Guideline for strarting business in Armenia and Georgia

Eastern Partnership Territorial Cooperation (EaPTC) Eastern Partnership Territorial Cooperation (EaPTC)

GUIDELINE FOR STARTING BUSINESS IN ARMENIA AND GEORGIA GUIDELINE FOR STARTING BUSINESS IN

ARMENIA AND GEORGIA

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CONTENTS Armenia Business Registration--------------------------------------------------------------- 4 Taxation System-------------------------------------------------------------------- 6 Licenses and Permits--------------------------------------------------------------- 9 Trade-------------------------------------------------------------------------------- 10 Georgia Business Registration-------------------------------------------------------------- 12 Taxation System-------------------------------------------------------------------- 13 Licenses and Permits--------------------------------------------------------------- 14 Trade-------------------------------------------------------------------------------- 15

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Business registration can be approved within two days of the date of submission of all required documents An online registration platformARMENIA is also available (www.e-register.am)

BUSINESS REGISTRATION • Registration is conducted by the State Register of Legal Entities under the THE TYPES OF BUSINESS ORGANIZATIONS IN ARMENIA : Ministry of Justice of the Republic of Armenia • Business registration can be approved within two days of the date of submission of all required documents • An online registration platform is also available (www.e-register.am)

• Sole Proprietorship THE TYPES BUSINESS ORGANIZATIONS IN ARMENIA: • OFLimited Liability Company • Joint Stock Company (Closed and Open) • Sole Proprietorship • Liability General Partnership • Limited Company • Joint Stock Company (Closed and Open) • Limited Partnership • General Partnership • Partnership Producer Cooperative • Limited • Producer Cooperative

REGISTRATION REGISTRATION FEES

FEES

Type of business Sole Proprietorship Limited Liability Company Joint Stock Company General and Limited Partnership Producer Cooperative

Price of registration (AMD) 3,000 0 0 0 0

STEPS IN COMPANY REGISTRATION STEPS IN COMPANY REGISTRATION Sole Proprietorship - A sole proprietor should contain the passport/ID and its copy, document confirming thecopy, payment of Sole Proprietorship - A soleapplication proprietor application should contain thethepassport/ID and its the state duty (payment receipt or payment made through the electronic payment system). Legal Entity-All the partners/founders should sign document confirming the payment of state duty (payment receipt or payment made through the the application, which must contain the decision of partners/founders on opening the legal entity, the name of the newly established comelectronic payment system). pany, the legal form and address, information (passport/ID) regarding the head of the executive body of the legal entity or acting as its head

Legal Entity-All the partners/founders should sign the application, which must contain the decision of the name of the newly established company, the legal form and address, information (passport/ID) regarding the head of the executive body of the legal • The application, signed by the General Director, which must contain information on entity or acting as its the registration number and head name of the founding company, and the head of the branch ESTABLISHMENT OF A BRANCH OF A FOREIGN COMPANY partners/founders on opening the legal entity,

(first name, last name, passport/ID data); • The decision of the company to B establish a branch office, ESTABLISHMENT OF A RANCH OF AorFrepresentative OREIGN COMPANY the resolutions on approving the charter and the head of the branch or representative office;

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The application, signed by the General Director, which must contain information on 4 the registration number and name of the founding company, and the head of the

The stamp duty of is paid and the registers sale-purchase agreement is notarized and approved by •• The the SCREC the title and provides a registration certificate to thelocal newoffice owner. a notary; to the new owner.

• The local office of the SCREC registers thebytitle and provides a registration certificate • The charter of the branch or representative office, which must be signed the authorized body of the founder; • The document confirming the payment of state duty. toAthe newAowner.

OPENING BANK CCOUNT OPENING A BANK ACCOUNT

REGISTERING PROPERTY

• Resident and non-resident entities of Armenia can open and dispose of any accounts in PENING AaBspecial ANKand ACCOUNT •sellerResident non-resident of Armenia openofand dispose of any accounts in •O The gets reference on restrictions on the property at the Statecan Committee both Armenian and foreignentities currency. the Real Estate Cadaster of the Republic of Armenia (SCREC); both Armenian and foreign currency. order a bank account, the entities must submit an application for opening • The • stampIn duty is paidto andopen the sale-purchase agreement is notarized and approved by a notary; • Resident and non-resident entities of Armenia can open and dispose of for any accounts in open a bank account, must submit an opening theorder account signed and sealed bythe theaentities authorized person ofnew theapplication legal entity, with • The • local In office of the to SCREC registers the title and provides registration certificate to the owner. bothaccount Armenian and foreign currency. the signed and sealed by the authorized of the legal entity, and with documentation of the State Registration License person (if available), Certificate OPENING A BANK ACCOUNT • documentation In order tocertifying openofathe bank account, the entities must an application State Registration License (ifsubmit available), Certificatefor andopening document the Taxpayer Registration number. thenon-resident account signed and by the authorizednumber. person of the legal entity, with document certifying thesealed Taxpayer • Resident and entities of Armenia can open andRegistration dispose of any accounts in both Armenian and foreign currency. documentation ofthethe State License (if available), Certificate •C InURRENT order to open a bankOF account, entities must an application the accountIN signed and sealedand by the authorized PRICES NATURAL GAS ,Registration Esubmit LECTRICITY ANDforWopening ATER SUPPLY ARMENIA person of the legal entity, with documentation of the State Registration License (if available), Certificate and document certifying the Tax\ document certifying theGTaxpayer Registration number.

