New Tax Incentives and Options for Foreign-Based IT and Shipping Companies 

Everyone knows Georgia as one of the best options for starting new businesses because of the tax options they offer. To build further on this reputation, the government of Georgia has announced decree #619 that opens up a whole new arsenal of options for IT companies that are based outside the country as well as shipping companies that actively trade on international boundaries. 

According to this latest decree, companies that follow the above said business line can now enjoy a corporate income tax rate of only 5%, instead of the 15% that was applicable before the decree came into existence. Tax for wages for employees and company workers will now also be calculated at 5% instead of the 20% that was implied before. 

Additionally, if you were to withhold tax on distributions, you will incur no additional taxes for it. This is in stark contrast with the 5% that was applied to almost all companies in Georgia before. Companies that wish to lower this tax further down the line can do so by making changes in their salary and R&D expenses.

If your company operates on a specific property to function, that property will not be counted for property tax and all taxes pertaining to the land will be exempted as long as any of the said company types own the property. 

However, it is vital that a company qualifies as an “international company” before it can avail of these tax benefits. One of the conditions is that the company must, at all costs, have at least 2 years of experience in their line of business. 

The second condition is that they need to show definite proof that the company has some semblance of business property from the country of Georgia such as proof of the employees that are national citizens of the country, proof of expenses generated and paid in the country, and proof of residence in the country if applicable. Essentially, anything that states the company has used Georgian assets to the benefit of the company and the welfare of said assets. 

However, it is important to know that similar benefits have been offered to IT and international companies even before these incentives came into action. For example, establishing your company’s own virtual zone in the country allows a business to function by paying a minimal amount of taxes. 

Depending on the type of virtual zone you establish, you can even avail of additional benefits and features offered by the government. One important factor that signifies the importance of decree #619, however, is that virtual zones do not qualify for tax benefits on dividend distributions, wages, and property that international companies can get from the decree. 

Georgia’s Economy to Grow in 2021 and 2022 after Covid Restrictions Lifted 

Georgia’s economy took a heavy hit because of Covid-19 and the restrictions that came along with it. The country’s economy heavily relied on tourism and international collaborations for their survival so it naturally went into a dip when the Covid-19 pandemic disallowed both of them from happening. 

However, as the pandemic restrictions have started lifting off and international transports have started becoming possible again, the country has seen an immediate surge in its economy that is predicted to grow again in 2021 by as high as 3.5%. According to the research conducted by ADB, this growth is predicted to last as long as the end of the year 2022 where it is supposed to achieve a growth rate of 6%. 

Various industries show signs of development such as the agricultural industry which will strengthen itself by 3-4% in the next two years. However, the most major impact will be on the exports industry which has a predicted growth rate of almost 20% by 2022. This growth is inspired by Georgia’s latest incentives for international companies and businesses as well as their tax changes to accommodate more and more new businesses into their economy. 

The Import industry on the other hand only shows a growth rate of 3-9% as compared to its other counterpart. The lifting of the covid-19 pandemic has allowed Georgia to resume its standard economic activities again and give its economy a chance to flourish on international grounds as before. With the latest regulations in place, it wouldn’t be too long before Georgia regains its status as one of the world’s largest growing economies. 

Two New State Programmes Added to the Country’s Export Promotion Agency to Encourage Business Welfare and Entrepreneurship

To boost its economic recovery as the pandemic restrictions lift up, Georgia has started introducing new state programmes to the country’s promotion agency titled ‘Enterprise Georgia’ to promote business, and ultimately economic, growth. 

The first of the state programmes is called Business Universal and the purpose of the programme is to ensure that a maximum number of businesses can avail the maximum amount of business loans possible for their organization. The programme does this by lowering the rates when a business co-finances a business loan, gives the loan a large duration to pay it off, and increases the up-front amount you get at the start of the loan. 

The exact terms of Business Universal are as follows - 

-A reduced rate of loan refinances rate minus 5% if applying for a co-financed loan. 

-Guaranteed 60% of the amount of loan you obtain. 

-Increased duration of 10 years to pay the loan off. 

-Permitted economic activities and options increased to a grand total of 360. 

-Loan amount ranging from 50,000 GEL to 10 million GEL, depending on your loan type and funding requirements. 

The second of the state programmes target entrepreneurship in businesses to enhance the country’s export potential and divert the focus on locally produced goods from imported goods by supporting new and existing entrepreneurship and enterprises. 

The terms of the Business Export programme, which are quite similar to the first programme, are - 

-If applying for a co-financed loan, you get the refinancing rate minus an extra 5%. 

-Guaranteed 60% of the loan amount the moment your loan is granted. 

-A 15% grant of the loan with an upper limit of up to 500,000 GEL. 

-A long duration of 10 years to pay off all the loans. 

-A loan amount of 50,000 GEL to 10 million GEL. 

Along with these two state programmes, two other state programmes were released as well for the agency that facilitates home purchase for Georgian families and develops natural and agricultural tourism amongst tourists and citizens, respectively. 

All of these state programmes are initiated by the government to stabilize Georgia’s economy and inculcate growth into it that was hampered by the pandemic and the various restrictions that came along with it. 

Georgia Awarded as One of the Top Countries in the World for Exporting Tech Services

In the recently conducted Kearney’s Global Services Location Index, or GSLI as it is more popularly known, Georgia debuted itself and was ranked 19th in the entire world for sourcing tech services to businesses and individuals across the world.

GSLI is published twice annually and is the result of the efforts of a global management organization called Kearney. The contestant countries’ efforts were measured in a grand total of 47 different aspects that were categorized into four main categories - how financially attractive the country looks on paper; people in the country, their skills and their availability; environment of the business world; how digitally resonant the country is. 

While several countries preceded Georgia and obtained higher rankings, it is still impressive Georgia got their spot considering the country has a very meager population compared to the top spots of India and China. What’s more impressive is Georgia’s ability to rank 19th in a total of the world’s top 70 countries despite still being relatively undeveloped in their hightech.

Georgia’s ranking should be considered quite commendable as the IT sector in the country is still growing and the country’s urban development has not even achieved its peak. According to the GSLI, the reason Georgia ranked so high was due to their impressive rankings on the financial attractiveness aspect, the skills of their workforce, and the quality of their business environment.

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