Crypto License in Georgia

Crypto Laws in Georgia

Until recently, the Georgian government did not regulate the cryptocurrency sector on a legislative basis. However, in early 2023, new regulations regarding cryptocurrency activities were prescribed, and on July 1, 2023, the Law on Virtual Asset Service Provider (VASP) Registration Procedure came into force.

The purpose of this legislation is to prevent the use of virtual assets, including cryptocurrencies, for illicit purposes such as money laundering and terrorist financing. This is because these assets have a high level of anonymity, leading to difficulties in tracking transactions. Thus, the new law is designed to increase control and transparency in this sector. Consequently, every company holding a Georgian crypto license is obliged to comply with AML/KYC regulations.

The law does not grant cryptocurrency the status of a means of payment, and the only legal currency is the Georgian lari. At the same time, the new regulations prohibit the use of a virtual asset on a par with legal tender.

A virtual asset is defined as a digital unit of value. It has interchangeability but is not unique. It can be transferred or sold electronically, serving as a means of payment or investment. Interestingly, a virtual asset does not denote a digital form of cash, securities, or other financial instruments. Objects like NFTs and collectibles do not fall under the new rules. At the same time, cryptocurrency is an object of regulation.

According to the new legislation, each cryptocurrency company must register with the National Bank and obtain a license for its activities.

A licensed VASP is authorized to provide the following services:

• Activities related to the transfer, storage, or management of virtual assets;
• Trade platform administration;
• Exchange transactions, including an independent exchange office (domestic or foreign currency, other digital assets, financial products)
• Services connected to initial offerings;
• Asset management (excluding collective asset management)
• Provision of loans for virtual assets.

Registration and opening of crypto companies in Georgia

To open a crypto company in Georgia, you need to follow the following steps:

• Determine the direction of activity;
• Choose the most suitable type of company, such as LLC or JSC;
• Select and register a unique business name in the National Register;
• Prepare a package of corporate documents and certify them with a notary;
• Register with the Register of Entrepreneurs;
• Obtain a tax number and an extract on the state of the enterprise and tax registration;
• Open a corporate bank account in Georgia.

List of documents required to register a company in Georgia:

• The company's charter is an official document that creates a legal entity and determines the conditions for its activities in Georgia.
• A document that determines the amount of contribution of each founder.
• The application must contain information about the enterprise's name, legal entities, authorized capital, and documents approving the composition of the board of directors.
• If you are registering an LLC-type company, the application must also contain the address, business plan, date of commencement of work, and information about the company's directors (name, place of registration and birth, professional activity).

Registering a company in a free industrial zone (FIZ) in Tbilisi, Kutaisi, or Poti to receive benefits is better. Companies registered in these zones are exempt from income tax and dividends tax. At the same time, even foreign investors can be owners of enterprises.

Currently, there are free zones in Georgia located in the following areas:

• Tbilisi (capital of Georgia);
• Kutaisi, located in the Oceania region, is an important transport hub between Tbilisi and the Black Sea ports;
• Poti – the first free zone in the Caucasus region.

Cryptocurrency taxation in Georgia

Regarding the taxation of cryptocurrencies, one should again refer to the public Decision N201. The Ministry of Finance made the following decisions:

• income received by an individual from the supply of crypto assets is exempt from income tax;
• supply of a crypto asset by individuals (exchange of a crypto asset for national or foreign currency) is also exempt from VAT.

At the same time, cryptocurrency companies must pay corporate fees on profits, including those earned abroad. Companies should pay a tax of 15% on each transaction if they receive a profit from it.

From 01.01.2017, the "Estonian model" of taxation was introduced in Georgia, which is based on the principle of taxation exclusively from distributed profits. This means that in a situation where enterprises do not pay dividends and instead direct funds to corporate development, they are exempt from paying income tax.

Recall that you should consider opening a company in the FIZ of Georgia if you want to receive tax benefits. Main advantages:

• Exemption from property tax for registered companies in FIZ Georgia.
• No VAT or import tax on goods imported into the FIZ.
• No VAT on transactions between companies registered in the FIZ.
• If the conditions established by the Tax Code of Georgia are met, the company's profits may be exempt from corporate tax.
• No restrictions on the repatriation of capital.

The Georgian government has pledged to launch the Common Reporting Standard (CRS) throughout 2023. The government believes that introducing CRS will increase the country's budget, as it helps identify the income of taxpayers who have previously evaded the introduction and payment of taxes. Georgia will join 113 countries that have already implemented automatic exchange.