CURRENT PRICES OF NATURAL AS, ELECTRICITY AND W ATER SUPPLY IN ARMENIA payer Registration number.

Price (AMD) Price (AMD) forWATER SUPPLY IN ARMENIA CURRENT PRICES OF NATURAL GAS, ELECTRICITY AND Price (AMD) Price (AMD) for for small large entities for small large entities entities 3 entities Price (AMD) 133 Price (AMD) for 156 Natural Gas (1 m ) 3 for small large entities 156 133 Natural Gas (1 m ) entities 3 156 133 Natural Gas (1 m ) Daytime price Nighttime price Daytime (AMD) price Nighttime (AMD) price (AMD) (AMD) 48.78 38.78 Electricity (1 kW/h) Daytime price 38.78 Nighttime price 48.78 Electricity (1 kW/h) (AMD) (AMD) Price (AMD) Price (AMD) for big 48.78(AMD) 38.78(AMD) for big Electricity (1 kW/h) Price Price for small entities, wholesale for small entities, wholesale entities price 3 entities price Price (AMD) Price (AMD) for big 179.78 51.49 Water supply (1 m ) 3 for small entities, wholesale 179.78 51.49 Water supply (1 m ) entities price 3 179.78 51.49 Water supply (1 m )

CURRENT PRICES OF NATURAL GAS, ELECTRICITY AND WATER SUPPLY IN ARMENIA

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TAXATION SYSTEM TAXATION SYSTEM

PERSONAL INCOME TAX (including social security contributions)

PERSONAL INCOMEAMD TAX (including social security contributions) 29,280 From 120,000 to 2,000,000 AMD

2,000,000 AMD and more

AMD plus 26% of taxable income 518,080 AMD plus 36% taxable income

Monthly taxable Income Range Tax 24.4% Up to 120,000 AMDand non-resident individuals Taxpayers: Resident on income received from sources in the 29,280 AMD plus 26% of taxable income From 120,000 AMD to 2,000,000 AMD Republic of Armenia (RA).

518,0803AMD plus 36% taxable income 2,000,000 AMD and more PROFIT TAX RATE IS 20%

Taxpayers: Resident and non-resident on income received from on sources in the Republic of Armenia Taxpayers: Resident and individuals non-resident individuals income received from(RA). sources

in the

Taxpayers:ofResidents of(RA). the RA (e.g. organizations and contractual investment funds with Republic Armenia PROFIT TAX RATE IS 20% state registration) and non-residents,on income received from sources in the Republic of Armenia.

Taxpayers: of theIS RA20% (e.g. organizations and contractual investment funds with state registration) and non-residents, on income PROFIT Residents TAX RATE received from sources in the Republic of Armenia.

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For residents: it is the taxable profit obtained within and beyond the RA boundaries.

ofobtained the RA (e.g. and contractual investment funds • Taxpayers: For residents: it is Residents the taxable profit within andorganizations beyond the RA boundaries.

• Non-residents: it is the total profit received from RA sources.

• state Non-residents: it is the total profit received from RA sources. registration) and non-residents,on income received from sources in the Republic Armenia.

with of

PROFIT AX RATES FOR NON-RESIDENTS PROFIT TAXTRATES FOR NON-RESIDENTS Type• of profit rate For residents: it is the taxable profit obtained within and beyond theTax RA boundaries.

Insurance compensation, reinsurance payments and income received from freight 5% • Non-residents: it is the total profit received from RA sources.

