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Establish a Branch in Georgia
Updated on Thursday 01st April 2021 Rate this article
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A branch in Georgia is the preferred business form for entrepreneurs who want to expand an already existing company. A branch office in Georgia can be incorporated following a much simpler procedure compared to the subsidiary, but its founders must know that the branch is seen from a legal point of view as a subdivision of the parent company. If you want to invest in Georgia and open a company here, our team of specialists in Georgian company formation can give you detailed information on all of the available types of companies.
Basic information on branch offices in Georgia
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
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.
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.
Meet us in Tbilisi
Call us now at +995 595 11 88 22 to set up an appointment with Valeri Bendianishvili, one of our specialists in company formation in Tbilisi, Georgia. Alternatively you can incorporate your company without traveling to Georgia.
As a Business Setup Georgia LLC client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Georgia.
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