Georgia has steadily positioned itself as a strategic hub for cross-border trade between Europe, the Caucasus, Central Asia, and the Middle East. Leveraging its location at the crossroads of major transport corridors and its liberal trade policy, the country offers unique opportunities for companies seeking to optimize both their logistics and tax structures for regional distribution and re-export operations.
Among Georgia’s most powerful tools for attracting international business activity is the Free Industrial Zone (FIZ) regime, a special legal and tax framework designed not only to incentivize import, storage, and re-export operations, but also to support manufacturing, processing, and a broad range of activities within a favorable regulatory environment.
Georgia’s Corporate Tax Framework
Georgia applies an Estonian-style Corporate Income Tax (CIT) regime. Under this system, corporate profits are not taxed when earned but only upon distribution. The standard CIT rate is 15%, with a further 5% withholding tax (WHT) applied on dividends paid to shareholders. These two taxes generally apply simultaneously when profits are distributed, producing a combined tax effect comparable to many other jurisdictions.
Profits retained for reinvestment remain untaxed until distribution. This deferral already provides a significant advantage for companies operating in Georgia. The Free Industrial Zone regime builds further on this foundation by eliminating Georgian tax exposure on qualifying activities entirely, creating powerful planning opportunities for businesses engaged in trade and manufacturing.
Legal Framework and Structure
The Free Industrial Zone regime is established under Georgian legislation, including the Law of Georgia on Free Industrial Zones and the Tax Code of Georgia. A Free Industrial Zone is a designated part of Georgian territory with defined boundaries and a special legal status, established for the purpose of conducting economic activity under a preferential regulatory and tax regime.
Strategically located FIZs currently operate in Poti, Kutaisi, and Tbilisi, with proximity to Black Sea ports, major highways, and rail connections. A FIZ may be established on any territory exceeding 10 hectares, either on the initiative of the Georgian Government or upon application by a private organizer. The organizer is responsible for the development and administration of the zone, while the overall supervision of FIZ operations is carried out by the Georgian Government.
A FIZ Enterprise is a company of any legal or ownership form (mostly LLCs and JSCs) registered within the Free Industrial Zone in accordance with Georgian company registration requirements. Foreign companies and Georgian companies registered outside the FIZ may also operate within it, but only through a permanent establishment registered inside the zone.
Tax Benefits
The FIZ regime provides a comprehensive package of tax exemptions under both the Law on Free Industrial Zones and the Tax Code of Georgia. A company registered and operating as a FIZ Enterprise benefits from the following:
- Full exemption from Corporate Income Tax (15%) on qualifying income;
- Full exemption from dividend withholding tax (5%);
- No VAT on the importation of foreign goods into the FIZ;
- No VAT on operations conducted within the FIZ;
- Full exemption from import duties on foreign goods brought into the FIZ;
- Full exemption from property tax on assets located within the FIZ;
- Exemption from import duties on goods produced within the FIZ that are subsequently imported into the rest of Georgia (such goods are subject only to VAT);
- No restrictions on the repatriation of profits earned from qualifying activities.
In effect, profits from eligible activities can be earned and distributed entirely free of Georgian tax, placing FIZ companies among the most tax-advantaged structures available to businesses in the region.
It is worth noting that employees working within an FIZ remain subject to personal income tax. However, unlike the standard withholding arrangement, personal income tax within an FIZ is paid by the employee on the basis of self-declaration, rather than being withheld by the employer.
A critical feature of the FIZ regime is a special 4% tax that applies to certain transactions between a FIZ Enterprise and persons registered under Georgian law (i.e., ordinary Georgian companies or individuals, other than FIZ enterprises).
Specifically, the 4% tax applies in the following circumstances:
- When a FIZ Enterprise supplies goods to a Georgian-registered person (other than another FIZ enterprise), the FIZ Enterprise must pay 4% of the income received or receivable from that supply (or 4% of the market price in the case of a gratuitous supply). This payment is due no later than the 15th day of the month following the month of supply.
- When a Georgian-registered person (other than a FIZ enterprise) supplies goods to a FIZ Enterprise, with the exception of electricity, water, and natural gas intended for on-site use or production, the FIZ Enterprise must also pay 4% of the market price of those goods, again due by the 15th of the following month.
This mechanism is designed to preserve a degree of separation between the tax-exempt FIZ environment and the regular Georgian tax base, ensuring that the zero-tax benefits of the FIZ are not extended to transactions with ordinary Georgian entities.
Restrictions on Transactions with Georgian-Registered Persons
In addition to the 4% tax, Georgian legislation imposes specific restrictions on FIZ Enterprises regarding service transactions with Georgian-registered persons. A FIZ Enterprise is prohibited from:
- Purchasing services from Georgian-registered persons (other than FIZ enterprises); and
- Providing services to Georgian-registered persons (other than FIZ enterprises).
- There are, however, important exceptions to the prohibition on purchasing services from Georgian persons. A FIZ Enterprise may acquire the following services from Georgian-registered providers:
- Security services and the lease or rental of property, provided by the FIZ organizer or administrator;
- Transport, telecommunications, sewerage, audit, and consultancy services;
- Financial transactions and financial services provided by licensed financial institutions;
- Installation, assembly, and construction services in respect of fixed assets;
- Any other services designated by the Georgian Government.
Permitted and Prohibited Activities
One of the most significant, and often underappreciated, features of the FIZ regime is the breadth of permitted activities. A FIZ Enterprise may carry out any production or processing activity within the zone, unless expressly prohibited by law.
This means that the FIZ regime is not limited to trading and re-export activities. It is equally available to manufacturing and industrial enterprises, processing businesses.
The following activities are expressly prohibited in a Free Industrial Zone:
- Production of, or trade in, weapons and ammunition;
- Production of, or trade in, nuclear and radioactive substances;
- Import, storage, production, or sale of narcotic and psychotropic substances;
- Import, storage, production, or sale of tobacco products and tobacco raw materials, except for tobacco brought into the FIZ for personal consumption on-site (which is not treated as an export). The use of buildings within an FIZ for residential purposes is also prohibited.
Movement of Goods: Customs Treatment
The customs treatment of goods moving into and out of a FIZ reflects its status as a separate customs territory within Georgia. The principal rules are as follows:
- Georgian goods entering a FIZ are treated as exports from Georgia;
- Goods leaving a FIZ for another country are also treated as re-export.
- Goods leaving a FIZ into the rest of Georgian territory are subject to the customs procedures provided by the Georgian Customs Code. Import duties do not apply to FIZ-produced goods; however, import VAT will apply.
The customs declaration and control rules for goods entering and leaving a FIZ are governed by Georgian customs legislation. Each FIZ has a designated customs checkpoint through which goods must pass.
Georgia’s Free Industrial Zone regime offers a comprehensive and highly competitive legal and tax framework for businesses across a wide range of industries. The combination of full exemptions from corporate income tax, dividend withholding tax, VAT, property tax, and import duties, together with the freedom to conduct virtually any lawful business activity, creates conditions that are difficult to replicate in comparable jurisdictions.
When properly implemented, the FIZ regime enables Georgia to serve not only as a geographic crossroads but also as a tax-efficient base for trading and manufacturing. Businesses considering the FIZ framework should assess their structure carefully in light of the restrictions on transactions with Georgian-registered persons and the 4% tax mechanism, as well as their specific logistics needs, target markets, and international tax planning objectives.
Disclaimer: This article is based on Georgian legislation and public data as of March 2026. Businesses are strongly advised to seek professional tax counsel tailored to their specific operational and jurisdictional circumstances before relying on the regime discussed above.