Income from the lease of property, passive income (with the exception of the income 10% received from freight) P ROFIT TAX RATES FOR NON-RESIDENTS Other services provided by a non-resident organization, as well as the income received 20% for the provision of services for the subdivision of the non-resident

Type of profit Tax rate Insurance compensation, reinsurance payments income received from 5% VALUE ADDED TAX RATE 20% OF THE TAXABLE TURNOVER OFand GOODS AND SERVICES VALUE ADDED TAXISRATE IS 20% OF THE TAXABLE TURNOVER OF GOODS ANDfreight SERVICES Income from the lease of property, passive income (with the exception of the income 10% Taxpayers: Companies whose annual turnover exceeds AMD 115exceeds million. AMD 115 million. received from freight) Taxpayers:Companies whose annual turnover Other services provided a non-resident organization, as Activity well asCommodity the income received 20% system The export of goods and import ofby certain products under the Foreign Economic Nomenclature classification The export of goods and import of certain products under the Foreign Economic Activity for the(especially provision the subdivision of the non-resident (FEACC) usedof in services agriculture)for are VAT exempt.

Commodity Nomenclature classification system (FEACC) (especially used in agriculture) are EXCISE TAX VAT exempt.

V ALUE ADDED TAX RATE IS 20% OF THE TAXABLE TURNOVER OF GOODS AND SERVICES

Taxpayers - All physical and legal persons producing or importing excisable goods in the territory of Armenia.

EXCISE TAX Taxable commodities, according to whose the law, are beer andturnover wine (with the exceptionAMD of brandy115 spirits) and alcoholic drinks, cigars, cheroots, Taxpayers:Companies annual exceeds million. cigarillos & cigarettes, unmanufactured tobacco, tobacco refuse, diesel, oil etc.

Taxpayers - All physical and legal persons producing or importing excisable goods in the

The export of goods and import of certain products under the Foreign Economic Activity territory of Armenia.

6 Taxable commodities, according to the law, are beer and wine (with the Commodity classification systemcigars, (FEACC) (especially used agriculture) are exception of Nomenclature brandy spirits) and alcoholic drinks, cheroots, cigarillos & in cigarettes,

TURNOVER TAX

Turnover tax (TT) is a substitute to VAT and/or profit tax for sole proprietors, trade organizations. If the return on sales of delivered goods and services (performed tasks) of individuals oris their turnover the previous without VAT does not Turnover tax (TT) a substitute to VATduring and/or profit tax for sole calendar proprietors, year trade organizations.

If the return on exceed sales of delivered goods and services (performed theirtypes turnover previous calendar year without VAT doestonot exceed AMD 115 AMD 115 milliontasks) withof individuals respect toor all of during their the activities, then they are required pay million with respect to all types of their activities, then they are required to pay turnover tax.

The tax object is the return on sales of goods turnover tax. The tax object is the return on sales of goods and services (performed tasks) and services (performed tasks) delivered by the TT payer during the reporting period, as well as other received incomes. The reporting pedelivered by the TT payer during the reporting period, as well as other received incomes. The riod for this tax is every three months. reporting period for this tax is every three months.

TURNOVER TAX

Income type Rate 4 5% Income from trading activity 3.5% Income from production activity Income from lease, interests, royalties, disposal of assets 10% (including real estate) 20% Income from notarial activity 5% Income from other activity

PROPERTY TAX: 0.1- 0.8% of the cadastral value of the property located in Armenia.

PROPERTY 0.1- 0.8% the cadastral value of the depend property located Armenia.

IMPORT TTAX: AX:The ratesof are 0% or 10% and on theintype of imported goods.

IMPORT TAX: The rates are 0% or 10% and depend on the type of imported goods.

OBJECT OF THE TAX:Goods transferred through the customs of Armenia.

OBJECT OF THE TAX: Goods transferred through the customs of Armenia.

DOUBLE TAX TREATIES more 40 countries.

DOUBLE TAX TREATIES with with more than 40 than countries.

SPECIAL TAX REGIMES

SPECIAL TAX REGIMES TAXATION OF BORDER COMMUNITIES: Individuals, sole proprietors and organizations operating in state border communities are exempt from turnover, income, VAT or profit taxes. Exceptions from this rule consist of products that are subject to excise.

TAXATION OF BORDER COMMUNITIES: Individuals, sole proprietors and organizations operating TAXATION OF FAMILY BUSINESS: Exceptions apply also when family members (parents, spouses, children, siblings) establish a family in state border communities are exempt from turnover, income, VAT or profit taxes. business. In this case, family members entitled to the family business are exempt from all types of taxes connected with that activity. Only Exceptions from rule consist products are subject to excise. residents of the RA are this eligible to form such of businesses.

Thethat turnover resulting from a family business should not xceed AMD 18 million during a taxable year. Individuals entitled to a family business have to pay only AMD 5,000 for each person as income tax.

TAXATION OF FAMILY BUSINESS: Exceptions apply also when family members (parents, FREE ECONOMIC ZONES (FEZ): Legal Entities operating in the FEZ are exempt VAT, Profit and PropertyTax and custom tariffs. spouses, children, siblings) establish a family business.

