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The path to successful company formation: How a company in Georgia means only 1% tax burden

Written by Ulrich Herzog | May 2, 2024 10:51:54 AM

In this blog post you will learn how you can successfully set up a company in Georgia with only 1% tax burden.

The most important thing

Georgia has a particularly attractive tax regime for certain companies, known as the "1% tax regime". This model offers a significant tax reduction and is particularly interesting for small entrepreneurs and start-ups. Here is a descriptive text explaining the most important aspects of this scheme.

In Georgia, certain types of companies can benefit from a remarkably low taxation - the 1% tax regime. This scheme is primarily intended for small businesses and start-ups that generate an annual income of less than 500,000 GEL (approximately 160,000 USD). Under this scheme, companies only pay 1% of their turnover as income tax, instead of the usual higher tax rates.

The 1% tax scheme aims to promote entrepreneurship and stimulate economic growth in Georgia. It is ideal for new and growing businesses that want to minimise their operating costs and increase their competitiveness. To be eligible for this tax relief, companies must fulfil certain criteria, which are primarily focused on their turnover and business activities.

In addition, Georgia offers a stable economic environment and a strategic location that facilitates access to European and Asian markets. This, combined with the low tax burden under the 1% regime, makes Georgia an attractive location for business start-ups and business expansion.

Legal form and liability

The 1% tax regime in Georgia is an attractive option for small businesses that fulfil certain criteria. In order to benefit from this tax rate, it is crucial to choose the right legal form. In Georgia, this scheme is specifically available to individual entrepreneurs (sole proprietorships) operating in certain economic sectors.

Individual entrepreneurs, on the other hand, can be subject to unlimited liability, which means that personal assets can also be used to cover business debts.

Prerequisites

Income limit: Companies must generate an annual income of less than GEL 500,000 (approx. USD 160,000).

Business activities: The 1% scheme applies to businesses in specified sectors to be determined in Georgia. These may include IT services, consulting and other service orientated industries.

Registration and reporting: Companies must be properly registered in Georgia and report their turnover transparently and in accordance with Georgian tax laws.

Tax obligations

In addition to the 1% income tax, companies covered by this scheme must also deal with other tax obligations in Georgia, such as VAT (if applicable), and ensure that all tax requirements are met.

Dealing with authorities and formalities

Registering a company in Georgia is considered one of the fastest and most straightforward processes in the world. This procedure is characterised by digital efficiency and a minimal bureaucratic burden, making Georgia an attractive location for entrepreneurs and investors.

Preparation of documents: Firstly, basic company documents must be prepared, including the choice of company name, the definition of the business purpose and the structure of the company. All documents must be completed correctly and, if necessary, notarised.

Online registration: Georgia allows online registration of companies through the National Agency of Public Registry (NAPR). The process can be completed via the NAPR portal, which largely eliminates the need for physical visits to the authorities.

Submission of documents: The required documents can be submitted digitally. This also includes electronic signing, which further speeds up the process.

Payment of fees: Registration fees are moderate and can also be paid online.

Completion of registration: Processing is surprisingly fast - registration is often completed within one working day. After registration, the company receives a registration number and business operations can begin.