Crypto License in Georgia

Crypto Laws in Georgia

Georgia still needs to have a special law dedicated to cryptocurrencies. However, in June 2019, the Minister of Finance of Georgia issued a public Decision N201, the only normative act (by-law) in Georgia containing a detailed definition of crypto assets and their tax interpretation.

The public decision explains:

• Georgian legislation does not legally define a crypto asset or virtual currency.
• Each unit of a crypto asset has a market value; it can be issued, owned, transferred, divided into parts, and bought and sold. At the same time, a crypto asset is not a legal tender, as well as e-money, by the legislation of Georgia.
• Based on the foregoing, by Article 13, part 2 and Article 16, part 2 of the Civil Code, the supply of a crypto asset (exchange of a crypto asset for national or foreign currency) and the transfer of ownership rights to it are not a VAT-taxable operation.
• In addition, per subparagraph “F” of Article 82 of the Civil Code, income (including benefits) received by a resident individual unrelated to income from a source in Georgia is exempt from income tax.

While there is no legislative regulation of the cryptocurrency sphere in the country, a crypto license in Georgia for legal activities can be obtained in free industrial zones (FIZ – FZ).

With this license, you will be able to provide the following services:

• Exchange cryptocurrencies;
• Sell tokens;
• Keep e-money in virtual wallets;
• Debit and credit digital currencies to accounts.

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: trading tokens, services for exchanging or storing cryptocurrency, etc.
• 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.
• Choose a place of registration, for example, a FIZ.
• 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. At the same time, even foreign investors can be owners of enterprises.

A Free Industrial Zone (FIZ) is established based on the Tax Code, which provides favorable business rules and special customs tax regimes. In addition, payments in any currency are possible in FIZ, and there are no trade barriers or quotas.

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.