Residence, citizenship and business opening in Georgia
Ranked 2nd in 2019 for actual business creation; Georgia is even easier for entrepreneurship than Singapore or Canada (Source: Doing Business). One reason for this is certainly that foreign investors are welcome to invest in the country, which is a nice addition before you realize that the country has a policy of implementing free trade agreements with the European Union and European Free Trade Association countries.
While registering a business in Georgia is relatively easy, it doesn't stop there, as you can own company shares without needing a visa or work permit (and agricultural land is no exception).
Georgia has a policy of HNWI (High-Net-Worth-Individual), which states that you are officially considered a HNWI if you own assets or property of more than 3 million GEL or have an annual income of more than 200,000 GEL.
This is a continuation of the series on Flag Theory.
Country Facts
| Article | Fact |
|---|---|
| Population | 3.9 million |
| Quality of basic education | Good |
| English proficiency | Moderate |
| Average violent crime rate | Low |
| Languages | Georgian, Russian |
| Capital City | Tbilisi |
| Average life expectancy | 74 years |
| GDP/PPP | US$ 15,014 |
Cost of living estimates
| Items | Monthly expenses |
|---|---|
| Single student | US$ 472 |
| Digital Nomad | US$ 652 |
| Single retiree | US$ 928 |
| Retired Couple | US$ 1,234 |
| Sole proprietor | US$ 1,147 |
| Entrepreneur with family of 4 | US$ 2,161 |
Advantages and Disadvantages
| Advantages | Disadvantages |
|---|---|
| Business opportunities in the future | Still some corruption |
| Chances to become the Estonia of the Caucasus | |
| Good banking laws | |
| Low barriers to settlement | |
| (Very) low cost of living |
Work residence permit
Persons from the countries listed below may stay and work in Georgia for up to one year:.
- Albania, Australia, Antigua and Barbuda, Andorra, Armenia, Argentina, Australia, Azerbaijan, Bahrain*, Bahamas, Barbados, Belize, Belarus, Bosnia and Herzegovina, Brazil, Botswana, British Dependent Territories*, Brunei, British Overseas Territories*, Canada*, Costa Rica, Colombia, Denmark Territories*, Dominican Republic, El Salvador, Ecuador, French Republic Territories*, Honduras, Holy See, Iceland*, Israel*, Kazakhstan, Japan*, Kyrgyzstan, Kuwait*, Lebanon, Malaysia, Liechtenstein*, Mauritius, Moldova, Mexico, Monaco, Montenegro, New Zealand, Netherlands Territories*, Oman, Norway, Qatar*, St. Vincent, Russia, Panama, Grenadines, Saudi Arabia*, San Marino, Serbia, Singapore, Seychelles, South Africa, South Korea, Tajikistan, Switzerland*, Turkey, Thailand, Ukraine, Turkmenistan, United Arab Emirates*, Uzbekistan and the United States of America.
Also, those who have a residence permit or a valid visa from the aforementioned countries (*) are completely exempt from the visa requirement. It should be noted that people from the EU or Turkey traveling to Georgia do not even need a passport; their identity card is more than sufficient.
Foreigners can look for a job or start a business in the one year they are allowed to stay in Georgia in order to obtain a residence permit.
Citizens who are exempt from the visa requirement are: Chile, Iran and Uruguay, but they can enter for 45, 90 and 180 days respectively.
Selected types of residence in detail
Georgia has a very liberal immigration policy and it is not complicated at all to get a residence permit there. As soon as you make an investment, get a job or start an economic activity, you should immediately apply for a residence permit.
This can be done either online through the Public Service Development Agency or by contacting an authorized representative, a subdivision of a public service center, a community center or an area office of the Public Service Development Agency.
The application form and other important documents should be submitted in English, Georgian and/or Russian.
There are different types of residence permits - the work permit, the investment permit and the permanent residence permit:.
-
Work Residence Permit: This is usually issued to individuals who wish to start their own business or work for themselves and others. The business activity and/or employment must be certified (e.g. by an employment contract, if the applicant is a self-employed person, he/she must present a document certifying his/her education or activities previously performed). Another option is a certificate from the bank stating that the applicant will pay (at least) double the costs he/she will incur in Georgia per month as long as he/she decides to stay (duration of the permit; mandatory or self-employed).