In thisfrom case, family members entitled

to the family business are exempt from all types of taxes connected with that activity. Only

CERTAIN GOODS WITH VAT EXEMPTION: Surgical bacteria sterilizers for surgery and laboratory use, and some other bacteria sterilizresidents ofmachines, the RA equipment are eligible to form suchor businesses.

The turnover from a family ers,dishwashing for washing bottles other items, equipment for fillingresulting and stamping bottles and similar items, varbusiness should exceed 18ofmillion during a taxable year. a ious types of cranes andnot lifting trusses, AMD some types bulldozers, machines for plowing land, Individuals presses, crushersentitled or similarto equipment, equipment for producing or similar some types of printing machines, types of sewing family businesspaper have to payproducts, only AMD 5,000 for each personsome as income tax. machines, equipment for producing leather, machines for producing electronic lamps or other products, equipment for making cigarettes, electrical machinery and mechanical appliances.

FREE ECONOMIC ZONES (FEZ): Legal Entities operating in the FEZ are exempt from VAT,

Profit and PropertyTax and custom tariffs.

7 CERTAIN GOODS WITH VAT EXEMPTION: Surgical bacteria sterilizers for surgery and

making cigarettes, electrical machinery and mechanical appliances.

EXEMPTION PERIOD SUBJECT TO THE ASSERTION TIME AND VALUE OF COMMODITIES

EXEMPTION PERIOD SUBJECT TO THE ASSERTION TIME AND VALUE OF COMMODITIES Timeframe 1 year 2 years 3 years

Customs Value < AMD 70 million AMD 70 million – 300 million > AMD 300 million

MICRO AND SMALL BUSINESS TAXATION PRIVILEGES

MICRO SMALL BUSINESS TAXATION • ANDTax exemption of familyPRIVILEGES business

(family income should not exceed AMD 18 million a tax year)(annual turnover less than AMD 115 million) • during VAT exemption • VAT exemption (annual turnover less than AMD 115 million) • Tax exemption of family business (family income should not5exceed AMD 18 million during a tax year)

LICENSES AND PERMITS

LICENSES AND PERMITS

The lawlaw “On“On Licensing” provides for two typesfor of licenses: simple compound (automatic non-automatic).

The Licensing” provides two types ofand licenses: simple andand compound (automatic

and non-automatic).

Type of license Simple Compound

Issue period 3 days 30 days

Licenses can be obtained online (www.e-gov.am/licenses).

Licenses can be obtained online (www.e-gov.am/licenses).

THE ONE STOP SHOP PRINCIPLE,UMBRELLA PRINCIPLE, AND SILENCE IS CONSENT PRINCIPLE THE ONE STOP SHOP PRINCIPLE,UMBRELLA PRINCIPLE, AND SILENCE IS CONSENT PRINCIPLE are lacking in the current licens arelaw. lacking in the currentand licensing law.inThe licenses to exercise and to use are used in ing The licenses to exercise to use are used practice of Armenia

practice of Armenia

CONSTRUCTION PERMIT

In total, it takes 84 days to get a construction permit.

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Procedure

Time to complete

Associated cost

1

Apply and obtain architectural-construction assignment 8 Request and obtain technical conditions approval

15 days

no charge

15 days

no charge

2*

CONSTRUCTION PERMIT CONSTRUCTION PERMIT

In total, it takes 84 days to get a construction permit.

In total, it takes 84 days to get a construction permit.

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Procedure

Apply and obtain architectural-construction assignment 2* Request and obtain technical conditions approval from Yerevan Water and Sewage Company, Electrical Networks of Armenia 3* Request and obtain technical conditions approval on Fire Safety from the Ministry of Emergency Situations Request and obtain building permit from Yerevan 4 Municipality 5* Notify State Inspection of the Ministry of Urban Development of the start of construction works Receive inspection by the Municipality 6 Receive inspection by State Inspection of Urban 7 Development of the Ministry of Urban Development Request water and sewage services inspection and 8 obtain connection Submit the construction logbook to the 9 Municipality and request occupancy permit 10* Notify the Ministry of Urban Development about the completion of construction works 11 Receive final inspection from the Ministry of6 Urban Development 12 Receive final inspection from the Ministry of Emergency Situations 13* Receive final inspection from the Municipality 14 Obtain occupancy permit from the Municipality 15 Register the building with the Cadaster 16* Receive on-site inspection for building registration 1

Time to complete

Associated cost

15 days

no charge

15 days

no charge

3 days

no charge

15 days

AMD 350,000

1 day

no charge

1 day 1 day

no charge no charge

9 days

AMD 2,600

1 day

no charge

1 day

no charge

1 day

no charge

7 days

no charge

1 day 28 days 2 days 1 day

no charge AMD 100,000 AMD 127,332 AMD 200,000

* Takes place simultaneously with another procedure.

