CM MARCH 2022

COUNTRY FOCUS
AUTHOR – Adam Bernstein
of Georgia. and by 2024, the construction
of 200 km of new highways will have been
completed.
SETTING UP SHOP
Under Georgian law, legal entities are
divided into two broad categories:
entrepreneurial legal entities and nonprofit
legal entities. Individuals may also
conduct business as sole proprietors
without establishing any separate legal
entity. Companies are required to have
their own name, management and
registered offices. However, in addition
to their legal address, entrepreneurial
legal entities may submit an alternative
legal address and email address to the
registration authority information.
Companies established in Georgia are
subject to Georgian law, but agreements
concluded by Georgian companies can be
governed by the law agreed between the
parties, unless otherwise determined by
the Georgian Act of International Private
Law. Foreigners can become a partner or
be appointed as director of a Georgian
company; permits are not required to
do so. But where a foreigner seeks to
become a partner in a company, that
owns agricultural land, restrictions might
apply.
TAXATION
BDO details that Georgia permits
International Financial Companies,
Special Trading Companies, Free
Industrial Zone Enterprises, Special
Trading Zones and Tourist Enterprises
as special purpose entities that enjoy
beneficial tax regimes. In terms of tax
rates themselves, corporation tax is levied
at 15 percent, income tax at 20 percent flat
rate, VAT at 18 percent, while capital gains
operate on two rates – five percent for
individuals and the normal corporation
tax rate for businesses.
It should be said at this point that a new
corporation tax regime came in from 2017
where, for most sectors, undistributed
profits remain untaxed until they are
distributed. The old regime applies
to commercial banks, credit unions,
insurance companies, microfinance
organisations, and loan providers until 1
January 2023.
With regard to VAT, an entity established
in Georgia must register as a VAT payer
when its taxable turnover exceeds 100,000
GEL, around £24,000, in any continuous
12-month period. However, the Georgian
fixed establishment of a foreign taxable
entity is liable for VAT registration from
the beginning of taxable operations.
And there is a special tax regime for
individuals with annual turnover of
less than 30,000 GEL (around £7250),
no employees, and who register as a
micro business – they will be exempt
from tax on their business income.
Individual entrepreneurs with
annual turnover of less than
GEL 500,000 (around £121,000)
may register as a small business
and pay 1 percent tax on
their turnover. The rate increases to 3
percent if annual turnover exceeds GEL
500,000.
INTELLECTUAL PROPERTY
Georgia has signed treaties and enacted
legislation to comply with its international
obligations with regard to intellectual
property rights. However, in the opinion
of the US Government, protection and enforcement
of rights “remains problematic.”
However, the Government has taken
several steps to introduce better practices.
In addition, the EU-Georgia Association
Agreement signed in 2014 mandates
improved performance in this regard.
Companies wanting to operate
in Georgia need to understand that
intellectual property is primarily a
private right, and it is the responsibility
of the rights’ holders to register, protect,
and enforce their rights where relevant,
retaining their own advisors.
The US Government advises conducting
due diligence on potential partners as a
good partner is important in protecting
IP rights. Thought should be given as to
whether partner should be permitted to
register IP rights on an entity’s behalf.
Doing so may create a risk that the partner
will list itself as the IP owner and fail to
transfer the rights should the partnership
end.
IN SUMMARY
It’s quite clear that as a small, post-
Soviet country, Georgia has a number
of challenges that it needs to overcome.
However, it is a country that is most
definitely business-oriented.
Traditional Kharcho beef
soup from the country Georgia
served with a dried hot pepper
and sliced lemon.
Brave | Curious | Resilient / www.cicm.com / March 2022 / PAGE 27