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Free Industrial Zones, Free Touristic Zones and Virtual Zones under the Laws of Georgia

March, 2014. Mariam Antia, lawyer at Mgaloblishvili Kipiani Dzidziguri

- Are there any laws, enhancing Georgia’s investment environment?

In the context of Georgia’s aspirations to become a country with attractive business climate, over the last few years the Parliament of Georgia has adopted various laws, designated for creating favorable conditions for attracting investments in the specific sectors of the industry. 

The Law of Georgia on Informational Technology Zones, The Law of Georgia on the Support of Free Touristic Zone Development and the Law of Georgia on Free Industrial Zones open the prospects for the businesses, interested in production of goods and services, development of hotel infrastructure and IT technologies.

Operations in Free Industrial Zones, Free Touristic Zones and Virtual Zones are subject to less stringent requirements in terms of taxation and regulatory oversight.

- What are the specifics of operations in such zones?

Free Industrial Zone is a place within the Georgian territory with defined boundaries and special status, granted under the law. Companies, operating in Free Industrial Zones are allowed to produce any goods or render any services, except for the production of arms, nuclear and radioactive items, drugs and tobacco.
Free Touristic Zones are located in specific areas of Kobuleti, Anaklia, Ganmukhuri (along the Black Sea coast), and other territories, as defined by the Government of Georgia. The applicable law promotes the development of medium and high class hotels in these territories.

IT Zones are virtual zones with IT companies. The applicable law aims at attracting investments in IT sphere.

- What are some of the benefits for the companies, registered in the zones?

Companies, registered in Free Industrial Zones are generally released from the profit tax.  Further, goods imported to Free Industrial Zone and the operations carried out in such zones are VAT exempt. No tax is levied on the property, located in Free Industrial Zone and on the goods, imported to Free Industiral Zone. Import of the goods, produced in Free Industrial Zones to other territories of Georgia is also exempt from import tax.

Companies, operating in Free Touristic Zones also enjoy tax benefits: they are released from the tax on property and the profit tax for 15 (fifteen) years. Further, Free Touristic Zone companies are also freed from the obligation to pay the construction permit fee. Another attractive feature is the possibility of acquiring the land for development at a symbolic price of GEL 1.

IT Companies of Virtual Zones also enjoy the tax benefits: no profit tax, VAT and export tax is imposed on export of the IT Technologies outside of Georgia.

- What are the regulatory benefits for the companies, registered in the zones?

Under the decision of the Government of Georgia, certain operations in Free Industrial Zones may be released from the obligation to obtain the relevant license/permit, or may be subject to simplified licensing procedures.  It is also noteworthy, that the any monetary settlements within Free Industrial Zones, or between the Free Industrial Zone Company and a regular Georgian company may be made in any currency.

IT companies in Virtual Zones are exempt from any special regulation, which means that no licenses, permits or any other regulatory documents are required for their operations.

As for the Free Touristic Zones, the developers shall be free from construction permit fee, enjoy symbolic price for property acquisition and rather simplified procedures.

- What is required for operating in the specific zone?

It depends on the type of the zone.

In order to be considered as an enterprise of a Free Industrial Zone, the company has to be registered within such zone. It is noteworthy, that beyond the boundaries of the zone, the Free Industrial Zone Company is regarded as a permanent establishment of a foreign enterprise.

To enjoy the benefits under the Free Touristic Zone, the developer has to acquire the land in the specified territory and develop a medium or high class hotel.

As for the Virtual Zones, special status of the Virtual Zone Entity is granted to the interested party within 10 days from the application. The terms of granting the special status are set forth by the Government of Georgia.  

                                                              


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