In the case of nationals from non-visa-free countries, one would need to have a D1/D2 immigrant visa. The fees depend on the conditions set when the permit was issued, i.e. 10 days (GEL 410 ≈ 150 USD), 20 days (GEL 330 ≈ 120 USD) or 30 days (GEL 210 ≈ 77 USD). -
Investment Residence Permit: This type of residence permit is issued to foreign citizens who have invested in Georgia at least the equivalent of 300 000 USD in GEL. This provision is in the Georgian Law on Investment Promotion and Guarantee (PDF). In such cases, residence permits are also issued to the investor's family members, which include the spouse, minor dependents and/or fully dependent disabled persons;
The applicant needs a document certifying the investment made, as well as some recommendations in written form from a member of the Georgian government or three Georgian citizens running a local business.
The permit is usually issued within 20 days (300 GEL ≈ 110 USD) or 30 days (180 GEL ≈ 67 USD). -
Permanent Residence Permit: This type of residence permit is issued to nationals of other countries whose spouses, parents and children are Georgian citizens, as well as foreign nationals who hold a temporary residence permit and have resided in Georgia for the previous six years. However, if the person has stayed in Georgia for educational purposes or medical treatment, or has worked for a period of time in a diplomatic mission or equivalent representative office, this period cannot be counted towards the required six-year period. A statement certifying the applicant's legal income must also be submitted.
Application for Georgian citizenship
The EU and Georgia have concluded an agreement stating that Georgian citizens can join the Schengen area without a visa. This agreement entered into force on March 28, 2017. In addition, Georgian nationals can visit Latin America, Indonesia and Malaysia with restrictions.
Apart from a blood relation in Georgia, citizenship can be granted to an outsider in the following ways:
- In due process: He has a job, real estate, developed business activities, or owns stakes/shares in national companies. In addition, he/she must have lived in the country continuously and legally for 5 years and have knowledge of Georgian history, language and general rules of law.
- In a simplified procedure: Georgian citizenship is granted in a simplified procedure to a person who is married to a Georgian citizen who has been legally and continuously residing in Georgia for 5 years prior to the date of application. In addition, the person must know the state language, Georgian history and the basics of Georgian legislation.
- Exception: An exception may be granted by the President of Georgia under Article 12 (2) of the Constitution if the foreign applicant has rendered special services to Georgia or if the granting of citizenship is in the interest of the state. He/she needs two letters of reference from a relative or a legal entity registered in Georgia.
If he/she is granted Georgian citizenship, he/she must renounce his/her previous citizenship unless the President of Georgia has granted an exemption.
Company registration
| Summary | Tax Resident LLC | International Trade LLC | International Finance Company | Free Zone LLC |
|---|---|---|---|---|
| Other Names | LLC | Special Trade Company | International Finance Company | Free Industrial Zone Company |
| Company Use | All Products and Services | Trading with a Global Customer | Providing Financial Services | Manufacturing and Export Trading |
| Time to sign and invoice | 1 week | 3 weeks | 3 months | 3 weeks |
| Time taken to hire staff | 1 week | 3 weeks | 3 weeks | 3 weeks |
| Time spent on signing a lease | 1 week | 1 week | 1 week | 1 week |
| Time required for issuing account numbers | 2 months | 2 months | 5 months | 2 months |
| Time required for issuing registration number | 1 week | 3 weeks | 3 months | 3 weeks |
| Corporate tax rate | 15% | 0% | 0% | |
| Is it a limited liability company? | Yes | Yes | Yes | Yes |
| Grants and incentives available | Yes | Yes | Yes | Yes |
| Authorization required for outside investors | No | No | No | No |
| Resident manager, partner, director, legal representative required | No | No | Yes | Yes |
| Smallest paid-up share capital | US$1 | US$100,000 | US$100,000 | |
| Can participate in public tenders? | Yes | Yes | Yes | Yes |
| The company's bank details? | Bank of Georgia | VTB | Liberty Bank | Peoples Bank |
| Is it a secure trade finance? | Yes | Yes | Yes | Yes |
| VAT on sales to local customers? | 18% | No local sales allowed | 0% | |
| Average total cost to start a business? | $11,500 | $18,150 | $32,550 | $17,030 |
| Average total duration of the engagement? | 2 months | 2 months | 5 months | 2 months |
Advantages and disadvantages of starting a business in Georgia.
