Merchandise Trade

• Georgia has been a member of the World Trade Organization (WTO) since June 14, 2000.


• Since achieving independence, Georgia has enacted a range of economic reforms that has seen the country conclude a wide range of FTAs with globally important players such as the EU, Turkey and (most recently) Mainland China. Thanks to its liberal trade regime, Georgia has signed FTAs with many of its neighbours, such as Ukraine, Belarus, Azerbaijan, Armenia, Russia, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan. In addition, it concluded a Deep and Comprehensive FTA with the EU.


• Georgia enjoys lower tariffs on 3,400 goods exported to the United States, Norway, Switzerland, Canada and Japan under the Generalised Schemes of Preferences (GSP).


• The country has also introduced customs clearance zones which have significantly streamlined border clearance times to the bare minimum, and imposed very minimal tariff and non-tariff barriers to international trade. Such reforms are helping the country's tourism and transport services sectors take off, especially as its strategic geographic location means that Georgia is set to become a key transit point for East-West trade under Mainland China's new Silk Road overland route.


• Georgia is not a member of any customs unions or single or common market areas (which usually provide for the free movement of the various factors of production). As a former Soviet state, the country was a member of the Commonwealth of Independent States (CIS). However, Georgia has not joined the CIS FTA or the Russian-led Eurasian Economic Union (EAEU). Although Georgia withdrew its membership in 2008, the CIS bloc has traditionally been the primary trading region for Georgia, largely part because of geographic proximity. Therefore, Georgia has separate FTAs with countries in the CIS.


• The United States and Georgia established a high-level bilateral dialogue on Trade and Investment in 2012, aimed at identifying measures to increase bilateral trade and investment. The United States and Georgia have shared a bilateral investment treaty since 1997, and Georgia can export many of its products duty-free to the United States under the GSP.


• There are a series of import tariffs applied on some agricultural products, which affect all trade-partner countries, unless specifically excluded in an FTA.


• In comparison with the EAEU single market bloc, penetrating the Georgian market as an outsider is easier, since tariff and non-tariff barriers to trade with Georgia are minimal. Nearly 90% of all goods imported to Georgia are duty free, and the country has the second-lowest average applied import tariff rate (0.7%) out of all eight Caucasus and Central Asian states.


• Georgia has the lowest time and cost burdens for both export and import procedures (for border and documentary compliance) out of all eight Caucasus and Central Asian states. There are no tariffs imposed on exports from the country as well as for no tariffs on goods imported for transit or re-export purposes. The introduction of customs clearance zones has significantly streamlined border clearance times to the bare minimum and the implementation of an integrated border management system has reduced the number of intervening agencies to only one point of contact between transporters and customs officials.

Sources: WTO – Trade Policy Review, Fitch Solutions

Multinational Trade Agreements

Active

1. Georgia-EU Deep and Comprehensive Free Trade Area (DCFTA): The EU and Georgia signed an association agreement on June 27, 2014 which entered into force on July 1, 2016. The agreement introduces a preferential trade regime. This regime increases market access between the EU and Georgia based on having better-matched regulations. The FTA with the EU provides a significant and wealthy export market for Georgia's manufacturing industries. The EU is Georgia's main trade partner, accounting for approximately 29% of total trade. The DCFTA allows for closer economic integration of Georgia with the EU based on reforms in trade-related areas. Based on the principles of the WTO, the DCFTA removes all import duties on goods and provides for broad mutual access to trade in services. It will allow EU and Georgian companies to set up a subsidiary or a branch office on a non-discriminatory basis, allowing the foreign company to benefit from the same treatment as domestic companies in the partner's market. The DCFTA allows Georgian trade-related laws to generally match selected pieces of the EU legal framework. Georgia's adoption of EU approaches to policymaking will improve governance, strengthen the rule of law and provide more economic opportunities by expanding the EU market to Georgian goods and services. It will also attract foreign investment to Georgia.


2. Georgia-Turkey FTA: The agreement came into effect in January 2008. Turkey is one of Georgia's largest exporting and importing partners. In February 2018 it was announced that Georgia and Turkey were taking action to widen the existing FTA between them and enable Georgian producers to increase export volume to Turkey by as much as 20%.


3. Georgia-Mainland China FTA: As of January 1, 2018, the FTA concluded between Georgia and Mainland China came into operation. It allows more than 90% of Georgian products duty-free access to the market of Mainland China and will boost Georgia's profile as a new Silk Road transit hub for East-West trade. Mainland China is one of Georgia's top five exporting and importing partners and its market dominance is likely to increase over the medium term now that the FTA is officially in operation.


4. Georgia-Hong Kong FTA: An FTA between Georgia and Hong Kong was signed on June 28, 2018. Georgia will eliminate import tariffs on 96.6% of its tariff lines for Hong Kong products. The FTA was negotiated in 2016 and has several standard components, namely the elimination or reduction of tariffs, the liberalisation of non-tariff barriers, flexibility regarding rules of origin to facilitate bilateral trade, customs facilitation procedures, the liberalisation, promotion and protection of investment, the liberalisation of trade in services and a dispute settlement mechanism for the FTA. The agreement was drafted based on the FTA between Georgia and Mainland China.


5. Georgia-European Free Trade Association: Signed in February 2016, the agreement grants Georgia free trade access to Switzerland, Norway, Iceland and Liechtenstein.

Sources: WTO Regional Trade Agreements database, Government websites, Fitch Solutions

Foreign Direct Investment

• Value Added Tax: 18%
• Corporate Income Tax: 15%

Source: Revenue Service of the Ministry of Finance, Georgia

Important Updates to Taxation Information

• In 2016, the Georgian government announced that it would adopt measures which aim to align the tax regime with the Estonian model of taxation. This model allows for all businesses (except profit sharing ventures) to be exempt from taxation and will, therefore, decrease the taxation burden for companies in Georgia. This came into effect from January 1, 2017, and effectively means that all businesses (except commercial banks, credit unions, insurance companies, microfinance organisations and pawn shops) will be effected by this new corporate tax regime from January 1, 2019.


• Companies are only taxed on their distributed profits (for example, in the form of dividends to shareholders) and not on their retained earnings. This is not necessarily meant to reduce the tax burden for corporate entities, but rather to defer payment and make the calculation of corporate tax easier. Businesses pay a 15% flat corporate tax rate on transactions such as profit distribution, costs incurred not related to economic activity, free of charge distributions and over-limit representative expenses. International financial companies, where 10% or less of total global income is derived from Georgian sources, are exempt from paying CIT on any income derived from financial services.

Localisation Requirements

The Georgian government does not enforce any localisation policies on businesses in terms of using domestic goods, labour or technology.

Foreign Worker Permits

Despite Georgia adopting a more stringent visa regime in 2014, it remains a fairly quick and low-cost process to obtain a foreign work visa in Georgia. Prior to 2014, people wanting to work in Georgia could enter and do so on a tourist visa. This has now been changed and anybody who wants to work in Georgia must apply for a long-term visa and eventually a resident's permit. The long-term visa is valid for 180 days. Resident permits take around 30 days to be issued.

Visa/Travel Restrictions

Various countries and groups enjoy visa-free access to Georgia and are usually permitted to stay (but not work) in the country for up to 360 days. Citizens of countries within the EU, the Commonwealth of Independent States, North Atlantic Trade Organisation, the Schengen area, the Gulf Co-operation Council, the United States and a wide range of others can enter Georgia visa-free.

Sources: Government websites, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Hong Kong’s Trade with Georgia