Quick Facts | |
Applicable legislation | Foreign country |
Best used for | Strictly regulated activities, such as financial ones |
Minimum share capital | No |
Time frame for the incorporation (approx.) | Approx. 4 weeks |
Management | Local (a resident director must be appointed) |
Legal representative required | Yes |
Local bank account | Yes |
Independence from the parent company | Fully dependent on the parent company's decisions |
Liability of the parent company | Fully liable for the branch office's debt and obligations |
Corporate tax rate | 15% |
Possibility of hiring local staff | Yes |
Basic information on branch offices in Georgia in 2022
A branch office is essentially an extension of the parent company abroad. It represents only a sub-unit of the parent company and does not have legal personality, under the Georgian law. Due to this, the parent company also holds the legal responsibility for the debts and other liabilities of the Georgian branch.
However, it must be noted that the
branch office does have certain advantages, one of them referring to the management of the entire company, as the
branch office will follow the same business model as its
parent company. Through this model, the
parent company is assured that its policies are followed as needed by all its representative units across the world, and that the
Georgian branch follows the same standards available anywhere else. Also, given that the company is incorporated following simpler rules, one will also benefit from
lower registration costs.
Because the
branch is not a separate
legal entity in Georgia, the
incorporation procedure will generally be
less expensive than in the case of any other type of company and the
branch can become operational in a shorter amount of time compared to starting a new business.
Our specialists in company registration in Georgia can also offer advice on the
disadvantages of opening a branch, which mainly refers to the liability that falls onto the
parent company. If the
branch experiences
financial difficulties or
files for bankruptcy, the
parent company abroad must be aware that these
financial liabilities fall under its obligations towards the
branch. If you want to
open a branch in other countries, such as Spain, we can put you in touch with our local partners.
Registration requirements for a branch in Georgia in 2022
A
branch in Georgia must be registered with the
National Agency of Public Registry belonging to the
Ministry of Justice. For this purpose, the company’s representatives will need to provide a set of documents, which are customarily submitted when
applying for
registration:
- • the parent company’s decision to open a branch in Georgia;
- • the original articles of association of the foreign company that wants to operate through a branch office;
- • one must also add a document which provides information on the names of the persons who act as company representatives, as well as certain corporate information on the parent company;
- • identification details for the appointed director of the branch registered in Georgia;
- • a receipt proving that the registration fee has been paid with the relevant authority.
Besides the documents mentioned above, those who want to start the process of
company formation in Georgia for a
branch office should also prepare other papers, such as: a copy of the identity document (passport) of the person who will act as a
director of the branch and the person’s signature sample, which must be certified by a
notary in Georgia.
Investors must also prepare the trading name under which the branch will operate in Georgia, as well as the official address where the branch will develop its business activities. All the registration information of the parent company is required – the legal name of the founder, the registration detail of the respective company obtained from the Companies Register in the respective country, as well as the respective company’s identification code.
The documents that will presented to the
Georgian authorities, issued by the institutions of the country where the
parent company originates, have to be notarized or apostilled in the said country. When they will be added to the registration file, for a successful process of
company formation in Georgia, the said documents will have to be translated and certified by a local public notary. If you need in-depth information on the full procedure, you can
rely on our team of consultants in company registration in Georgia.
In 2022, the procedure for company formation in Georgia for local branches has not been modified, which means that all the steps that were traditionally required will be maintained throughout the year. Thus, those who want to register a branch in Georgia in 2022 do not have to search for various amendments to the legal procedures required for this; however, if you need assistance on the process of registering a branch in 2022, our team of consultants in company registration in Georgia remains at your disposal.
Are there any other registration requirements for a Georgian branch?
When
starting a Georgian branch, it will also be necessary to
choose a business form. As a general rule, foreign investors can
set up the branch as a
limited liability company or as a public company. This is decided depending on the
legal entity under which the
parent company is registered.
It is important to know that
Georgia offers a
simple registration procedure and thus, the
branch can be registered with the authorities working under the
Ministry of Justice in only one day. If the company’s representatives pay an extra fee, the registration can be completed in the same day in which the required documents were deposited with these institutions. Foreign investors must also observe the requirements applicable for
VAT registration in Georgia.
Furthermore, the investors will also need to
open a corporate bank account for the
branch office operating in Georgia, which can be set up in the local currency or any other foreign currency. In this situation, the
representatives of the parent company need to provide documents that attest the fact that the beneficial owners hold at least 25% of the capital of the legal entity.
In some cases, a power of attorney empowering the
director of the branch may be needed together with the aforementioned documents. Additionally, we can help you notarize and translate any documents.
Our company formation experts in Georgia can help you obtain a power of attorney and submit any other documents needed for the
incorporation of the branch.
What are the tax advantages of starting a branch in Georgia?
A
branch in Georgia will be liable to the payment of the same taxes that are charged to other company types. However, the
branch will have to pay its taxes only for the commercial activity that was carried out on the
Georgian territory. Businessmen who want to
open a company in Georgia operating as a
branch office or as another business form will pay the following
taxes:
- • the corporate income tax, charged at the standard rate of 15%;
- • the value added tax, charged at the standard rate of 18%;
- • those who want to open a company in Georgia must know that they will become liable for the payment of the value added tax when the annual taxable turnover reaches GEL 100,000;
- • in the case in which the Georgian branch is involved in import activities, one must know that customs duties can be charged at rates of 0%, 5% or 12%, depending on the nature of the goods;
- • Georgia also charges the excise tax, applied to specific categories of goods, such as alcohol, tobacco, automobiles, natural gas and others and the rates vary from GEL 0.12 per unit to GEL 800 per unit.
With regards to taxes, it is important to know that Georgia charges the property tax and the land tax. Those owning a property in Georgia will be charged with a tax of 1% on the value of the fixed asset, but properties bought prior to 2005 can be charged with other taxes.
The land tax is calculated per 1 hectare of land and it can vary between GEL 5 to GEL 100, but the value of a hectare can increase based on the location of the respective land. One should know that Georgia does not charge the stamp duty, nor does it charge transfer taxes. Investors arriving from countries where the tax base is higher can easily consider the tax system in Georgia as an attractive one.
However, it its region, the country provides one of the most competitive tax systems and one of the most attractive markets for starting a business. For example, the withholding taxes on the distribution of dividends are charged with a tax rate of only 5%. This applies for both local and non-resident entities and one should know that this tax rate can be charged at a lower rate, if a double tax treaty applies and if it mentions a lower rate.
The same rate applies on the payment of interest and royalties, while the technical service fee is charged with an withholding tax of 10%. However, a rate of only 4% is applied to those charging the technical service fee in the field of oil and gas industries. If the recipient of the interest of royalties is a tax resident of an offshore jurisdiction (or other type of jurisdiction with a low tax regime), then the withholding tax will be charged at a higher rate, of 15%. You can receive more details with regards to the withholding tax regimes from
our team of consultants in company registration in Georgia.
If you want to
open a branch in Georgia or you are interested in exploring other available business options, please
contact our team of specialists in company formation in Georgia, who can provide legal counselling and consultancy services regarding the registration of any of the company types prescribed by the national law.