There are a number of advantages and disadvantages that you should consider when starting a business in Georgia.
| Advantages | Disadvantages |
|---|---|
| In Georgia, foreign investors can invest and establish their own limited liability company with only one or more shareholders and a managing director, none of whom need to be Georgian. There is also no minimum investment required to establish a company. | The companies producing for the local market in Georgia face two challenges: 1. Georgia has the second lowest population in Central Asia with 3.9 million inhabitants, just behind Armenia 2. Since the population is very small, the purchasing power in Central Asia is also very low and far behind that of the European continent. |
| Foreigners wishing to establish a business in Georgia can benefit from the country's advantageous tax regime: a) The corporate tax rate is 15% and is the fourth lowest in Central Asia after Turkmenistan, Uzbekistan and Kyrgyzstan. b) Companies are exempt from payroll tax, remittance tax, capital tax and social security contributions. | Although very large investments are made in Georgia, the standard of living there is very low. It is reported that about 21% of the country's population lives below the poverty line, which makes it difficult for foreign businessmen to understand and adapt to the country's economy. |
| a) companies trading in Georgia whose revenues from Georgian business are less than $420,000 and 5% of the total customs value of products traded with foreign customers; b) companies with revenues from abroad exceeding 90% of their total revenues. | |
| Georgia has a pool of young and talented labor because a) entrepreneurs can find young and talented labor at a very low cost and b) Georgia has a high-level skills development and vocational training program, namely the OECD Eurasia Competitiveness Program offered by the OECD and the training program. | |
| The process of starting a business in Georgia is very simple: a) The registration steps are very simple and easy compared to other Central Asian countries. The country has fewer and easier registration steps than most other Central Asian countries. One can establish a company there already within a week. b) The application for registration of incorporation is made to the National Public Registry Agency and can be submitted either by one of the shareholders or by a legal representative. c) As a result, Georgia ranks 16th in the World Bank's ease of doing business ranking. | Georgia has a very confused and tense relationship with Russia because: a) The Russian military has occupied the regions of Abkhazia and South Ossetia in northern Georgia since the 2008 war and considers them independent territories. Since Russia does not allow international interference, the problem remains unresolved. b) Most gas is supplied by Azerbaijan, but Georgian consumption of Russian gas is important to achieve a diversified gas supply and thus a price balance. |
| Companies wishing to establish themselves in the free zone will be exempt from a) VAT and import/export tax on certain products, b) land tax, and c) corporate income tax. | |
| Other benefits include: a) Georgia has fifty-two double taxation avoidance agreements with various countries, including Singapore, the United Kingdom, China, Germany, India, and Ireland. b) Georgia was ranked the 13th freest economy in the Heritage Foundation's 2017 Index of Economic Freedom, a measure of freedom in economic, monetary, financial, trade, investment, and labor markets. The reason for Georgia's high ranking is free labor and minimal trade regulations. c) Due to low electricity costs of only 4 cents per kWh, Georgia has become the Eurasian destination country for crypto mining company registration. |
The best reasons to start a Georgian company.
Tax Efficiency: If you want to save taxes, Georgia is the best option because it offers international trading companies and international financial companies a very efficient solution to save taxes. These companies do not have to pay corporate tax on their worldwide income.
Access to Russia: Those who want to enter the Russian market and benefit from various tax advantages can first consider establishing a branch in Georgia, as it is very easy to move their company from Georgia to Russia.
Outsourcing: Another option for investment is outsourcing the business process in Georgia. As mentioned earlier, the unemployment rate in Georgia is up to 12.6%. Of this, almost 50% of the population is between the ages of 20 and 34. This may be unfortunate, but if you look at it from a business perspective and from an outsourcing perspective, it certainly means that this group represents talents and skills that have not yet been discovered, as the majority of Georgians from these categories have completed at least secondary education and most of them are continuing their studies. The younger Georgians are very good and fluent in English and Russian, and about 70% of the population speaks Russian very well. So, if Georgia abolishes social security tax and individual income tax is flat (20%), then outsourcing in Georgia becomes a very favorable point for investment by smart investors. Main outsourced departments are customer support, IT infrastructure, human resources, management, etc.
Real Estate: The real estate demand of the country is struggling to reach the best possible level as it can still be called a developing economy. There is a high demand for prime commercial space and entertainment facilities. The Global Retail Development Index lists Georgia in 6th place, so this area should not be neglected when looking for an investment opportunity. The Georgian capital, Tbilisi, is regularly referred to as the business center of the region due to the large number of international companies from the South Caucasus operating in this capital. Although the success rate for business investment is very high, there is always room for further improvement.
