Quality government investment incentives in Georgia in 2023
The Georgian government offers a range of incentives to foreign investors, including those in i) IT services ii) manufacturing and iii) real estate & hospitality.
Why set up a Georgia Free Zone company?
- Georgia Free Zones companies enjoy simplified procedures for obtaining licences/permits. That said, our multinational Clients should be aware that it is extremely difficult to open a corporate bank account for a services-related Free Zone company. Banks overwhelmingly prefer manufacturing and export-orientated businesses. For companies providing services, we recommend they apply for Virtual Zone status (see under IT incentives below).
- Full exemption from corporate income tax.
- Full exemption from VAT for goods produced outside Georgia and imported into Georgia Free Zone warehouses.
- Just 4% tax on profits on trade between a Free Zone and Georgia mainland company.
- A free zone company that produces goods for export can apply for a licence from the Ministry of Finance. This licence enables the company to import raw materials free of import, customs and value added tax.
- A free zone company can conduct activities anywhere in Georgia (I e outside free zones) as a permanent establishment of a foreign company.
- A Georgia-incorporated company can freely repatriate profits and capital outside the country. There are no controls on foreign exchange.
Incentives for export-oriented companies
- Georgia is a member of, and signatory to, major trade organisations and agreements including WTO, DCFTA, EFTA and a General Schemes of Preference (GSP) with the USA, Canada and Japan. Georgian exports therefore have a huge potential tariff-free market of about 2.3 billion people.
- Georgia has free trade agreements with the world’s largest economies and economic blocs such as the US, the EU and China.
- Georgia’s import tariffs are low, at between 0% and 12%.
- Exports and re-exports from Georgia are free from customs duties.
- VAT and excise duty rates are the same for both locally-manufactured and imported goods.
Incentives for manufacturing companies
- Georgia’s geographical location, located between Europe and the Middle East, is good for manufacturers since transit lead-times are shorter.
- Utility costs in Georgia are low, which attracts energy-intensive industries such as manufacturers.
- Manufacturing companies can access public and private government funding, including i) 11.5% co-financing of bank loan interest for the first 36 months (minimum loan volume US$16,300) ii) 13.5% co-financing of the annual interest rate for the first 36 months (for the project value at least US$16,300) iii) access to technical assistance associated with business development and operational improvements to a value of US$3,262.
- Project financing can also be accessed through the Partnership Fund, Georgian Energy Development Fund (GEDF), or Georgian Co-Investment Fund (GCFUND). To date, almost 350 manufacturing projects in Georgia have received US$325 million in funding. The program prioritises textiles, wood processing, chemical manufacturing, metals & plastic product, electrical equipment and mechanical engineering.
Incentives for hospitality
- Government incentives are available to local and international hotel brands in the form of i) co-financing of the bank loan interest rate for the first two years, ii) co-financing on franchising/royalty fees (up to US$97,800 annually) iii) co-financing of consulting services, business matching, installation of technology and innovation, skills development, quality management, standardization, etc.
- Free Tourism Zones in the regions of Anaklia and Kobuleti were created to attract hospitality investment. Benefits include i) low rates for land purchase ii) government technical support to build infrastructure iii) simplified procedures to secure building permits iv) exemptions from property and profit taxes until 1 January 2026 and v) free casino licences for hotels with over 80 rooms.
- Multinational Clients involved in software and other IT-related fields can apply for Virtual Zone Person (VZP) status if they offer their services to Clients not resident in Georgia. VZP status means i) no corporate income tax on revenue ii) no VAT on services delivered outside Georgia iii) simple procedures & regulation iv) low company maintenance costs and v) qualified labour.
- However, a company providing services outside Georgia after having obtained VZP status will pay 5% withholding tax on dividends.
- We recommend VZP status for any company offering services of any kind, because it is easier to open a corporate bank account than for a Free Zone company.
Transport and logistics incentives
- Georgia is located between Europe and Asia, and the government promotes the country as a major regional transport and logistics hub.
- In 2017, the Baku-Tbilisi-Kars (BTK) Railway was completed, linking Georgia with Azerbaijan and Turkey. An East-West Highway Corridor is under construction. The government is likely to continue to prioritise transport infrastructure development.
- For investors in this sector, Georgia offers i) transparent, fast customs clearance via a network of modern customs clearance terminals so transit of goods can be completed in just minutes and ii) tax-free transit for goods.
Let us know if you need Healy Consultants Group’s assistance to determine how to access the Georgian government’s quality investment incentives.