Establish a Subsidiary in Georgia

Establish a Subsidiary

Establish a Subsidiary in Georgia: Many foreign companies are interested in expanding their operations in other countries once they’ve achieved maturity and their profits allow them. While some of them choose the European market, there are also those willing to venture into the Georgian markets.

Foreign companies seeking to expand their business activities in Georgia can set up subsidiaries or branch offices.

The main difference between these types of structures is the degree of independence of the Georgian company.

Our Company Formation Georgia team can offer a clear definition of the subsidiary company. One of the advantages of the Georgian subsidiary is that this business structure is seen as an independent legal entity.

A subsidiary in Georgia is a legal entity that has a foreign company as its main shareholder. Unlike the branch, this type of business gives the foreign company the possibility to detach itself from the liabilities of its subsidiary. The foreign parent company will thus establish its presence in Georgia by incorporating a new company in the country.

Requirements to establish a subsidiary in georgia

In order to open a subsidiary in Georgia, a foreign entrepreneur must open a limited liability company. There are a few steps to complete when opening this type of company, starting with choosing the right and available business name (followed by the abbreviation LLC), opening a bank account and registering the limited liability company.

The liability of the shareholders is limited to the amount of their contributions to the share capital, this being one of the main reasons foreign businessmen choose to register a company under an LLC. This type of company has at least one shareholder and it may be formed by appointing a single director. In the case of a subsidiary, the foreign parent company is the main shareholder.

The most important documents that need to be provided when opening a subsidiary are the documents belonging to the parent company; our team of consultants in Company Formation Georgia team can provide in-depth assistance on documents such as the articles of association, identification details of the company, information regarding the shareholders of the business and others.

The advantages of a subsidiary in Georgia

The decision to open a branch or a subsidiary in Georgia can depend on a number of factors and on the business plans the foreign company has in Georgia. Although the branch is easier to set up and it becomes operational in a shorter amount of time, the subsidiary can be seen as a more risk-free business structure because the assets owned by the parent company will not be at risk if bankruptcy occurs.

The subsidiary is also a preferred business structure when dealing with customer perception. Some customers and/or partners will show more confidence when working with a subsidiary company because the business is a Georgian legal entity, committed to the Georgian market and the Georgian Company Law.

The tax system of Georgian subsidiary 

Just like any other type of company in Georgia, the subsidiary is liable to taxation. From a taxation point of view, the Georgian subsidiary will be treated following the regulations available for local businesses and the investors will have to register for a set of taxes, to which local companies are liable, as follows:

• the subsidiary is required to register for value-added tax (VAT), once the company reached a turnover of GEL 100,000;
• this business form is also liable to corporate tax, which is imposed at the rate of 15%;
• the company is also required to pay withholding taxes for the payments transferred to non-residents;
• the withholding taxes in Georgia are applicable to dividends, royalties, and interests.

Once the company will be registered with the local institutions, the company’s representatives can hire employees, who are liable for taxation. The tax legislation available here requires employers to register the company’s employees for social security and other employment taxes and, in this sense, it is important to know that Georgia applies a personal income tax imposed at the rate of 20%.