Source: doingbusiness.org Source: doingbusiness.org

TRADE

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TRADE PREFERENTIAL TRADE REGIMES

• Free Trade Agreement (FTA) with CIS countries • Most Favored Nation of WTO • Eurasian Economic Union Membership • Generalized System of Preferences (GSP and GSP +) • Export is exempt from tax and does not have any licensing requirements.

• Armenia has introduced a “one-stop shop” process to provide the rules of Certificates of Origin. To receive the certificate, the proprietor needs to apply to “Ekspertiza” Limited Liability Company of the Chamber of Commerce and Industry of Armenia.

IMPORT LICENSES AND PERMITS

In Armenia, restrictions of import include requiring authorization for pharmaceutical products and medicines, phytoprotection chemicals, weapons, components used in the production of weapons, explosives, nuclear materials, poison, drugs, strong psychotropic substances, devices for use in opium smoking, and pornographic materials.

• The import of medicines must be authorized by the Ministry of Health • The import of agricultural chemicals must be authorized by the Ministry of Agriculture • The import of armament and some military equipment must be authorized by the Ministry of Defense • The import of some chemical products and endangered species of flora an fauna must be authorized by the Ministry of Nature Protection

ARMENIAN FOOD SAFETY SERVICE ISSUES THREE TYPES OF PERMITS/CERTIFICATES

• Veterinary certificate for import and transit of products • Phyto-sanitary certificate for import of products • Food safety certificate for import of products EXPORT LICENSES AND PERMITS

• Pieces of art and other products having cultural value leaving the country need to be accompanied by an export authorizing document from the Ministry of Culture.

• Medicines being exported must be authorized by the Ministry of Health.

• Agricultural chemicals being exported must be authorized by the Ministry of Agriculture.

• Armaments and some military equipment being exported must be issued by the Ministry of Defense.

• Chemical products and endangered species of flora and fauna being exported must be issued by the Ministry of Nature Protection.

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Armaments and some military equipment being exported must be issued by the Ministry of Defense.

Chemical products and endangered species of flora and fauna being exported must be issued by the Ministry of Nature Protection.

Type of permit

Product subject to control Livestock, animal Permit for products and raw import and materials (fur, fluff, transit of some products subject feather, endocrine and gastrointestinal, blood, to veterinarycontrol bones), animal feed and feed mixes, collection of animal origin Permit for import of some products subject to phytosanitary control

Agricultural, forest and ornamental plants seeds, seedlings, bulbs, blisters, fresh and dried fruits and vegetables, grain, flour, wheat, raw tobacco and spices, wood products, etc.

List of documents required for permit Application package must contain: Exporter's name, place of residence, in case of a legal entity: full name and address, name of the importing country. Recipient's name and address, in case of a legal entity: full name and location, the names and quantities of exported products,receiving location.

Application package must contain: name of the importing country, weight, and exporting duration.

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Duration of permit

5 days

14 days

GEORGIA

Business Registration

Georgia

BUSINESS REGISTRATION • Registering authority - National Agency of Public Registry (NAPR), under the Ministry of Justice.

• Registering authority - National Agency of Public Registry (NAPR), under the Ministry of • Business registration requires only one day for completion.

Justice.

• Online registration approval.

• Business registration requires only one day for completion.

• Online registration approval.

THE TYPES OF BUSINESS ORGANIZATIONS IN GEORGIA The types of business organizations in Georgia

• Individual Enterprise; • Individual • Joint Liability Company; Enterprise; • Joint Liability Company; • Commandite Company; • Commandite • Limited Liability Company; Company; • Limited Liability Company; • Joint Stock Company and Cooperative.

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Joint Stock Company and Cooperative.

REGISTRATION FEES

Registration Fees Type of businessPrice of Registration (GEL) Within one working day 20 GEL Individual Enterprise 100 GEL Joint Liability Company 100 GEL Commandite Company 100 GEL Limited Liability Company 100 GEL Joint Stock Company 100 GEL Cooperative

Immediately (on the same day) 50 GEL 200 GEL 200 GEL 200 GEL 200 GEL 200 GEL

StepsINinCOMPANY CompanyREGISTRATION Registration STEPS

Individual Enterprise - ID and application (name, ID number, signature, address and the date of application submission).

Individual Enterprise - ID and application (name, ID number, signature, address and the date of application submission).