Taxation
According to the Global Competitiveness Report of the World Economic Forum, Georgia ranks 9th among the countries with the lowest taxes, which means that taxes in Georgia are comparatively low. One can have a tax-free residence in Georgia if one can prove that he/she has not saved any Georgian income.
Income from local sources is taxed at twenty percent; dividends and interest are taxed only at source at a withholding rate of five percent and are not included in an individual's personal income tax base. Income from rentals and leases is also subject to a reduced tax rate of 5%.
Corporate Taxation
Although Georgia taxes businesses on their worldwide income, they may claim a tax credit for tax paid in other countries up to the amount of income tax paid in Georgia. Registered businesses are expected to pay approximately (see comparison to business registration) a 15% tax on their actual or payable profits. This means that retained profits to be reinvested in businesses are exempt from further tax.
All payments to residents or non-residents in the form of interest, royalties and dividends are taxed at a withholding rate of 5%.
Payments to professionals are taxed at a withholding rate of ten percent.
If the applicant company is a resident that is considered a tax haven, a tax of fifteen percent is levied.
Whether or not the company is a resident, dividends are not considered something distributed among shareholders; therefore, they are not taxable unless considered from a specific tax jurisdiction. The tax base for corporate income tax also includes capital gains.
To prevent tax avoidance, Georgia has very detailed and elaborate transfer pricing rules, which require transactions between two related companies (resident or non-resident) to be made at fair market value and the relevant documentation to be kept and submitted to the tax authorities upon request. There are no such rules for controlled foreign companies and thin capitalization.
The applicable property tax states that it may not exceed 1% of the average residual value of fixed assets, uninstalled equipment, investment property and structures.
There are no such capital, payroll, stamp, social security, transfer, property or inheritance taxes.
One can use the increased depreciation of assets with the total deduction in the first year and the remaining loss can be divided in the next ten years. It has the lowest tariff rate among WTO countries, which is only 1.5%; this is in addition to the free trade agreements. The VAT rate is 18%.
There are many incentives for taxpayers in these so-called Free Industrial Zones (FIZ). All companies covered by the FIZ, even if foreign, are exempt from import and export tax, corporate income tax, dividend tax, real estate tax and VAT. Registration is very easy, and the location of these zones makes the environment very favorable for incorporation.
The only tax that is levied is 4% on all transactions that take place between the rest of the national territory and the free zone. There are essentially four FIZ zones, located in the port of Poti, Hauling, Kutaisi and Tbilisi, all operated by private companies. The investor is expected to lease a plot of land to the aforementioned operators.
Individual taxation
The rules for taxation of individuals state that a person who stays in the territory of Georgia for at least 183 days is taxed only on his Georgian income. This clarifies that income earned elsewhere is not taxed in Georgia. The tax rate is a flat 20%, but interest income and dividends are taxed at a 5% withholding tax and are not available.
Income from rentals and leases is subject to a reduced tax rate of 5% if no prior deductions are made from such income.
Capital gains are generally subject to the standard tax rate, but there is an exception for gains from the sale of real estate held for up to two years.
A reduced tax rate of 5% is levied on gains from the sale of residential real estate that is attached to a plot of land.
A person who owns real estate is subject to a tax of between 0.8% and 1% on the market value of the property.
Households with an annual income of less than GEL 40,000 (≈USD 16,500) are fully exempt from the tax, and households with an annual income between GEL 40,000 and GEL 100,000 (≈USD 41,200) are subject to a reduced tax rate ranging from 0.05% to 0.2% of the property's market value.
If you would like to check the latest guidelines and tax rates, please visit the website Revenue Service of the Ministry of Finance of Georgia.
Final Thoughts
There are a number of opportunities to invest in Georgia, be it in agriculture, real estate, manufacturing, tourism or outsourcing.
The government plays an important role in attracting investors to make Georgia a thriving investment destination. It offers numerous grants and incentives and lowers the cost of doing business in Georgia by eliminating them altogether.
There are a large number of success stories from Georgia, which in turn encourage more people to invest there. In a follow-up article, you will learn more about the banking sector in Georgia and the specific benefits.
The website and the information contained therein are not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained on this website do not constitute investment advice.