Comparison of Free industrial zones in Georgia

In several years, Georgia had greatly strengthened its positions among investors on a global market. Businessmen from other countries are especially interested in tourist sphere, real estate, and possibility of optimized taxation. The latter is realized in Georgia at a quite high level. We speak here of special territories called Free industrial zones (FIZ). When a company is registered in a free zone, there is no need to pay taxes to the state budget. This is not the only benefit of FIZ. So, how do Free industrial zones in Georgia attract non-residents and what are the basic differences between them?

Свободные индустриальные зоны Грузии

Georgia is the country of business opportunities

Georgia is a small country located in the Western part of the Caucasus and neighboring upon Russia, Turkey, Armenia and Azerbaijan. Available exit to the Black Sea coast makes Georgia the sea gates for countries of the Caspian region, which use its transit resources for delivery of goods to CIS and EU. It should also be mentioned that China had included Georgia in lists of countries-partners of the project “The New Silk Way”. PRC manufacturers plan to supply their products over the Georgian territory to countries of Europe. The country has all chances to become a key logistic, transport and trade unit of the Caucasus region. Still, this requires modernization of the transport infrastructure. With this purpose the construction of the country’s first deep-water port Anakliya, which embodies the highest hopes of the state authorities, was started.

The Georgian government applies a very active policy on a global level, which main purpose is to improve terms of realization of products by local manufactures in other countries. Thus, according to the mid-June 2019, Georgia had concluded agreements on free trade with China, Hong Kong, EU, CIS (including Ukraine), and Turkey. Besides, among countries of the region only Georgia has a free access to the market with population more than 1 billion people, which is often used by investors from neighbor countries. Be registering a Georgian company and obtaining a certificate “Made in Georgia”, they may supply products abroad with avoidance of customs duties.

Providing the presence effect or a substance for companies in Georgia.

Free industrial zone in Georgia – benefits and peculiarities

To attract foreign investments in the country, the government of Georgia decided to establish special territories where registered companies would be exempted from taxation, provided that they sell products abroad.

Not only residents may establish a company in FIZ Georgia; this opportunity is also given to non-residents, who can be a natural person or a legal entity. Nevertheless, most investors give preference to registration of a company through natural persons. This is simpler, as a reduced set of documents is required from a person.

Requirements to legal entities that wish to register in Free industrial zones are similar with requirements to standard companies in Georgia:

  • founders can be residents or non-residents – currently Georgian banks had stiffened monitoring of legal entities from FIZ. Now, opening a corporate account is approved within a week. The process can be highly accelerated if at least one citizen of Georgia is among founders. Presence of a resident among company shareholders will also help to promote the communication with regulatory bodies in future;
  • availability of actual legal address – company obtains this address in FIZ. Due to its availability, the tax service defines that a legal entity has privileges;
  • amount of authorized capital – subject to the legislation, there are no limitations, but the management of FIZ may impose individual requirements on legal entities;
  • hired personnel and director – persons who wish to establish a company in a Georgian FIZ do not have to worry about mandatory hire of certain number of residents. The Georgian legislation does not impose such requirements. The only thing necessary is conclusion of a hire agreement with the director. Director can be a citizen of Georgia or a non-resident.

Apart from the mentioned, a legal entity must obtain a license for working in a Free industrial zone. This can be made at the management of FIZ, having preliminarily submitted documents for registration.

It should be remembered that in the territory of tax-free zones it is permitted to make any business, except:

  • manufacture and trade of weapons, military supplies, nuclear or radioactive substances;
  • import, storage and realization of narcotic and psychotropic substances;
  • import, storage and realization of tobacco, alcohol or other excisable goods;
  • using areas for residential purposes.

Our company will be glad to help in execution of constitutive documents, hiring personnel, opening a corporate account, as well as other issues related to organization of business in Georgia. We have adequate skills and a qualified staff for realization of any business ideas of our customers.

Learn about what non-residents need for starting business in Georgia – the list of basic services for companies in Georgia.

Benefits of registration of a company in FIZ Georgia

The most attractive part of registration of a legal entity in FIZ is, of course, the absence of taxation. All companies, representative offices, sole proprietors, and associations working here are exempted from payment of:

  • corporate income tax – 15%;
  • VAT – 18%;
  • tax on import – up to 18% depending on products;
  • tax on real estate – 1%;
  • tax on dividends – 5%.

Besides, registration of a company in FIZ Georgia is financially sound by the following reasons:

  • no requirement on making reports – other legal entities must submit declarations on income every month. Benefits: no need to spend money on bookkeepers staff;
  • low cost of electric energy and other utilities – services in tax-free zones are not VAT taxed. Therefore, cost of electric energy here is 18% lower. Meanwhile, by this reason in FIZ it is popular to open mining farms for extracting cryptocurrency;
  • absence of VAT reduces the price of construction and repair services, as result of which companies may waste much less money on building premises necessary for business in FIZ itself, rather than in other territory in Georgia;
  • all FIZ are favorably located, near major transport networks;
  • available low-priced human force – many foreign investors establish their manufacturing business here due to cheap human force. In that way, according to the Saxstat in 2018 the average monthly income of one person in Georgia made 318,3 lari (approx. 111 USD);
  • in territories of FIZ there are customs toll booths, access to which are provided 24/7. Also, the entire necessary infrastructure is provided for business purposes: different warehouses, office premises, and land areas;
  • possibility to obtain the certificate “Made in Georgia”, which grants a duty-free access to markets of many countries;
  • territories of Free industrial zones are fenced, around the entire perimeter video surveillance is organized, security is provided;
  • services on infrastructure management are available; it is allowed to also use virtual offices for business;
  • absence of currency control over trade operations, no limitations on payments in different currencies.

