Dateline: Tbilisi, Georgia
The unfortunate truth is that there is a shortage of attractive places to start a business these days. The US economy is not as dynamic as it used to be and the European Union is crippled by excessive red tape and high taxes.
Even the private sectors of so-called “emerging” economies like China, India, and Turkey are held back by corruption, poor infrastructure, and unpredictable government policy.
Is there any good news hidden under all the gloom and doom? Yes! There are still a few fertile entrepreneurial fields to be sewn.
Georgia is one example.
This once-crumbling, post-Soviet country has remade itself as a welcome destination for businesses of all sizes, and is a great place to start an offshore company or establish tax residency.
As a developing country, Georgia needs access to foreign capital, as well as an influx of skilled, enterprising people. Recognizing these needs, the government has made its mission over the past decade to ensure that starting a company in Georgia is as simple and cost-effective as possible.
The fruits of Georgia’s business-friendly policies are blossoming. This year the country ranked 24th in the World Bank’s Doing Business Survey, due in large part to being ranked 6th in the world on ease of starting a business.
Why You Should Start an Offshore Company in Georgia
Firstly, consider why starting a business in Georgia might be a good fit for you. It’s a country of fewer than 4 million people, but it lies right on the boundary of Europe and Asia and enjoys good economic relations with the EU, US, China, Turkey, and Iran (with almost everyone, in fact).
Georgia signed a deep and comprehensive free trade agreement with the EU in 2014 and is currently negotiating a free trade deal with China. Plus, the country’s business community is hopeful that a similar deal with the US will be reached in the coming years.
Companies such as China’s Hualing Group have taken advantage of the country’s liberal trade regime by using Georgia as a hub for transporting goods between the two continents.
What’s more, Georgia has vibrant service, tourism, and real estate sectors. It has attracted forward-looking business people from around the world.
What Kind of Company You Should Start?
Georgia’s start-up sector is covered by the Law of Georgia on Entrepreneurs, which was first passed in 1994 and has been amended several times since to make corporate governance more efficient. The country’s legislative and regulatory framework covers the following types of companies:
- Joint Stock Company (must register)
- Limited Liability Company (must register)
- General Partnership (must register)
- Cooperative (must register)
- Sole Proprietorship (must register, but not a legal entity)
- Joint Venture (registration is not required)
- Branch Office (must register)
- Limited Partnership (must register)
Whichever of the above models describes your operation, starting an offshore company in Tbilisi or other cities in Georgia is nearly cost-free. An interested entrepreneur must simply pay the new business registration fee of 100 Georgian Laris (about $40 at the current exchange rate).
Streamlined Procedures for Starting an Offshore Company
In addition to keeping costs down, the Georgian government has made the process simple for those with little knowledge of how to start a business. Here are a few main features:
- A single registration process for both state and tax purposes
- No minimum capital requirement
- The company charter can be in any language
- Only two registration procedures are required
Once you’ve decided that this charming locale is the place where you want to make an offshore investment by starting a business, the process is a snap.
First, you pay the very reasonably-priced registration fee. Next you register your company with the National Agency of the Public Registry. This process requires a few steps: First, submit the completed application, a notarized copy of your company charter, and a document proving that you paid the registration fee.
The process also requires you to attach a document confirming your legal occupancy of the premises of your new company’s registered address and the written consent of your company’s appointment director to serve in the position (Georgia is welcoming to start-ups, but still imposes certain conditions).
Registering a Branch Office is slightly more complex than the other cases, as you’ll have to submit additional documents pertaining to the company’s establishment outside of Georgia.
Once you’ve paid the fee and submitted your completed application, you’ll also need to open a bank account in Georgia. Fortunately, the country’s retail banking sector is surprisingly well developed. You’ll also find the customer service in Georgia’s banks is without question the best in the former Soviet Union.
The Georgian Model Will Help You Pay Less in Taxes
Once you have established an operation in Georgia, you’ll find taxation to be much lighter than in nearly any European country. There is a corporate tax rate of 15 percent, a flat income tax rate of 20 percent, a 5 percent tax on dividends and interest and a 1 percent tax on property.
Plus, there is no capital gains tax.
However, Georgia’s taxation system still has some kinks to work out, so contacting an expert is probably a worthy proposition.
Other Important Information to Know
Georgia has no capital requirements for starting a company. However, you will need to prove legal occupancy of the premises. This may involve purchasing property in Georgia.
Fortunately, foreigners have property rights on an equal plane with citizens of Georgia (for a time foreigners were restricted from buying agricultural land, but in 2014 the law was revised to open the market to non-Georgian citizens).
Registering your purchase of immovable property is simple. You must simply submit an application as well as attach a notarized version of the contract, documents proving your identification, and ancillary documents.
Procedures are similar if your offshore company is to be registered on rented premises, the only difference being that you will be required to submit a notarized copy of the lease agreement.
If you believe that Georgia may be the right place for you to start an offshore company and/or obtain a second passport, apply for a personal Strategy Call with us. We can help you determine the right course of action for your preferences and situation.