Last times, I have been often asked about Free Trade Zones in Georgia. Some is interested in Tbilisi Free Trade Zone, Some in Poti Trade Zone. This made me write this blog post today. My aim Is to analyze their offer. To give you Pros and Cons. Is It Truly worth or not to start your company in Free Trade Zone of Georgia? Some people may now have comprehensive understanding of consequences when they start there. It’s obvious, you need to have an in-depth understanding of Georgian Tax Code and Legislation in order to analyze how good is this offer for your requirements. This is why I am here, to compare their advantages with disadvantages, give you clear vision and let you decide are you going to start your business in Georgia on your own or you will still go with Free Trade Zone Services.
Declaimer
This Article is most Beneficial for those who seeks for Import-Export Business and Service Companies Serving Non-Resident companies in Georgia. This Blog is prepared by based on the legislation information effective as of the date of its
preparation. It is prepared solely for informative purposes and cannot substitute legal advice and/or cannot be used by third parties for similar purposes. Blog contains general information and does not list any and all items related to the reviewed issue in details. This Brochure is limited to the matters directly addressed herein and shall not be deemed applicable to the explanations,
clarifications or matters other than expressly contemplated herein.
Tbilisi Free Zone Advantages - Is It Real?
I decided to construct my blog the following way: I am going to follow advantages that they state and give you my overview about them. I aim to answer the question – Is the Free Trade Zone advantages real? Here you can find official website, from where I am taking the whole information.
Claimed Tax Advantages
My Comments
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Interest and Dividend paid by a Free Industrial Zone Enterprise is not taxed and is not included in the taxable income base of the receiver
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Income of a Free Industrial Zone Enterprise is exempt from the Corporate Income Tax
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Free Industrial Zone Enterprises have no obligation to administer personal income tax of the employees
- Free Industrial Zone Enterprises are not liable to asses and pay Reverse Charge VAT (RCVAT)
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Export is exempted from VAT with the entitlement to tax credit
- Property, including land, located in a Free Industrial Zone is exempted from property tax
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Well, this sounds a great offer. Total Profit ( Corporate Income) + Dividend tax in Georgia is 20% of a tax base. TAX base is your net profit throughout the year. Profit tax is payed once in a year. Of course, this sound like a great deal. You can minimize your profit tax to ZERO. This is dream of each company. However, here you need to consider the fees and commissions that Free Industrial Zone Requires for its' service.
> Company Registration with them one time payment is - 2000 USD
> Annual License Fee for One exact service - 4000 USD. If your company does have different activities, than you can obtain general license for 8000 USD. Speaking in numbers, If your net profit comprises of less than 40 000 USD this offer is not profitable for your Business. Due to the fact that, you need to pay more commission that your tax would be. In other words, if you are completely sure that your year end profit tax base will be over 40 000 USD you should go for this offer. Otherwise, you pay more than it would be required if you would not deal with TFZ.
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There is personal income tax, which consist of 20% of the Gross salary that you pay to your employees. Personal income tax base is Gross Salary of employee. In other words, if you do not have an employee you are not obligated to pay income tax in Georgia. You are not exempt of Personal Income tax when you are licensed by TFZ.
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This is the most interesting and tricky part for me. Reality is that, in General, re-exporting activities in Georgia is TAX exempt. No matter are you registed with Free Trade Zone in Georgia or not, you are not liable for VAT tax when re-exporting. So, if your primarily goal for registering in Free Trade Zone in Georgia is to Minimize your VAT Tax than think twice, is It worth to pay above mentioned commissions when you are Tax Exempt anyways?
- Resident Enterprise is liable to pay property tax on an assets recorded as the principal means of its balance. There are equipment, construction, as well as leased property. Means, that you are not obligated to pay property tax for the properties that are owned by other Companies/Individuals . Maximum rate of Property Tax on Assets owned by Companies is 1%. You are free of this tax if FIZ. On the other hands, there is fees for renting an office or warehouse in FIZ. Minimum rental space with Tbilisi Free Industrial Zone is 100 sq.m with Anual Price ofr 70-80 USD per sqm. Which means that monthly rental fee is around 650 USD. I believe, you can rent warehouse or office for cheaper price. So, here, make sure how much would cost your assets and how much would be Property tax without Free Trade Zone and than compare with rental commissions they ask for and ordinary prices to make sure how beneficial this offer is for you.
Once again, that is just a general overview for companies who plan re-exporting from Georgia or plan to have Service company serving non-resident enterprises. How is It worth for those companies to operate with Free Economical Zone. For other kind of companies, I would suggest you to directly contact me and I will try to prepare for your personal needs detailed overview. Here You Can contact me
Disadvantages for Operating in Tbilisi / Poti / Kutaisi Free Trade Zone
- High Registration Fee - 2000 USD to Incorporate company with them. Legal fee for company incorporation without their hellp is around 100 USD. Well, you might still need help of an agent who has some experience in there, but It will never cost you 2000 USD. For more details about company formation procedure in Georgia and useful information of Business Registration refer click the button down below.
- High Membership Commission - Which is 4000 USD anual for single activities. For General License 8000 USD
- High Rental Fees - 80 USD per sq.m annually. Minimum 100 sq.m to be rent
Recent Update
- Georgian Banks no Longer Support Free Trade Zone Companies. They literally do not open Bank Accounts for those.
Expats.