Tax optimization strategies represent a legitimate and essential tool for business management, aimed at reducing the tax burden using methods permitted by law. It is crucial to clearly distinguish between tax optimization (Tax Avoidance) and tax evasion; the former is a legal right, while the latter is a crime. Georgia offers businesses one of the most liberal tax environments in the region, with diverse preferential regimes such as "Small Business" status, "Virtual Zone" Person, "International Company," and Free Industrial Zones. Each of these regimes requires compliance with specific criteria and proper structuring. Without a qualified tax strategy, companies often pay more taxes than they are obligated to, or conversely, face the risk of serious penalties due to incorrect interpretation of laws.
What Does Tax Optimization Service Cover?
Specialists on Legal.ge offer a comprehensive approach tailored to the specifics of your business. The service includes:
- Business Model Analysis: Studying existing or planned activities and selecting the most effective legal entity form and tax regime.
- Implementation of Preferential Regimes: Assisting in obtaining and maintaining statuses such as Small Business (1% tax), International Company (5% profit tax, 0% dividend tax), and others.
- Expense Structuring: Correctly classifying and documenting expenses to maximize the reduction of the taxable base within legal limits.
- International Structuring: Creating holding structures and effectively using Double Taxation Avoidance Treaties in cross-border operations.
- Risk Prevention: Identifying potential tax risks and developing ways to neutralize them before a tax audit occurs.
Common Situations and Scenarios
Many entrepreneurs lose money due to a lack of information. For example, an IT specialist or freelancer working as an individual and paying 20% income tax could instead register as a "Small Business" and pay only 1%. Another example is a foreign IT company opening a branch in Georgia and paying standard taxes instead of obtaining "International Company" status to benefit from radically reduced rates. It is also common for companies to fail to utilize their right to VAT deduction due to documentation errors, which directly increases costs. Another scenario involves importers: incorrect use of customs regimes (e.g., import deferral, warehouse regime) leads to freezing of working capital.
Georgian Legal Framework
Tax optimization is strictly based on the Tax Code of Georgia. The Code defines general tax regimes as well as special taxation regimes (Small Business, Micro Business). Additionally, the Law of Georgia on Entrepreneurs is important for defining corporate structure. Special statuses (Virtual Zone, International Company) are regulated by specific articles and Resolutions of the Government of Georgia, which define permitted activities and criteria. At the international level, optimization strategies consider Double Taxation Avoidance Treaties applicable to Georgia and BEPS (Base Erosion and Profit Shifting) principles.
Step-by-Step Service Process
Working with a tax strategist on Legal.ge begins with diagnostics. In the first stage, the specialist conducts a "tax health" check of your business. In the second stage, several alternative strategies are developed with calculated financial effects (e.g., "What happens if we change the legal form?"). The third stage is the implementation of the chosen strategy: registration, contract review, changing accounting policies. The final stage involves monitoring to ensure that the new structure works correctly and yields the expected results.
Why Choose Legal.ge?
Legal.ge brings together leading experts in the tax field who have both local and international experience. Tax legislation changes constantly, and specialists on our platform continuously update their knowledge regarding the latest regulations and practices. A specialist found on Legal.ge will not offer you a "template" solution; they will create an individual strategy that legally reduces your taxes and increases business profitability.
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