Frequently Asked Questions (for Startups)

There are several Legal entity types in Georgia:
Joint-Stock Company (JSC)
Limited Liability Company (LLC)
General Partnership (GP)
Limited Partnership (LP)
Cooperative (CO)

Let’s have a look at each in detail:

Joint-Stock Company (JSC)
A Joint Stock Company is a legal entity where liability to creditors is limited to its own assets and capital is divided into shares, classes, and quantities, which are set by the company charter.
Unlimited number of founders are allowed; founders can be from any place (i.e. not limited to Georgia.) Shareholders can be natural persons or legal entities. 
Submits monthly Corporate income tax, income tax, and VAT declarations if applicable. Investors who want to open a company in Georgia as a joint stock company must know that they can have the possibility of registering the company’s shares with the Georgian Stock Exchange.
It is necessary to subscribe a minimum share capital 100,000 GEL.
If the number of shareholders exceeds 50 members, they have to be registered by an independent register.
The supervisory board of a joint-stock company shall comprise at least three members. The statute may provide for a maximum number of members.  If a joint-stock company is an accountable determined by the Law of Georgia on Securities Market, whose securities are admitted for trading on the stock exchange, or if a joint-stock company is licensed by the National Bank of Georgia, it is mandatory to establish a supervisory board comprising at least 3 and not more than 21 members.

Limited Liability Company (LLC)
The most suitable business form available for small and medium-sized companies with shareholders’ limited liability.
Submits monthly Corporate income tax, income tax, and VAT declarations if applicable.
According to the new Law on Entrepreneurs the procedure is simplified to attract new capital in an LLC. Noting that the capital requirements of an LLC are more flexible than the respective requirements regulating a JSC. Among other aspects, such flexibility is reflected in novel regulation permitting an LLC to issue different classes of shares. It is anticipated that the changes envisaged under the Law will support an LLC to the maximum extent possible to adjust its subscribed shares to the investor’s requirements, including to issue shares with nominal value or no-par value shares. In a statute or a partners’ agreement a limited liability company may establish rules different from those provided by the Law, unless it is clear from the content and purpose of a provision in this Law that it shall prevail in the event of a conflict with said rules.

Partnerships and Cooperative
The general partnership is formed by at least two partners, one who has limited liability and the other one who has full liability for the company’s debts;
The limited partnership – all the partners bear the same level of responsibility towards the company’s debts;
The cooperative – it is set up with the purpose of increasing the members’ profits and to represent their business interests.

Branch office
The branch office does not represent a separate legal entity, as it is considered a sub-division of the parent company.
This business model can be used by companies interested in holding the control of their other business locations, as the branch office is not entitled to take its own management decisions, nor can it develop other business activities than the ones of the parent company.  Investors who are interested in setting up a branch office should also be aware that any debts the branch may have in Georgia will need to be paid by the parent company, as the parent company holds full liability and this can be seen as a disadvantage.
When opening a company in Georgia as a branch office, the investors should prepare the following documents: personal identity documents, the registration certificate of the parent company issued in the country where the company was incorporated, the decision to establish a branch in this country, signed by the authorized person representing the parent company and other specific documents. 
Even though the branch office is not a separate legal entity, the commercial legislation requires this entity to have a separate corporate bank account, which can be set up in the Georgian currency or in a foreign currency. 

Subsidiary, Joint Venture
In the case of a subsidiary, it must be incorporated under one of the business entities available in Georgia (generally, it is set up as a limited liability company). 
A business in Georgia may also be set up through a joint venture. The joint venture is generally designed for infrastructure projects or other similar, large investments and it is formed through the association of at least two entities, with the purpose of accomplishing a specific business task. Once the company accomplished its business objective, the joint venture will be closed down.  

A little about: Law of Georgia on Entrepreneurs
The regulations contained in the Law of Georgia on Entrepreneurs equally apply to foreign and local companies. Therefore, foreign nationals are eligible to incorporate legal entities considering the absence of any applicable legal limitation. 

General Rules Applicable to All Types of Business:
The registration of companies is conducted by the National Agency of the Public Registry operating within the Ministry of Justice of Georgia. Once the registration process is duly performed the Public Registry shall issue a corporate extract indicating the identification data of the company. All and any document submitted before the Public Registry in course of the registration process is publicly available.
The instrument of incorporation of a company is necessary to establish a company. The instrument of incorporation of a company shall be drawn up in a written form and shall be signed by all founding partners of the company. The instrument of incorporation of a company should contain its charter and the data determined by the Law.  In the absence of a charter drawn up by the founders, a standard charter shall be considered as part of the founding documentation of a company.
Charter Capital – Under new law Company have to indicate the amount of its Charter Capital on the documents submitted to the Public Registry.
Stamp – Companies in Georgia are not required to maintain a stamp.
Apostille / Legalization – the documents executed in countries other than Georgia shall be notarized and legalized or apostilled in a manner duly applicable to the respective procedure.
No requirements for local shareholders or local resident management apply.
A company needs to have a registered office address. the registered office of a company does not have to be a commercial space. 
The most important step in company registration is to have articles of association fully in accordance with the law.
Registration with the local tax authorities
First registration for getting a tax code is performed directly at the Public Registry of Georgia when registering a company itself.
Later a company must be registered for using Online services.
All other procedures including Registering as a VAT payer is performed electronically through personal Revenue Service page.
Every company must have active Bank account to be able to use all other online services, including monthly declarations (consignment notes, invoices).

Taxes in Georgia:
Corporate Income Tax (CIT): 15%.
The so-called Estonian CIT model is applied in Georgia. Meaning that such tax is payable only upon the distribution of dividends by a company. In other words, companies in Georgia do not pay any corporate income tax until the profit is distributed to the shareholders except some cases when a transaction is deemed to be profit distribution. If the company makes the decision on profit reinvestment, NO CIT is paid on reinvested amount.
Notably, there is no special tax on capital gain in Georgia. It falls under the general CIT rules and 15% tax is payable only after the distribution of such profit.
Personal Income Tax: 20%.
Wage Tax: 20% + Contribution to the pension fund on company’s name 2% + contribution to pension fund on behalf of employee 2%.
VAT: 18%.
Withholding tax on service remunerations to non-residents: 10%.
Withholding tax on service payment to resident non-registered natural persons: 20%.
Withholding tax on dividends: 5%. Applicable in case of payment to both, residents and non-residents.
Withholding tax on royalty: 5%; Applicable in case of payment to both, residents and non-residents.

Requirements for audit of a company
From 1st October 2018, directed by EU-Georgia Association Agreement for Georgian Companies it became mandatory to publish audited financial statements prepared in accordance with IFRS standards If category of a company is I or II. It means that 2 of 3 criteria are met: total assets are more than 10 mill GEL; income is more than 20 mil GEL; more than 50 employees.