kutaisi and Poti. The main advantages:
- Companies are exempt from 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;
- organizations are exempt from property tax;
- for market transactions between enterprises in Georgia there is a fixed tax – 4% of the invoice price.
Virtual zone of Georgia
The status of “Virtual Zone” is awarded to enterprises that operate in the field of IT technologies, within 10 working days after applying to the Ministry of Finance of the Republic of Georgia. During the next two days, the company receives a unique document – an electronic certificate confirming the right to preferential payment of taxes.
According to the created conditions, the Virtual Zones do not pay:
- profit tax from the distribution of goods and services in other countries;
- value added tax, which is also established outside Georgia;
- customs duty on export transactions;
In fact, the company pays only 5% tax on dividends.
How much you will pay taxes certainly depends on the legal form of your business. But the Georgian government is doing its best to support entrepreneurs and create favorable conditions for business within the Free Industrial and Virtual Zones, thus attracting foreign investors and improving the reputation of the country in the international financial arena.
If you have decided to open a business in Georgia, then leave an application and we will help you deal with the nuances of preferential taxation and provide accounting support at all stages.