Free Industrial Zone in Georgia

What does Free Industrial Zone (FIZ) mean?

We often hear the terms FIZ, Free Economic Zone, Free Industrial Zone, tax and these terms are associated with low taxes and “something” benefits, but what exactly we are talking about and what the purpose of such zones is, in most cases, remains unknown.

The purpose of this article is to provide you with information about what is a free industrial zone and what is behind this term.

Free Industrial Zone (FIZ) is a type of free zone provided by the Tax Code of Georgia, where additional conditions and tax benefits apply. A free industrial zone is set aside for a definite period of time for economic activities and individuals within it are subject to a special economic and legal regime.

FIZ can be created:

At the initiative of the Government of Georgia;

At the request of a natural or legal person – organizer, for which a guarantee must be submitted, the amount and conditions of which are determined in accordance with the Resolution of the Government of Georgia on the rules of creation, arrangement and operation of a free industrial zone.

FIZ can be established in any area with an area of ​​more than 10 hectares, except for protected areas defined by the legislation of Georgia. On its territory, the entrance and exit will be determined in accordance with the rules established by the tax legislation of Georgia – a customs checkpoint will be set up.

FIZ Enterprise can be any organizational-legal and ownership form enterprise registered in a free industrial zone in accordance with the registration norms of enterprises established by the legislation of Georgia.

Enterprises registered in FIZ operate in the zone, while enterprises registered outside the zone (both Georgian and foreign) operate in FIZ through permanent establishments registered in the zone, except for electricity, water, natural gas distribution, communications and sewerage services in FIZ. And Georgian enterprises carrying out related activities. It should also be noted that the enterprise registered in the mentioned zone operates in another territory of Georgia (outside FIZ) as a permanent establishment of a foreign enterprise.

Issues related to taxes in FIZ are regulated by the Tax Code of Georgia, in particular:

Profits received by FIZ Enterprise are exempt from income tax.

The importation of foreign goods is not subject to value added tax.

Transactions in FIZ are not subject to value added tax.

Property in FIZ is exempt from property tax.

Import of foreign goods is exempt from import tax.

Import of goods produced in FIZ from FIZ (import) to another territory of Georgia (outside FIZ) is exempt from import tax.

In FIZ, the employee pays the income tax on the basis of income declaration.

The import of Georgian goods into the FIZ is considered as an export of goods, while the export of goods from another zone to another country is considered as an export of goods.

When importing goods from FIZ to another territory of Georgia, the goods operation defined by the Tax Code of Georgia shall be applied to the goods. In addition, when importing goods produced in the zone, the goods, regardless of their quantity, are taxed only at value added tax.

FIZ may manufacture, process or provide any goods other than:

Production of weapons, ammunition, trade in weapons, ammunition;

Production of nuclear, radioactive substances, trade in nuclear, radioactive substances;

Import, storage, production and / or sale of narcotic and psychotropic drugs;

Import, storage, production and / or sale of tobacco products and / or tobacco raw materials, except for import for on-site consumption.

FIZ Enterprise is prohibited:

Purchase of services from a person registered under the legislation of Georgia (except FIZ enterprise), except:

Provision of security services by the organizer and / or administration of the FIZ and / or lease or transfer of property;

Transport, communications, sewerage, auditing and / or consulting services, financial operations and / or financial services provided by a licensed financial institution, as well as fixed assets installation, installation and / or construction services;

Services defined by the Government of Georgia;

Providing services to a person registered by the legislation of Georgia (except for FIZ enterprise).

As for the currency – in FIZ, as well as between FIZ Enterprise and Georgian Enterprise, payment is made in any currency.

The functioning of free industrial zones is supervised by the Government of Georgia.

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