Georgia company formation, with substance.

The primary vehicle for international commerce in Georgia is the Limited Liability Company (LLC), governed by the Law of Georgia on Entrepreneurs. Formation is managed through the National Agency of Public Registry (NAPR), known for its high degree of digitisation. A standard LLC requires no minimum share capital, and shareholders can be of any nationality. However, the simplicity of the formation process often masks the complexities of effective tax structuring. At Xavion Capital, we advise on the optimal configuration of the registered address, the drafting of the Articles of Association to facilitate multi-jurisdictional management, and the appointment of local representation where necessary.

The 'Estonian model' is the cornerstone of the Georgian tax system. Under this regime, corporate income tax (CIT) is only triggered upon the distribution of dividends, at a rate of 15% (calculated as 15/85 of the net distribution). This allows for the indefinite tax-free reinvestment of capital. When coupled with the absence of a capital gains tax on the sale of shares (subject to holding periods) and a simplified VAT regime, Georgia presents a compelling case for growth-oriented firms. Our mandate typically involves synchronising these local advantages with the client’s global tax position, ensuring that the Georgian entity does not inadvertently create permanent establishment risks or CFC issues in the principal's home jurisdiction. Typical timelines for a fully operational, banked entity range from three to five weeks depending on the complexity of the shareholder structure.

For technology-led enterprises, Georgia offers two distinct preferential regimes: Virtual Zone Person (VZP) status and International Company (IC) status. VZP status is granted by the Ministry of Finance to entities providing software exchange or development services to non-residents. Successful applicants benefit from a 0% CIT on exported services and a 0% VAT rate. However, the Revenue Service has recently increased oversight, requiring clear evidence that high-value software development occurs within Georgian borders. We assist clients in building a robust 'nexus file' to withstand such scrutiny, moving beyond mere administrative presence to genuine operational substance.

The International Company status, introduced by Government Decree No. 619, provides an even more attractive 5% CIT rate and a 5% withholding tax on dividends. This status is applicable to a wider array of services, including IT, telecommunications, and certain maritime activities. Unlike the VZP, the IC status allows for servicing both domestic and international markets while maintaining the 5% rate. The trade-off is a stricter substance requirement, including mandatory local expenditure and qualified personnel. Xavion Capital’s role is to evaluate which regime aligns best with the client’s headcount and revenue projections, managing the application process with the Revenue Service and providing ongoing compliance monitoring to ensure the status is maintained throughout the entity's lifecycle. We focus on mid-sized tech firms looking to offshore R&D or operational hubs efficiently.

While Georgia transitioned away from a 'no-questions-asked' banking era, the current landscape remains highly functional for legitimate businesses. The market is dominated by two LSE-listed institutions: TBC Bank and the Bank of Georgia (BoG). These banks operate under the supervision of the National Bank of Georgia (NBG) and adhere to Basel III standards. Opening a corporate account for a foreign-owned LLC requires more than just basic KYC; it requires a demonstrated economic link to the country. This can be evidenced through local contracts, employees, or physical premises.

Xavion Capital facilitates banking introductions by preparing a comprehensive 'Business Profile' that pre-empts the compliance queries of Georgian banks. This includes a detailed analysis of fund flows, counterparty risk, and the source of wealth for UBOs. For firms engaged in digital assets or high-volume international trade, we provide specialist advice on navigating the NBG’s evolving stance on virtual asset service providers (VASPs). We focus on tier-1 banking relationships, avoiding the riskier fringe banks, to ensure our clients have access to stable SWIFT/SEPA channels and sophisticated treasury management tools. While 'remote' opening is technically possible via PoA, we strongly recommend a physical visit to Tbilisi to establish a direct relationship with the bank's corporate or wealth management divisions, which we coordinate as part of our core mandate. We ensure that the account structure aligns with the firm's operational needs, including multi-currency facilities and integration with international payment gateways.

Georgia’s Free Industrial Zones (FIZs), such as those in Poti, Kutaisi, and Tbilisi (Hualing), offer an alternative for companies engaged in manufacturing, processing, and international trading of goods. Regulated under the Law on Free Industrial Zones, these areas provide a 0% CIT on international trade, 0% VAT, and 0% property tax. Unlike the Virtual Zone, which is service-oriented, the FIZ is the preferred route for physical trade and logistics hubs. Each FIZ is managed by a private administrator, and the choice of zone depends on the specific logistical requirements, such as proximity to the Port of Poti or Tbilisi International Airport.

Our advisory scope includes a comparative analysis of the various FIZ administrators, as their fees, lease requirements, and 'trading licenses' vary significantly. We handle the negotiation of the lease agreement, which serves as the entity's registered address, and ensure the business license correctly reflects the intended operations to avoid customs complications. It is critical to note that transactions between a FIZ entity and a mainland Georgian company are subject to a 4% tax on the invoice value, making the FIZ primarily an export-oriented tool. Xavion Capital ensures that the FIZ structure is integrated correctly into the client's global supply chain, managing the interface between the FIZ administrator and the Revenue Service to ensure full compliance with the unique reporting requirements of these zones, which differ slightly from standard 'mainland' LLCs.

Economic substance is no longer a peripheral concern in Georgia; it is a central pillar of corporate longevity. While Georgia is not currently on the EU 'blacklist,' it has introduced substantial reforms to align with the OECD’s Base Erosion and Profit Shifting (BEPS) framework. For an LLC to be considered a Georgian tax resident and benefit from the country’s 56 Double Tax Treaties (DTTs), the 'place of effective management' must be in Georgia. This means that key management and commercial decisions must be made within the country, documented by board minutes and supported by the physical presence of directors.

Xavion Capital provides a comprehensive substance solution that goes beyond the basics. We assist in sourcing executive-grade office space, navigating local employment law for the hiring of Georgian staff, and providing local resident directors where appropriate to bolster the management and control test. This is particularly vital for entities mothering intellectual property or acting as regional holding companies. We also oversee the annual filing requirements with the Revenue Service to ensure that the entity remains in good standing. By establishing genuine operational depth, our clients mitigate the risk of treaty benefits being denied by foreign tax authorities. Our approach is designed for principals who require a defensible, mid-shore structure that can withstand the scrutiny of both the Georgian Revenue Service and international regulators, ensuring that the tax advantages offered by the Caucasus are both legal and sustainable.