Business Setup Types in Georgia: An Overview of Legal Structures and Tax Benefits

Georgia offers a business-friendly environment with low tax rates and a simplified company registration process. Entrepreneurs and investors can choose from various legal entities, each designed to accommodate different business needs.

Here's an overview of the main business setup types available in Georgia:

Sole Proprietorship (Individual Entrepreneur - IE)

A Sole Proprietorship is the simplest form of business in Georgia. It is ideal for those who want to operate as an individual rather than a legal entity.

• •No minimum capital requirement
• •Personal liability for business debts
• •Quick and easy registration process
• •No need for business bank account
• •Eligible for Small Business Status with potential tax benefits

Small Business Status

Individual Entrepreneurs in Georgia can apply for Small Business Status, which provides significant tax benefits:

• •1% turnover tax for annual revenue up to 500,000 GEL in a calendar year (January to December).
• •If revenue exceeds 500,000 GEL in a calendar year a 3% tax rate applies till the end of the calendar year. This shouldn't happen during 2 consecutive years.
• •Simplified accounting and reporting requirements.

However, not all Individual Entrepreneurs are eligible for the Small Business Status.

Limited Liability Company (LLC)

The LLC is the most common business structure in Georgia due to its flexibility and limited liability protection.

• •No minimum capital requirement
• •Owners (shareholders) are not personally liable for company debts
• •Can have one or multiple shareholders, all shareholders might be foreigners.

Virtual Zone Company

Businesses engaged in IT and software development can apply for Virtual Zone Company (VZC) status, which provides tax incentives for companies exporting digital products and services.

• •0% corporate tax on income generated outside Georgia
• •0% VAT on cross-border IT services
• •5% dividend tax, applicable only when distributing profits
• •Quick and simple registration process

This status is ideal for tech companies, software developers, and digital service providers operating globally.

International Company Status

Georgia also offers International Company Status, designed for businesses in IT and maritime industries, providing further tax benefits:

• •5% corporate tax instead of the standard 15%
• •0% tax on dividends
• •Reduced personal income tax (5%) for employees working under this status

Branch Office

A foreign company looking to expand into Georgia can register a branch office.

• •Legally dependent on the parent company
• •No separate legal identity but can conduct business in Georgia
• •Profits are subject to Georgian taxation

Business Registration Process in Georgia

Registering a business in Georgia is straightforward and can often be completed within a day. The key steps include:

1. Choosing the Business Structure: Select the appropriate type of entity based on your needs.

2. Registering at PSH (Public Service Hall): Submit the necessary documents, including an application form.

3. Applying for Special Tax Regimes (if applicable): For example, Virtual Zone status for IT companies or Small Business Status for Individual Entrepreneurs.