Free Industrial Zone (FIZ) Company

Free Industrial Zone (FIZ) status provides complete tax elimination for qualifying manufacturing, logistics, and trading operations conducted within designated zones. This regime creates exceptional opportunities for import-export businesses, manufacturing operations, and logistics companies leveraging Georgia's strategic position between Europe and Asia.

FIZ Status Overview and Benefits

Free Industrial Zone companies operating within designated zones enjoy complete elimination of all major taxes on qualifying activities. This includes zero corporate income tax on profits generated from FIZ activities, zero VAT on imports into the zone and exports from the zone, zero customs duties on goods imported into the zone, zero property tax on facilities and equipment within the zone, and zero excise taxes where applicable. The comprehensive tax elimination creates one of the world's most favorable environments for trade, manufacturing, and logistics operations.

The critical distinction of FIZ operations is the territorial limitation - benefits apply only to activities conducted within the physical boundaries of designated free zones. Goods imported into zones, processed or stored there, and then exported receive full tax benefits. However, selling goods from FIZ to the Georgian domestic market triggers normal taxation, ensuring FIZ benefits support international trade and production rather than domestic commerce that would otherwise generate tax revenue.

FIZ status particularly benefits companies engaged in international trading, importing goods for processing and re-export, manufacturing for export markets, warehousing and distribution operations, and logistics and freight forwarding. Georgia's location at the crossroads of Europe, Asia, and the Middle East, combined with free trade agreements with the EU, China, and CIS countries, makes FIZ operations strategically valuable for accessing multiple markets from a low-cost, low-tax base.

The program dates to Georgia's economic reforms of the 2000s, establishing free zones near ports and transportation hubs to attract international trade and manufacturing. The zones have grown to accommodate hundreds of companies across various sectors, from agricultural processing to electronics assembly to pharmaceutical manufacturing. Continued infrastructure investment and streamlined administration have made Georgian FIZ operations increasingly competitive with alternatives in other countries.

Designated FIZ Locations

Poti Free Industrial Zone, located at Georgia's primary Black Sea port, represents the largest and most developed FIZ. The strategic port location enables efficient import of raw materials and export of finished goods via maritime routes connecting to Mediterranean, Black Sea, and international markets. The zone features developed infrastructure including warehouses, manufacturing facilities, office space, and utilities. Direct port access eliminates inland transportation costs for sea freight, creating substantial logistics advantages for import-export operations.

Kutaisi Free Industrial Zone in western Georgia near David the Builder International Airport provides air cargo access alongside road connections to both Tbilisi and the Black Sea coast. The zone targets lighter manufacturing, assembly operations, and businesses requiring air freight capabilities. The availability of the international airport enables time-sensitive shipments and connections to European destinations served by budget carriers operating from Kutaisi.

Tbilisi Free Industrial Zone, located near the capital, offers access to Georgia's largest market, skilled labor pool, and transportation infrastructure. While lacking direct port access, the zone benefits from proximity to international airport, major highways, and railway connections. Companies requiring skilled technical labor, coordination with Tbilisi-based operations, or serving both export and limited domestic markets often choose this location despite the logistics trade-offs versus coastal zones.

Additional smaller zones have been designated in various regions, each with specific industrial focus or logistics advantages. Zone selection depends on your business model - port-oriented manufacturers and traders favor Poti, air cargo operations lean toward Kutaisi, and businesses requiring technical labor or capital access choose Tbilisi. Visiting multiple zones and understanding their infrastructure, costs, and available facilities is essential before committing to a location.

Qualifying Activities and Business Models

Manufacturing operations of all types qualify for FIZ status when conducted within zone boundaries. This includes assembly of components into finished products, processing of raw materials, packaging and labeling for export markets, quality control and testing, and light to heavy manufacturing across sectors. Companies import components or materials duty-free, add value through manufacturing processes, and export finished goods without taxation. The value-add can range from simple assembly to complex manufacturing depending on capabilities and market demand.

