Why are Western companies relocating their business to Georgia?

The content of the article:

• Business Development Programs in Georgia
• Sakartvelo is a paradise for doing business
• Types of companies on the territory of Georgia
• Advantages of "Georgian business" for Western entrepreneurs

“A kind word opens the iron gate” says a Georgian folk proverb. But it was not only Georgian hospitality that attracted investors from different countries to the country. Rather, for profitable investments in Georgian business: a comfortable tax policy for foreigners, stability in the economy and profitable investment projects. According to statistics for 2023, the main investors in the Georgian market were the United Kingdom, the Netherlands and Turkey. Moreover, the leading positions in doing business were taken by: insurance, energy, manufacturing, IT technologies and real estate. Many foreign businessmen note that they feel great support at the state level, which affects the speed and ease of business registration. The opening of government programs aimed at improving the activities of foreign entrepreneurs becomes another important link to start your own business.

The Agency “Produce in Georgia”, opened in 2014, currently operates in several directions:
Business (local production) is the development of the economy and agriculture in the country. The state provides subsidies for the creation of new companies, as well as supports the expansion of those that already exist. The conditions are quite simple: new companies — start production within two years from the date of receipt of the loan; for existing ones — the launch period is 1 year
“Host Georgia" is aimed at the development of tourism in Georgia. Special conditions apply to investors: payment of royalties; 10% of the loan in lari is paid by the state during the first two years; if necessary and requested, you can get security for up to 50% of the loan amount (maximum 0.5 million lari) during the first four years
“Grow the future" is an agricultural direction in which the main emphasis is on exports. Anyone who wants to grow crops can rent land and receive a non-refundable grant. But that's not all! The state pays up to 70% of the planting material and up to 50% for the installation of the irrigation system.

Startup Georgia focuses on the development of innovation and information technology. Projects aimed at the development of aerospace production, automotive industry, artificial intelligence, robotics, etc. receive funding. The advantage is that investments can reach 100,000 lari, while the applicant himself is not required to participate in the financing. Also, 95% of the equity belongs to the applicant, and 5% belongs to the agency for a period of no more than 7 years. With successful business development in Georgia, Startup participants are sent to Silicon Valley, whose experts work closely with this program.

As noted in the Ministry of Georgia: “In recent years, all these programs have already yielded positive results: more than 60,000 jobs have been provided and up to 11,000 different projects have been funded.” According to the index of economic freedom, Georgia occupies the 12th position (out of 178 countries), which makes it a promising country for foreign entrepreneurs.

What is attractive about this “side of the coin” — opening a business in Sakartvelo (that's what the locals call the country):

• High level of confidentiality — for many Western entrepreneurs, this level is one of the most important when doing business
• Stable economic situation in the country — despite the fluctuations around the world, Georgia manages to maintain a balance in the economy of the state
• An advantageous location — mountains, sea, temperate climate — all that affects the flow of tourists and, accordingly, business income
• The fast process of opening and establishing a company — about 90% of investors, comparing this procedure in European countries, note how quickly and simply they completed all the documents for the transaction
• Well—established trade relations with both European and Asian countries - Georgians are able to negotiate “on the shore”, so many countries are willing to cooperate with them.
• The opportunity to open a company remotely — in the era of online technologies, the government of Georgia supports such a format, which allows you to open a new company without leaving your office, within 10 minutes
• Zero capital gains tax is another advantage for many investors from abroad. While most countries are tightening and raising the tax rate, Georgia supports businessmen here with all its might

It is clear that everyone who wants to launch their new business is faced with the question: what format of company should they open. There are several options in Georgia:

• Limited Liability Company — LLC;
• Joint and Several Liability Company — CCA;
• Joint—Stock Company - JSC;
• Limited Company — CO;
• Individual entrepreneurship — Sole proprietorship;
• The Cooperative;
• A special trading company.

It should be noted that persons of any residency can register a company on the territory of Georgia. This is a big plus for those foreign citizens whose goal is to build a profitable enterprise. For this reason, the main percentage of foreign businessmen decides to open an LLC, since this company is more suitable for large and medium-sized businesses. Both individuals and legal entities can become founders of an LLC. At the same time, there must be at least 1 founder and the number of shareholders must not exceed 50. Another prerequisite for a Limited Liability Company is the name, which must be spelled out in Georgian with an indication of the chosen organizational and legal form. Tax rates must also be taken into account when registering a company. Thus, non-resident companies are subject to corporate income tax, the rate of which is 15%. VAT is 18% and applies to the sale of all goods and services supplied to the country. Customs duties vary depending on the types of products: 0%, 5% and 12%. Interest payments, royalties or other income are taxed at a rate of 15%. It is noteworthy that the state allocates a “Free Industrial Zone” to foreign citizens: the absence of restrictions on the repatriation of assets, exemption from licensing, the presence of multi-currency transactions, uncontrolled foreign exchange transactions. Such “Free Industrial Zones” include: Poti, Tbilisi, Hualing, Kutaisi and the Virtual Zone.
The Virtual Zone is a zone of IT technologies, on which many foreign entrepreneurs have been betting for the last 2 years. Here they are exempt from VAT and income tax, receiving a minimum rate of 5% for the distribution of dividends. Thanks to this tax policy, Georgia is rapidly gaining momentum and is already on the list of leading countries in information technology. Agree, it's nice when the state provides support at this level.

And also about the significant advantages of doing business in Georgia:

• the documentation is stored in electronic form;
• an electronic apostille is in effect (as in the EU countries);
• Georgian corporate law has borrowed the best practices of Austrian and German civil law;
• international accounting standards: IFRS for SMEs;
• business support from international audit companies: Nexia International, KPMG, Grand Thornton;
• The current European Business Association in Georgia, whose activities are aimed at developing a corporate, tax and economic base for foreign businesses.

In conclusion, I would like to recall the phrase of one of the heroes of the film "Do not grieve": "Only we Georgians can do everything." If you have plans to start your own business, start it here — in the wonderful country of the highlanders.