A growing number of freelancers and entrepreneurs from other countries are choosing Georgia in the Caucasus to start sole proprietorships there. This is not surprising because Georgia is among the top-10 countries for the ease of doing business, according to international ratings. The entrepreneurial spirit permeates Georgia without any doubt.
The authorities of the country are highly supportive of foreign and domestic entrepreneurs. They do not overregulate business operations in Georgia and they trust small businesses. If you register a sole proprietorship in Georgia, you will be able to file a tax declaration online without having to visit any Government agency. The taxes are extremely low for sole proprietors in Georgia and the banking system in the country is reliable.
What are the main advantages that a sole proprietor can find in Georgia?
- Low taxes: 0% if the annual income does not exceed 30,000 laris and 1% if the income does not exceed 500,000 laris. (The lari is the national currency in Georgia. One lari costs 0.37 US dollars at the time when the article is written even though the exchange rates can fluctuate.)
- Fast and simple registration process (1 to 2 business days).
- An advanced Internet banking system and an opportunity to pay the taxes online.
- An opportunity to conduct business operations in Georgia while living in another country.
- Most nationalities are free to visit Georgia without visas and stay there for 365 days. When the period is over, a visa-run can come to the rescue. Spend a day in one of the neighboring countries and then return to Georgia: the countdown will start again. (Please note that your national passport has to give you visa-free access to a least one of the countries that border Georgia: Russia, Azerbaijan, Armenia, or Turkey.)
- No currency control in Georgia.
- Tax inspections are infrequent and it is possible to interact with the fiscal authorities totally online.
Documents required for registering a sole proprietorship in Georgia
You will have to submit the following documents when registering a sole proprietorship in Georgia:
- A passport with a stamp confirming legal crossing of the Georgian border;
- A document confirming a legal address in Georgia;
- A Georgian telephone number;
- Your email address;
- A receipt confirming payment of the registration fee.
Where can you file the application documents?
The application documents have to be submitted to a House of Justice that can be found in several large Georgian cities.
- In Tbilisi, the House of Justice is located at 2 Zviad Gamsakhurdia Street.
- In Batumi, the House of Justice is located at 7 Sherif Khimshiashvili Street.
You’d better submit the application documents at the end of the month to avoid paying a 20% tax (see below). You are exempted from this tax beginning the 1st of the month that follows the month of your application.
After the sole proprietorship is registered, you will receive and SMS with a login and password to your personal account with the Georgian tax service. You will have to log in and fill out a taxpayer’s form that you will find at the website.
An important note: when filling the form, you have to confirm your desire to register as an individual entrepreneur in Georgia (tick the corresponding box). If you do so, you will be taxed at reduced rates. If you fail to do so, you will be taxed at the standard rate of 20%.
Costs of registering a sole proprietorship in Georgia
- Accelerated registration on the day of application – 75 laris (standard registration – 1 day and 26 laris);
- A sole proprietorship registration Certificate in the English Language – 25 laris (that is optional).
We suggest that you apply for a registration certificate in English. This will let you use the document to sign contracts with international partners.
Who should consider registering a sole proprietorship in Georgia?
The following groups of people will benefit greatly by registering sole proprietorships in Georgia:
- Freelancers;
- Remote workers;
- Small business owners who have international partners;
- Those who need foreign bank accounts.
How to file a tax declaration in Georgia
You can file a tax declaration online by logging onto your personal account with the tax service. You can pay the taxes online at the tax service or the bank’s website.
Tax declarations have to be filed monthly before the 15th of the following month. Thus, you have to file a tax declaration for April before May 15. You will have to go through the following stages when submitting a tax declaration:
- Log onto the tax service website and switch to English (left lower corner of the screen);
- You will find white boxes at the top of the page and you have to choose ‘Declarations’;
- In the left menu click ‘Monthly’, then ‘Small Business Annual Income Declaration’, then ‘New return’;
- Field 15 — cumulative total income on an accrual basis;
- Field 17 — your income for the last month.
Suppose you became a tax resident of Georgia in January and you are filing a declaration for April. Also suppose that you earned 1,000 laris in April and the same amount in each of the previous months. Then you have to put ‘4,000’ in Field 14 (your income from January to April) and you have to put ‘1,000’ in Field 17 (your income in April).
The income has to be indicated in laris regardless of what currency you have been paid in. If you need to find out the official exchange rates, you can visit the website of the National Bank of Georgia.
- In Field 19, you will see the tax to be paid: 1% of the figure in Field 15;
- Then click ‘Next’ and ‘Send’;
- In the ‘Basic information’ section, you will find the amount of money that you have to pay. When the payment goes through, you will find the word ‘Surplus’ in green font.
Opening a bank account in Georgia
Opening a bank account in Georgia is not going to be a problem if you have a local SIM card. We suggest that you should set up a separate bank account for your private company instead of using your personal bank account (although you can do so). In this way, your account details will contain your legal address in Georgia, which will certainly make cooperating with international partners easier.
The most popular Georgian banks are Bank of Georgia (BoG), TBC Bank, and Liberty Bank. Bank of Georgia is probably the best of these because it has a user-friendly interface and flexible tariffs. You should know, however, that BoG is reluctant to take non-resident clients onboard.
Key points in brief
Below we provide the gist of the story quoting the tax rates in Georgia and pointing out the main advantages and disadvantages of having a sole proprietorship registered in the country.
| Taxes | Advantages | Disadvantages |
Sole proprietorships pay taxes at a progressive scale:
The preferential tax treatment is available from the 1st of the months following the month of sole proprietorship registration. |
Infrequent tax inspections and remote interaction with fiscal authorities. |
A sole proprietorship has to be in operation for at least six months before the entrepreneur can apply for a residence permit in Georgia. |
As you can see, Georgia is not flawless and you might need some expert advice to overcome certain difficulties. At the same time, the advantages of registering a sole proprietorship in Georgia clearly overweigh the disadvantages. Where else in Europe could you pay so little in taxes if you don’t make very much?