If summarized all the above mentioned, a non-resident who registers a company in a Georgian FIZ significantly reduces his expenses for: taxation, logistics, human force, utilities and construction services. This makes international business particularly reasonable in the Georgian jurisdiction for companies that wish to seriously cut administrative and tax expenses. For many potential investors is also very important that Georgia does not participate in the system of automatic exchange of financial information between tax bodies of different countries. As result, a high level of business confidentiality that can be enhanced even more by using nominal service is provided. In Georgia, all the information on legal entities and sole proprietors are kept in a public register that is available to everyone. Anyone interested can get information on founders and managers of a company, as well as obtain other important information. Nominal service helps to avoid disclosure of information related to shareholders and managers of legal entities, which is the essence of this service.

To increase the level of business confidentiality, we recommend to use the nominal service.

Comparison of Free industrial zones of Georgia

As of June 2019, 5 Free industrial zones operate in Georgia, which are located in the following cities:

  • Tbilisiи;
  • Kutaisi;
  • Kutaisi Hualing;
  • Poti;
  • Kulevi.

The last zone is at the establishment stage and is not functioning yet. The government of Georgia decided to create a tax-free zone in Kulevi back in 2012. Still, the infrastructure is not ready yet for servicing of legal entities. FIZ Kulevi is designed for entities that deal with oil products. The zone provides the entire necessary infrastructure – containers for storage of oil products and natural gas are available.  

Comparison of operating Free industrial zones of Georgia

  Tbilisi Kutaisi Kutaisi Hualing Poti
established in November 2015 June 2009  July 2012 June 2008
area 17 ha 27 ha 36 ha 300 ha
zone administrator BitFury Group (Holland) ООО Georgian International Holding (final beneficiary Fresh Electric Company (Egypt)) Hualing Group (China) 75% CEFC China Energy Company Limited (China)

10% Government of Georgia

15% Governmental entity of the emirate Ras-al-Khaimah

license price Special license for one product/service – 4 000 USD per year

General trade license for product/service — 8 000 USD per year

4 000 USD per year (one license for all types of activity) Special trade license for one product – 4 000 USD per year

General trade license — 7 000 USD per year

Special/General license for services — 4 000 USD per year

Special trade license for one product/service – 5 000 USD per year

General trade license — 10 000 USD per year

 

virtual office lease free free 1 200 USD per year 1 900 USD per year
significant benefits · located in the capital of Georgia;

· Tbilisi has better developed infrastructure, representative offices of many Georgian and international companies, corporations, banks;

· Tbilisi international airport

· cheap human force;

· low prices for residential services, food, clothes;

· available railroad track that may receive long rakes

· one license is enough for any type of activity

· cheap human force;

· low prices for residential services, food, clothes;

· available railroad track that may receive long rakes

· located in the close proximity to the sea port;

· the largest area;

· the widest selection of different structures;

· small railroad branch (can receive rakes consisting of 5 wagons maximum and a locomotive)

popular types of activity IT technologies, mining farms, processing, pharmaceutics, light industry, logistics, warehouse storage mining farms, production of household appliances, sewing industry various productions, including  ferrous alloys, solar batteries, paper, mattresses, furniture, construction materials various productions, including  lubricants, roofing, packing aromatizers, trade and logistics, warehouse storage, heavy industry

It should be noted that currently in Poti and Tbilisi FIZ there is no possibility of renting warehouses, because all of them are employed.

Approximate prices for rent in tax-free industrial zones:

FIZ Warehouse, USD per year Land area, USD per year Office, USD per year
Kutaisi 40-45 from 20 70
Kutaisi Hualing 40-45 from 20 70
Poti 75 from 7 130
Tbilisi 75 from 20 from 100

Summarizing the above, it can be said that Tbilisi FIZ will be interesting for non-residents who need to organize production in the capital of Georgia. This is not only the access to the most developed infrastructure in the country, but reputation as well. Free industrial zone Poti is aimed for large production and trade, which is promoted by huge territory and availability of a sea port. Kutaisi and Kutaisi Hualing – both these zones share the territory of the former automobile factory; the entire necessary infrastructure is available, as well as cheap human force for organization of a small production or assembly.

If you are interested in opening a company in any of Georgian Free industrial zones, please contact us at: info@offshore-pro.info. We will help you to select a tax-free territory and will prepare all necessary documents for registration of a legal entity in the shortest time and with account of your preferences.


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