Finding untapped or underserved markets has always been one of the keys to operating a successful business. In the wake of the recent global pandemic, international expansion has become a necessity.
One such market, which has become increasingly popular in recent years, is the nation of Georgia. Its strategic location, ease of doing business, and beneficial tax laws have made it the perfect destination for both foreign investors and entrepreneurs over the past few years. Its growth is expected to increase even more in the next few years.
Georgia’s Perfect Location
Georgia lies in both eastern Europe and western Asia, allowing businesses to tap into the markets of both continents. Additionally, although Georgia did withdraw from the Commonwealth of Independent States (CIS) in 2009, the nation continues to honor free-trade agreements with every current CIS member, plus a few additional countries. This dramatically increases the potential customer base for a new business.
Its location also makes it the perfect tourist destination, along with major sites that draw international interest like Like Ritsa, Mount Kazbek, and the Narikala Fortress. In fact, tourism is one of the fastest-growing industries in the country, with an uptick in international travel expected as pandemic-era restrictions begin to be lifted around the world.
Georgia’s Current Economy
According to the analysis by The World Bank, Georgia has averaged 4% growth by GDP every year for the past ten years. This has come despite the fact that many of the country’s residents are employed in agriculture and not very successfully, with a lower collective output than would be expected for a nation with a similar amount of farmland.
Combined with a recently-lowered national poverty rate, this makes Georgia a prime candidate for foreign investors to either start a business or purchase real estate. Put simply, their economy functions well and one-sixth of the nation rose above the poverty line in the past decade. A corporation headed by a person or a group of people with business acumen should do rather well.
Georgia’s Tax Structure
Perhaps the most attractive element of a potential expansion into Georgia is its business tax structure, which was already beneficial to foreign investors and entrepreneurs before changes in recent years to make it an even more desirable destination. Georgia operates on a flat tax system, with a 15% corporate sales tax rate and a property tax that varies from region to region but is 1% or less throughout the nation.
There are fewer tax deductions available here compared to other jurisdictions but with income earned abroad not subject to taxation and Georgian law allowing non-citizens to own businesses, it is as close to an ideal tax situation as possible. According to a 2019 World Bank study, Georgia ranked seventh in the world in “ease of doing business” and was ranked first in the Europe and Central Asia region.
Residency and Citizenship
Depending on the exact setup and nature of a new business, it may become beneficial or even necessary to apply for citizenship or one of the various tiers of residency permits, both of which can potentially lead to lower taxes. The best thing to do is to reach out to a Georgia law office that specializes in international tax laws that can help potential investors find the tax situation that works best for them.
According to Lika Tsintsabadze, the founder of the Tbilisi-based NOMOS law firm, “there has never been a better time for real estate buyers, stock market investors, and business owners to put their money to work in Georgia. Our country’s untapped investment potential is only now beginning to be realized by foreign investors.”
Summary and Conclusion
Due to beneficial tax laws, the current state of the economy (both locally and globally), and its ideal location, Georgia is the perfect investment opportunity for real estate, a new business, or as part of a global expansion for an existing entity. The free trade agreements the nation has signed with many of its neighbors, coupled with visa-free travel, expand a corporation’s potential reach far behind the approximately four million citizens currently living in the country.
Whether it’s something as simple as a small real estate purchase or something as major as a multinational corporation opening a new office, Georgia is quickly becoming a major player in international investment circles. European businesses may want to consider expanding into the market sooner rather than later, as fierce competition is likely to start in a few years and those who get in early will have a distinct advantage over their rivals.