Legal Entity - Application signed all partners.

The application should contain: Legal Entity - Application signed by allby partners.

The application should contain: • The name• of the company, the legal form andthe legal address; Thenewly nameestablished of the newly established company, legal form and legal address; • The managing body of the company and information on the partners or commandites in the case of an LLC or commandite company; • The managing body of the company and information on the partners or commandites in • The name, address andof IDan number of the managers of the company. the case LLC or commandite company; • The name, address and ID number of the managers of the company.

ESTABLISHMENT OF A BRANCH OF A FOREIGN COMPANY

Establishment of a Branch of a Foreign Company

• The decision of thedecision enterprise onmanagement creating a branch; • The of management the enterprise on creating a branch; • A copy of• theAstatutes of the enterprise and branch; copy of the statutes of the enterprise and branch; • The decision on appointment of aappointment branch manager warrantmanager giving him/her power giving of attorney, and apower copy ofof his/her passport.

• The decision on of aorbranch or warrant him/her

attorney, and a copy of his/her passport.

Transfer of Immovable12Property To purchase immovable property:

TRANSFER OF IMMOVABLE PROPERTY To purchase immovable property: • Submit a legalized (notarized) document indicating ownership and an extract of the purchaser’s registration.

• The seller and purchaser could also submit an application for registration.

• The title to agricultural land plots is granted to citizens of Georgia and private legal entities registered according to Georgian legislation.

OPENING A BANK ACCOUNT • Resident and nonresident entities of Georgia can open and dispose of any accounts in national as well as any other foreign currency.

• In order to open a bank account, entities are obliged to submit a document confirming their registration with NAPR or the tax authorities.

TAXATION SYSTEMS Personal Income Tax - flat rate of 20%.

Taxpayers: non-residents and tax resident individuals, only on income received from Georgian sources.

Profit Tax- flat rate of 15% Taxpayers: Legal entities incorporated in Georgia and legal entities incorporated abroad on income from Georgian sources or income from performing business activities through their permanent establishment in Georgia.

Income from Georgian Sources Dividends Interest Oil and gas subcontractors International telecommunication and transportation services Royalties Management fees Income received in the form of wages Payments to non-residents by other Georgian-basedincome sourcenot connected to their Permanent Establishment in Georgia

Current Tax Rate 5% 5% 4% 10% 10% 10% 20% 10%

SPECIAL TAX REGIMES Special Trading Company: A foreign entity that renders its economic activities in Georgia through its permanent establishment has the right to be granted the status of a Special TradingCompany and register a separate permanent establishment only in case the permanent establishment renders the activities of the Special Trading Company envisaged by the Tax Code. A Special Trading Company is exempt from profit tax.

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objective of International Financial Companies is to serve offshore companies with as little cost as Tourist legalcertain entitytax which builds hotels, supplies assets/part possible,Enterprise: they benefitAfrom exemptions as provided in hotel the Tax Code. of assets to another International Company: A financial on the basis of the application by its authorized representative, is granted person inFinancial order to gain returns in institution the formthat, of rent and makes buildingsoperate as hotels according to the status an International Company.

As the as primary objectiveby of theGeorgian International Financial Companies is to serve offshore companies theofconditions of Financial a Tourist Enterprise, envisaged legislation.

Tourist Enterprises Tourist Enterprise: A legal entity whichtax builds hotels, supplies hotel assets/part of assets to another with as little cost as possible, they benefit from certain exemptions as provided in the Tax Code. enjoy taxtoexemptions personcertain in order gain returnsasinprovided the forminofthe rentTax andCode. makes buildingsoperate as hotels according to the Enterprise: conditionsA of a Tourist Enterprise, as supplies envisaged theGeorgian legislation.

Tourist Enterprises Tourist legal entity which builds hotels, hotel by assets/part of assets to another person in order to gain returns in the Free Industrial Zone: Offers extended tax benefits as well as operational simplicities to the legislaform of rentcertain and makes as hotels according to the conditions enjoy taxbuildingsoperate exemptions as provided in the Tax Code. of a Tourist Enterprise, as envisaged by theGeorgian tion.

Tourist Enterprises enjoy tax exemptions as provided in the Taxin Code. companies based in certain the Zone.

Businesses registered the Zone benefit from lower taxes, and

easy to the transport Free access Industrial Zone: Offers corridor. extended tax benefits as well as operational simplicities to the

Free Industrial Zone: Offers extended tax benefits as well as operational simplicities to the companies based in the Zone. Businesses regiscompanies basedfrom in lower the Zone.

Businesses in the Zone benefit from lower taxes, and tered in the Zone benefit taxes, and easy access to registered the transport corridor.

