What is a Free Zone?
A Free Zone is a part of the territory (in this case of Georgia) with defined borders and a special status granted by law. The main feature of the special status for a Free Zone, usually implies tax privileges.
Free Zones are used as a Foreign Direct Investment („FDI“) attraction tool for the government. It can give certain tax and non-tax advantages to manufacturing, trading and service providing entities.
What is the advantage of incorporating a Free Zone?
The first and foremost important advantage is that all the companies that register within the borders of the Free Zone (or have an address there) are permanently exempt from all the corporate taxes on export oriented businesses. The other advantages include:
- No minimum capital requirement;
- 100% foreign ownership permitted;
- Fast corporate and private bank account opening in reputable Georgian banks (including full internet banking and various other high-end services);
- A Free Zone Company has the capacity and privileges of an ordinary mainland company and no anti-offshore measures are taken against it;
- No tax on dividend withdrawal;
- No restrictions on number and nationality of the shareholders and directors. Shareholders can be the director at the same time;
- Double taxation treaties in place with over 53 countries.
Do you need to pay corporate tax with a Free Zone company?
No, for (trading) businesses (including international trade) corporate tax is 0% in the Free zones.
Do you need to pay socials on the salaries?
No socials are paid on salaries. A Free Zone company employee does however need to pay 20% income tax from its monthly salary.
Do you need to pay dividend tax?
No, Free Zone companies are exempt from paying dividend tax.
Do you need to pay income tax as a foreigner?
Yes. You need to pay income tax as a foreigner unless your country of residence and Georgia have signed an agreement on avoidance of double taxation. Georgia has signed such agreements with 53 different countries and the list of those countries can be found here.
Do you need to keep accounting records?
As per the new regulations, all companies registered in Georgia must submit yearly financial statements to the Revenue Service (until October 1st, each year). Therefore, companies should indeed keep accounting records.
How many Free Zones does Georgia have?
In total, Georgia has four Free Zones. Two of them are located in Kutaisi, one is in Poti and one in Tbilisi.
Which is the best one?
The conditions in terms of tax advantages and other legal privileges are the same in all of the Free Zones. There are however several differences in services they provide and tariffs charged.
The fastest developing Free Zone for trading and manufacturing businesses is Hualing Kutaisi Free Zone. Hualing Kutaisi Free Zone offers the most competitive prices on licenses and the most flexible conditions for company registration and licensing.
For large industrial projects the Poti Free Zone has larger spaces to offer.
What is the procedure to set up a Free Zone company?
Companies can be registered in the Free Zone through the physical presence of the Beneficiar(y)ies/Director(s) or from distance – through a designated Power of Attorney. Applicants must fill out a simple application form and provide this, together with passport copies of the Beneficiary and the Director of the company (if different from the Beneficiary). Company registration is finalised within one working day, after which the company can apply for corporate bank account opening.