Economic overview
Thousands of citizens of Georgia receive financial aid each month from relatives working in Russia. After the sanctions imposed on Moscow by the West for the invasion of Ukraine, the transitions are now blocked, with consequences for those with economic problems.
Sofia Gvaramia lives in Tbilisi and tells us that her relatives in Moscow sent her money every month. “Both for the transfer and for the withdrawal there were never any problems. The money was credited to the account via the app. Then we went to the ATM to collect them. Now they can only send Russian rubles, it makes no sense because the rate is low. The dollar rose sharply in Russia. Some banks here in Georgia have even suspended this service. And if you transfer dollars, it’s a challenge to withdraw them from the banks. ”
Remittances account for 13% of Georgia’s GDP. In 2021, Russia was in first place in the ranking of money transfers to this country, according to the national bank, followed by Italy and the United States. For analysts, this situation will weigh on the national economy.
“The decrease in money transfers can cause significant damage to certain citizens and banks may also be affected in part, noted Alexandre Dzneladze, President of the Georgia Banking Association. For the institutions, on the other hand, there should be no particular repercussions. ”
Meanwhile, according to the National Bank of Georgia, money transfers will not cease entirely, but will be significantly reduced. An additional burden for an economy already in trouble due to the war. And this despite the fact that the country has not joined the sanctions against Russia.
Main sectors of industry
The driving sectors of the Georgian economy are agriculture (about 11% of GDP) and tourism. More than 50% of the workforce is employed in agriculture, a sector strengthened after the riots following the fall of the Soviet Union. Unfortunately, the high transport costs within the country make local products more expensive than imported ones, forcing farmers to let their crops rot. Winemaking is the most important industry of the agricultural sector in Georgia, where the oldest quality wines in the world are produced. In 2007, after the Russian ban on imports of Georgian wine, wine sales collapsed.
The tourism sector is growing more and more. According to the government, there are 103 resorts in the various climatic zones of the country; attractions include 2,000 springs and 12,000 monuments. Recently in Georgia, the electricity sector was deregulated, offering free access to the energy market. Currently, the energy generated in Georgia comes, for the most part, from hydroelectric plants, with the danger of having to import energy in times of scarcity. at present it is possible to expand production through the restructuring of existing plants and the construction of new plants.
Taxation for businesses in Georgia
Georgia has a corporate income tax on corporations. (Note: If the S-corporation status is recognized for Georgia purposes, the shareholders of the corporation pay the tax as opposed to the corporation paying the tax):
- Corporate income tax is a non-graduated percentage based on a corporation’s federal taxable net income and as modified by Georgia statutory adjustments.
- Corporations that own property, do business in Georgia, or receive income from Georgia sources are subject to corporate income tax
- The rate of taxation is five and three quarters percent (5.75%) of a corporation’s Georgia taxable net income
Corporations may also have to pay a net worth tax. This tax is based on the net worth of a corporation, levied in exchange for the privilege of doing business or exercising a corporate franchise in Georgia. For net worth years beginning on or after January 1, 2018 (those reported on the 2017 income tax return), corporations with a net worth of $ 100,000 or less are not subject to tax but must file a return.
The maximum is $ 5,000 for a net worth in excess of $ 22 million. All corporations doing business in Georgia for the first time must file an initial net worth return on or before the fifteenth day of the third calendar month after incorporation or qualification in the state (for C corporations, 15th day of the fourth month for net worth years beginning on or after January 1, 2017; those reported on the 2016 income tax return).
Investing in Georgia
In the current political context, Georgia offers the advantage of being probably the best positioned among the three countries of the South Caucasus to be able to aspire to become an ideal base for regional investments or projects (with a potential market of around 16 million of the people living there).
Indeed, it maintains excellent relations with both Armenia and Azerbaijan, while the latter have long since suspended commercial relations between them due to the frozen conflict of “Nagorno-Karabakh”.
Potential investors find in Georgia a land that, according to the various international rankings, has the highest standards in the area in terms of respect for legality, fight against corruption and adherence to the principles of European integration.
Knowledge of the English language is increasingly widespread and, in schools, it is possible to choose the study of German, French, Spanish and Italian among the optional subjects.