Microaccess and Small easy to theBusiness transport corridor.

Business MicroMicro and Small Business

Small Business How is the Micro andstatus Smallgranted?

Business Micro Business Small Business The microgranted? business is granted to a Howstatus is theofstatus physical person who independently carries out economic whoseistotal annual The status activity of microand business granted to aincome does not exceed 30,000 GEL. physical person who independently carries out economic activity and whose total annual income does not exceed 30,000 GEL.

The status of small business is granted to an individual entrepreneur whose total annual income does exceed 100,000GEL. The status of not small business is granted to an individual entrepreneur whose total annual income does not exceed 100,000GEL.

How are micro and small businesses taxed?

Micro businessesare fromtaxed? income How are micro and fully smallexempt businesses tax. They are not obliged to use a cash register, except for special economic activities Micro businessesare fully exempt fromprescribed income by the government. tax. They are not obliged to use a cash register, except for special economic activities prescribed by the government.

Small business is taxed at the rate of 5% of income tax. It is taxed at a 3% rate if -the enterprise expenses are Small businessapproves is taxed atthat theits rate of 5% of 60% of its income tax.total It isincome; taxed at a 3% rate if --the theenterprise economic approves activity isthat conducted within its expenses arethe special zone.

60% of trade its total income;

- the economic activity is conducted within the special trade zone.

The following activities are forbidden for micro business: • activities which need licenses or permits; currency exchange; The•following activities are forbidden for micro business: •• activities medical, architecture, notary and advocate, audit; which need licenses or permits; gambling;exchange; •• currency •• trade (except when thenotary processing and supply of purchased goods is conducted). medical, architecture, and advocate, audit; 14 • gambling;

Value Added Tax - 18% • Taxpayers - the companies whose annual turnover exceeds 100,000 GEL. • Two types of exempted transactions exist - with VAT input and without VAT input rights. The export of goods is exempt with VAT input rights, while import of certain medicines, passenger cars, publications, mass media and baby products are exempt without input VAT rights.

Excise Tax:Taxpayers: All physical and legal persons producing excisable goods on the territory of Georgia, or importing excisable goods.

Property Taxes: 0.05-1% of the fair market value of the property located in Georgia,differing based on the amount of annual income of the individual person. Up to 1% of the taxable property value for legal entities. Import Tax: Rates of 0%, 5% or 12% and dependingon the type of goods being imported. Subject of the tax: Goods transferred through the customs system of Georgia. Double Tax Treaties: With more than 50 countries.

The following activities are forbidden for micro business: • activities which need licenses or permits; • currency exchange; • medical, architecture, notary and advocate, audit; • gambling; • trade (except when the processing and supply of purchased goods is conducted).

LICENSES AND PERMITS ONE-STOP SHOP PRINCIPLE: The issuing agency is responsible for collecting all relevant information from different government agencies.

STATUTORY TIME LIMITS: The following statutory time limits are imposed: 30 days after filing an application for a decision on granting a license and 20 days after filing an application for issuing a permit.

“SILENCE-IS-CONSENT” RULE: If the agency fails to respond within the defined statutory time limits, the license or permit is automatically granted.

“UMBRELLA PRINCIPLE”: General and specialized licenses have been introduced and the holder of a general license is not required to apply for a specialized license.

The license to exercise and license to useare used in practice in Georgia.

CONSTRUCTION PERMIT Three stages in order to obtain the Permit: Stage I - Determination of construction terms from the date of submission of the application on approval of terms for usage of a land plot for construction, appended with the required documents - 15 days.

Stage II - Agreement on the architectural-construction project - 20 days; Stage III - Issuance of the Permit -10 days.

There are some exceptions to this rule in case of buildings of special importance, which require a longer period, but not exceeding 60 days.

The Permit for all buildings and structures are issued by local self-government bodies.

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TRADE PREFERENTIAL TRADE REGIMES • Most Favored Nation of WTO • Free Trade Agreements (FTA) with the EU, CIS countries and Turkey • Generalized System of Preferences (GSP) - US, Canada, Japan, Switzerland and Norway.

• No non-tariff restrictions (prohibitions, licensing) in international trade are included in the Georgian legislation except cases where health, security, safety and environmental issues are concerned.

• Export or re-export is tax exempt in Georgia.

• A certificate of origin is needed for exporting to some countries. A certificate of origin is issued by the Ministry of Economy and Sustainable Development, the Revenue Service, the Ministry of Finance and Economy of the Adjara Autonomous Republic and by the Chamber of Commerce and Industry. For goods being exported under DCFTA, the certificate of origin is issued only by the Revenue Service.

