ACCOUNTING SERVICES

Free Trade Zones in Georgia: A Comparative Analysis of Tax Benefits for LLC and JSC Companies

Georgia's strategic location at the crossroads of Europe and Asia, coupled with its liberal economic policies, makes it an attractive destination for international businesses. One of the key elements enhancing its appeal is the establishment of Free Trade Zones (FTZs), which offer significant tax benefits compared to traditional business structures such as Limited Liability Companies (LLCs) and Joint Stock Companies (JSCs). This essay explores the tax advantages of operating within Georgia's FTZs, compares these benefits with those available to LLCs and JSCs, outlines the tax evidence obligations for businesses, and highlights the services provided by Bookkeeping.ge to support new and existing clients.

Tax Benefits in Free Trade Zones

Free Trade Zones in Georgia are designed to attract foreign direct investment and promote export-oriented activities. Businesses operating within these zones enjoy several tax incentives, including:

1. Exemption from Corporate Income Tax: Companies within FTZs are generally exempt from the standard 15% corporate income tax that applies to businesses outside these zones.
2. Exemption from VAT: Goods produced and exported from FTZs are exempt from the 18% Value Added Tax (VAT).
3. Customs Duty Exemption: Imports and exports within FTZs are not subject to customs duties, which significantly reduces operational costs.
4. Simplified Tax Procedures: Businesses benefit from streamlined tax reporting and reduced administrative burdens, making it easier to comply with regulatory requirements.

Comparison with Classic LLC and JSC Companies

In contrast, traditional LLCs and JSCs operating outside of FTZs face different tax obligations:

1. Corporate Income Tax: Both LLCs and JSCs are subject to a 15% corporate income tax on their profits.
2. VAT: These companies must charge and remit 18% VAT on applicable goods and services.
3. Customs Duties: Imports and exports by LLCs and JSCs outside of FTZs are subject to standard customs duties, increasing their operational costs.
4. Additional Taxes: Depending on the nature of the business, additional taxes such as excise duties and property taxes may apply.

Tax Evidence Obligations

Regardless of the business structure or location, companies in Georgia are required to maintain accurate tax records and comply with the reporting obligations set by the Georgian Revenue Service (GRS). Key obligations include:

1. Filing Annual Tax Returns: All businesses must file annual tax returns detailing their income, expenses, and payable taxes.
2. Maintaining Financial Records: Companies are required to maintain comprehensive financial records, including invoices, receipts, and financial statements, for at least six years.
3. VAT Reporting: Businesses registered for VAT must submit monthly or quarterly VAT returns, depending on their turnover.
4. Payroll Reporting: Companies must report and remit payroll taxes for their employees on a regular basis.

Bookkeeping.ge Services

At Bookkeeping.ge, we offer a comprehensive suite of services to assist both new and existing clients in navigating the complexities of the Georgian tax system. Our services include:

1. Tax Advisory: We provide expert advice on the most advantageous tax structures for your business, whether you are operating in an FTZ, as an LLC, or as a JSC.
2. Compliance Assistance: Our team ensures that your business complies with all tax reporting and documentation requirements, reducing the risk of penalties and audits.
3. Financial Management: We offer bookkeeping and accounting services to maintain accurate financial records and prepare necessary financial statements.
4. Payroll Services: We manage payroll processing and reporting, ensuring timely and accurate payment of salaries and related taxes.
5. Office and HR Support: For businesses in the startup phase, we assist in finding and setting up offices, hiring staff, and establishing a legal framework for employment.

Operating within Georgia's Free Trade Zones offers significant tax benefits compared to traditional LLCs and JSCs, including exemptions from corporate income tax, VAT, and customs duties. However, all businesses must adhere to stringent tax evidence obligations to remain compliant. Bookkeeping.ge is dedicated to supporting businesses by providing expert tax advisory, compliance assistance, and comprehensive financial management services, ensuring that our clients can focus on their core operations while enjoying the fiscal advantages offered by Georgia's progressive tax policies.