A liaison office in Georgia is a good investment option for those foreign investors who want to test the available market by doing the necessary research and engaging with their potential customers prior to starting a business activity in Georgia.
The liaison office provides certain advantages and it can be used as an intermediary between the Georgian market, clients and business partners and the parent company abroad. Our company formation agents in Georgia can tell you all about the incorporation procedure for a liaison office and offer you counselling regarding the best business options for your needs.
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What does a liaison office offer?
A liaison office in Georgia is valuable for those businesses that want to perform certain activities and also want to have a permanent representative office in Georgia. The types of activities a liaison office can perform are mainly those related to market research and others, including: representation, market research, promotion activities for the parent company and advertising, technical support, regional management services, product sourcing or quality control and others.
Thus, the representative office (or the liaison office) is not a suitable way to enter the Georgian market for those who want to open a company in Georgia and start their business activities immediately after the company is registered. It can be the ideal step to take for those wishing to start the process of company formation in Georgia in the following years, as the representative office can be used as a way to gather information and establishing business contacts with local investors.
Why establish a liaison office in Georgia?
If the above activities can be useful for your company, then a liaison office is the best choice in terms of operational costs and benefits offered. A Georgian liaison office cannot perform any business transactions. This type of office is entirely dependent on the foreign parent company and it is also fully funded by the parent company.
Please mind that the liaison office in Georgia is not considered a separate legal entity. Investors have to be aware that this structure is fully dependent on the parent company and, to a certain extent, it has very similar traits with the branch office, which is also 100% subordinated to the parent company abroad.
The main difference between the two structures is that the branch office is set up with the purpose of carrying economic activities by replicating the same business model that the parent company implements in its own country and it other countries where it develops business activities.
However, both structures can be seen as permanent establishments of the parent company abroad, but they also differ when we refer to the taxes that the two structures must pay. Here, one has to know that the branch office is fully liable for taxation in Georgia, but only for the business operations it generates in Georgia, while the liaison office is mainly exempted from taxation due to the fact that it does not generate taxable income.
However, the liaison office in Georgia may also be required to pay several taxes – for instance, if the liaison office will hire an employee, which is almost always the case, as there has to be at least one person who will represent the foreign company through the representative office and who will develop specific work activities related to research, technical support, advertising, etc., then the establishment will pay employment taxes.
The liaison office will carry its specific activities in a physical office, and this means that the parent company will have to rent a suitable office space and pay rent accordingly. Besides these costs, the office will need to take into consideration few operating costs – such as utility bills in most of the situations. Below, our team of consultants in company registration in Georgia has prepared a short presentation on the main tax differences between the branch office and the representative office:
- • the branch office may be liable to the payment of the VAT in the case in which it reaches a turnover above GEL 100,000, as it is seen as a commercial entity, unlike the liaison office, which does not have to pay VAT, as it does not develop operations charged with the VAT;
- • if the branch will become a VAT payer, the VAT rate is of 18%;
- • the branch office must also pay the corporate tax, which is imposed at the standard rate of 15% (the tax will be charged for the income generated in Georgia), while the liaison office is exempt from paying this tax also;
- • the branch must also pay withholding taxes, currently charged at a rate of 5% on the payment of interest and royalties to payments made to non-residents;
- • a withholding tax of 10% is charged for transportation services;
- • the main tax that both entities have in common is the employment tax, charged at a rate of 20% from the income of the employee.
The liaison office will not require a share capital or expensive incorporation fees. Also, because this type of office does not generate profit of its own, it does not have to be registered for VAT purposes in Georgia. The registration procedure will be straightforward and our company incorporation experts in Georgia will help you make all the necessary preparations.
As such, your Georgian liaison office can become operational in the shortest amount of time possible. If you want to know more about the investment climate in Georgia or about the types of companies you can register there, please address to our company incorporation agents in Georgia.
The legal framework concerning taxes charged to commercial and non-commercial entities operating here, registered by local investors and foreigners alike, can be verified with the Legislative Herald of Georgia. However, an in-depth presentation on the matter can also be offered by our team of specialists in company registration in Georgia.
How can our specialists help you open a liaison office in Georgia?
Our team can prepare the list of documents you will need when establishing the representative office in Georgia, and can also advise you in any other aspect that you will need during this time. You can also receive professional representation from our team, as most of the documents are in the Georgian language, and this can become an issue for those who are not familiarized with the local language.
Our team of consultants in company formation in Georgia can also intermediate the process of finding a suitable office space and, of course, can help in the process of signing the rental agreement. You can rely on our team on any other matter that can be of interest when setting up a business in this country, including on tax advice and information on the accounting regulations applicable here.
The liaison office will have to go through the same registration steps that are applied when a foreigner wants to open a company in Georgia, with few differences, given the nature of this type of business venture.
Our consultants can provide step to step assistance and can prepare the documentation for the registration, through the power of attorney, which is a legal document that grants the right to representation.
Through this document, our team can help you open a business in Georgia of any kind without the foreigner being required to complete all these steps by himself/herself.
The power of attorney can be signed for a particular legal step or for all the steps involved in the process of registering a legal entity. You can also rely on us if you want to relocate employees to work in the liaison office.
Although the liaison office will not have as many documents as a regular business, there is still legally required to maintain the bookkeeping of the office.
Thus, contracts, employment agreements, paychecks, the payment of various taxes, etc., can fall under the supervision of our accountants in Georgia, who can submit the necessary documents with the local institutions, as per the applicable law.