EXPORT LICENSES AND PERMITS • Electronic surveillance facilities – issued by the Ministry of Internal Affairs; • Some chemical products – issued by the Ministry of Environment and Natural Resources Protection; • Products of dual purpose – issued by the Ministry of Economy and Sustainable Development; • Armaments and some military equipment – issued by the Ministry of Defense; • Medical products subject to special control - issued by the State Regulatory Agency for Medical Activities under the Ministry of Labor, Health and Social Affairs; • Endangered species of flora and fauna - issued by the Ministry of Environment and Natural Resources Protection; • Products having cultural values – issued by the Ministry of Culture and Monument Protection of Georgia.

IMPORT LICENSES AND PERMITS • Electronic surveillance facilities – issued by the Ministry of Internal Affairs; • Products subject to veterinary, sanitary and phyto-sanitary control – issued by the National Food Agency; • Some chemical products – issued by the Ministry of Environment and Natural Resources Protection; • Products of dual purpose – issued by the Ministry of Economy and Sustainable Development; • Armaments and some military equipment – issued by the Ministry of Defense; • Medical products subject to special control - issued by the State Regulatory Agency for Medical Activities under the Ministry of Labor, Health and Social Affairs; • Endangered species of flora and fauna - issued by the Ministry of Environment and Natural Resources Protection; • Non-iodized salt – issued by the Ministry of Agriculture and Ministry of Labor, Health and Social Affairs.

The National Food Agency issues two types of permits: • Permit for import and transit of some products subject to veterinary control; • Permit for import of some products subject to phyto-sanitary control.

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The National Food Agency issues two types of permits: • •

Permit for import and transit of some products subject to veterinary control; Permit for import of some products subject to phyto-sanitary control.

Type of permit

Permit for import and transit of some products subject to veterinary control

Permit for import of some products subject to phyto-sanitary control

Products subject to control

List of documents required for permit • Application; • Invoice confirming payment for the permit; • Veterinary certification; • Statement from public register

Livestock, animal products and raw materials, livestock feed (food additives), biological, medical and chemicalpharmaceutical products used for veterinary purposes

• •

Products subject to phyto-sanitary quarantine, items which may cause the dissemination of materials subject to quarantine

• •

Application; Invoice confirming payment for the permit; Veterinary certification; Statement from public register

Duration of permit

1 month

6 months

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The “Cross-border Economic Development” project is co-funded by the European Project is co-funded Unionwithin the framework of the Eastern Partnership Territorial Cooperation (EaPTC). by the European Union EaPTC opens an opportunity for Eastern Partnership countries to identify and jointly address common challenges in their border regions towards sustainable economic and social The “Cross-border Economic Development” project is co-funded by the European Union within the framedevelopment at local level.EaPTC comprises four territorial cooperation programmes: work of the Eastern Partnership Territorial Cooperation (EaPTC).

Armenia-Georgia, Azerbaijan-Georgia, Belarus-Ukraine and Moldova-Ukraine.

EaPTC opens an opportunity for Eastern Partnership countries to identify and jointly address common challenges in their border regions towards sustainable economic and social development at local level.

EaPTC comprises four territorial cooperation programmes: Armenia-Georgia, Azerbaijan-Georgia, Belarus-Ukraine and Moldova-Ukraine.

The is project is implemented the Development Civil Development Agency (CiDA) in partnership with The project implemented by theby Civil Agency (CiDA) in partnership with thethe Support for Support(SFN) for Noyemberyan (SFN) and the Northern of Eurasia Partnership Foundation Noyemberyan and the Northern Branch of EurasiaBranch Partnership Foundation (EPF NB).

(EPF).

This guideline has been produced with the assistance of the European Union. The contentof this publication is the sole responsibility of CiDA-led partnership and can in no way betaken to reflect the views of the This brochure has been produced with the assistance of the European Union. The content European Union of this publication is the sole responsibility of CiDA-led partnership and can in no way be taken to reflect the views of the European Union

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CONTACT INFORMATION Civil Development Agency (CiDA) 9/1 Pirosmani St., 3700 Rustavi, Georgia + 995 592 926464; + 995 3412588 24; + 995 341242434 www.cida.ge ced@cida.ge Support for Noyemberyan (SfN) 3 Yerevanyan St., 4101 Noyemberyan, Armenia + 37426 663286; + 37491 783283 www.tavushcf.am h.azibekyan@gmail.com Northern Branch of Eurasia Partnership Foundation (EPF NB) 60 Ankakhutyan Ave., 4001 Ijevan, Armenia + 374 952 515 63 www.epfarmenia.am info-epf@epfound.am

www.facebook.com/CEDproject www.facebook.com/groups/1020858794642498

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