Registration of sole proprietor in Georgia

Acting as a sole proprietor is the most popular form of business in Georgia. As of 1 February, 2019, the number of active sole proprietors in the country made 96 866, which is 53,63% of the total number of all active economic subjects. The interest in this form of business is explained by simplicity of registration. For sole entrepreneurship, there is no need in formation of an authorized capital or hiring employees; also beneficial taxation terms are applied. Absence of strict requirements to those who wish to become proprietors stipulates the interest to this form of business organization among non-residents as well.

Peculiarities of sole entrepreneurship in Georgia

All aspects of establishing and performing business in the form of sole proprietor are regulated by the law “On entrepreneurship” and the Tax Code of Georgia. Subject to the first legislative act, entrepreneurship means legal and continuous activity aimed at profit making. As residents of Georgia, so as non-residents or people without a residence can act as a sole proprietor. Moreover, the Georgian legislation treats loyally businessmen from other countries who wish to operate in the territory of Georgia.

Still, there are certain sectors where a citizen may not perform proprietor activity. These include:

• science;
• art;
• medicine;
• architecture;
• advocacy;
• notary system;
• rural or forestry business;
• consultation or audit services.

All people registered as sole proprietors in Georgia are filed under the public Register of proprietors and non-commercial legal entities. A new sole proprietor only becomes valid after information on him is shown in the Register.

Subject to the Georgian legislation:

• sole proprietor is responsible before creditors for his obligations with all his property (movable or immovable). In case of cancellation of his registration, the legal successor and executor of all debts is the corresponding natural person. It should be noted that the applicable international legislation allows creditors to collect debts from foreign assets as well;
• regarding any business relations, a sole proprietor acts in his/her name. Nevertheless, the name can be amended provided that it does not confuse customers.

the main challenge in establishment of a sole proprietor for non-residents is the absence of the registration address. Without this address it is impossible to file an application for registration. To solve the problem, there are two ways for non-residents:

• to ask help at citizens of Georgia;
• to purchase property and obtain a resident permit. It should be remembered that soon for obtaining a temporary permit one will have to spend not 35 000 USD, but 100 000 USD for the purchase.

Resident permits in Georgia

Registration as sole proprietor in Georgia

Acceptance of documents for registration of a sole proprietor in Georgia is made by Houses of Justice. Houses of Justice are presented in all major cities of Georgia, including Poti, Batumi, Kutaisi, Telavi, Gori, Borjomi, Senaki, and Tbilisi. An application can also be filed in the Agency for Development of State Services.

An application for registration of a sole proprietor is submitted in Georgian language personally or through an authorized representative. Therefore, it is recommended to execute and submit documents by a native speaker, because an official of the House of Justice will speak Georgian.

An application for registration should provide:

• full name of an applicant;
• information on location;
• personal number – provided in the identity card (ID card); people without the Georgian residence are assigned 9-digit identification number;
• date of completion and signature;
• contact details: phone number and email;
• another legal address for correspondence.

An application itself is completed by an operator. Except this document, a non-resident should provide an international passport or other document verifying identity, resident permit, ID card, and bill on payment of the state fee for registration as a sole proprietor.

Please keep in mind that if a non-resident registers as a proprietor at address different from what stated in the identity card, and this property is not his own, he/she should also provide:

• notarized consent for using the address from the owner of the property;
• rental agreement.

The price of service of registration of a non-resident in Georgia as a sole proprietor traditionally depends on speed of execution of documents:

• the same day – 50 lari (approx. 20 USD);
• the next day – 20 lari (approx. 8 USD).

Upon obtaining the extract from register, a sole proprietor should register an account here on the site of the tax service: https://eservices.rs.ge/Registration.aspx.

Types of entrepreneurship in Georgia

Tax administering of sole proprietor in Georgia

Another great advantage of operating as a sole proprietor is few tax and bookkeeping reports that should be regularly prepared and submitted to control bodies.

Declarations can be either brought to tax bodies personally or sent via registered mail or electronic service. Reporting is submitted on a monthly basis, before 15 day following the reporting month.

Status of small business for businessmen in Georgia

Businessmen with an annual turnover not exceeding 500 000 lari (approx. 185 000 USD) can obtain a status of small business. If the condition is fulfilled, a businessman should address the tax body for execution of a corresponding certificate.

Please note that the status of small business can be lost if:

• during two successive years annual turnover exceeds 500 000 lari;
• businessman started activity that is not provided for people with small-business status;
• person was charged a penalty already 3 times per year for breaching rules of using cash register.

A businessman with status of small business pays the turnover tax in amount of 1%, if his annual income does not exceed 500 000 lari. If an income is bigger, taxation rate increases up to 3%. Nevertheless, it is less than before – until July of 2018 the tax rate made 5%.

Sole proprietors pay annual tax fee, on a quarterly basis, in the following amounts according to the schedule:

• not later than 15 May – 25%;
• not later than 15 July – 25%;
• not later than 15 September – 25%;
• not later than 15 December – 25%.

A mandatory condition for representative of small business is filing a special bookkeeping journal (permitted in printed or electronic form), where profit and expenses of a businessman are shown.

Besides, representatives of small business are not obliged to pay taxes on the salary paid to a hired employee in amount not exceeding 000 lari, if any of the following conditions is fulfilled:

• natural person was registered as a sole proprietor and obtained status of small business the same year;
• overall income for previous year does not exceed 50 000 lari.

Georgian proprietors-VAT payers

Sole proprietors must register as VAT payers if the overall amounts of VAT-taxed operation for continuous 12 calendar months exceeded 100 000 lari. In such a case, proprietors should not later than 2 working days after exceeding the stated sum file an application for registration of VAT payer. VAT rate makes 18% of the sum taxable turnover or product import.

Declarations on VAT should be submitted not later than 15 day of the following month, also in this period the tax itself should be paid.

Person of virtual zone in Georgia

Status of micro business in Georgia

This status is assigned only to natural persons who independently lead business without hired employees, while their annual gross revenue does not exceed 30 000 lari (approx. 11 000 USD).

This status is beneficial because it exempts a natural person from payment of income tax and using a cash register.

It should be mentioned that the Government of Georgia defines a number of activities prohibited for natural persons with the status of micro business. This status is also nullified by the following reasons:

• if, as result of tax inspection, a stock of products for amount of more than 45 000 lari was found;
• registration of a person as VAT payer;
• upon request of a person.

Persons having the status of micro business should always state this when invoicing for their products, and also provide the certificate number in invoices.

Sole proprietor is the simplest and the most available form of business in Georgia that will suit non-residents who wish to start a small business here. Benefits of his form are: moderate tax burden, minimum tax reporting, and possibility to request state support. Moreover, sole proprietorship is a nice variant for obtaining resident permit.

If you have questions on registration of a sole proprietor in Georgia, please contact us at: [email protected]. We will help you to establish a small business in the nearest time.