Warehousing and logistics operations use FIZ status for international distribution networks. Companies import large quantities of goods, store them in FIZ warehouses, and ship smaller quantities to various destinations as needed. This enables consolidation of shipments, inventory management near key markets, and distribution operations without Georgian tax burden. Pharmaceutical companies, electronics distributors, and consumer goods importers commonly use this model for regional distribution.

Trading companies import goods for re-export, taking title to products within the FIZ without triggering customs duties or VAT. The goods may be repackaged, relabeled, sorted, or combined with other products before onward shipment. Trading margins remain tax-free provided goods don't enter Georgian territory outside the zone. This creates opportunities for international trading operations benefiting from Georgia's free trade agreements and strategic location.

Processing and agricultural operations transform imported raw materials into finished or semi-finished goods for export. Wine bottling operations import bulk wine and bottle it for export markets. Food processing companies import agricultural commodities and create packaged food products. Textile operations process imported materials into finished garments. Any activity adding value to imported materials for subsequent export potentially qualifies for FIZ treatment.

Services supporting FIZ operations including freight forwarding, customs brokerage, quality inspection, and logistics coordination can operate within zones. These service providers support the manufacturing and trading companies forming the zone's core activities. However, pure service companies without physical goods handling generally don't qualify for FIZ status and should consider alternative structures like Virtual Zone for IT services.

Tax Treatment Details and Calculations

Income generated from qualifying FIZ activities is completely exempt from Georgian corporate income tax. A company earning 10 million GEL profit from FIZ operations pays zero corporate tax on these profits. Contrast this with standard 15% corporate tax on distributions (1.5 million GEL on 10 million profit) or traditional corporate tax systems reaching 15-25% on annual profits. The savings compound over years of operation, creating massive capital preservation for reinvestment or shareholder returns.

VAT exemptions create additional substantial benefits. Goods imported into FIZ from foreign countries enter without 18% Georgian VAT normally charged on imports. This eliminates significant working capital tied up in VAT advances. Goods exported from FIZ remain VAT-free. For a company importing 50 million GEL of goods annually, the VAT working capital benefit reaches 9 million GEL - money available for operations rather than tied up awaiting VAT refunds.

Customs duties elimination applies to all goods entering FIZ from abroad. While Georgia has relatively low tariffs overall, certain categories face meaningful duties. Heavy machinery, vehicles, certain agricultural products, and specific industrial goods may face 5-12% duties. FIZ status eliminates these costs entirely, reducing input costs and improving price competitiveness for final products.

Property tax exemption benefits companies owning facilities and equipment within zones. The exemption applies to buildings, machinery, inventory, and other business property located in the zone. For capital-intensive operations with significant facility and equipment investment, the property tax savings, while smaller than income and VAT benefits, still contribute to the overall favorable environment.

The critical limitation is sales to the Georgian domestic market trigger normal taxation. If a FIZ company sells goods into Georgia proper outside the zone, those sales face standard VAT (18%), corporate income tax (15% on distributions), and any applicable duties. The tax benefits exist exclusively for international trade and production, not domestic commerce. Companies must carefully track which goods go to export versus domestic market to properly calculate tax obligations.

Setup Process and Requirements

Establishing FIZ operations begins with selecting the appropriate zone based on your business activities, logistics needs, and industry sector. Contact zone administrators to discuss your business model, space requirements, and infrastructure needs. Zone administrators can explain available facilities, pricing, approval procedures, and typical timelines for your type of operation. Early discussions help assess feasibility and identify potential issues before formal application.

Application to zone administration requires detailed business plan explaining products or services, production processes, import and export flows, target markets, and projected volumes. The plan should demonstrate genuine business operations rather than pure tax optimization. Include financial projections showing expected revenues, costs, employment, and investment over 3-5 years. More substantial operations with significant employment and investment receive priority consideration.

Corporate registration in Georgia is required before FIZ status can be granted. You must establish a Georgian LLC, register with Revenue Service, and complete standard company formation procedures. The company then applies for FIZ participant status, which, upon approval, allows it to conduct qualifying activities under FIZ tax treatment. Some companies operate both FIZ and non-FIZ activities, carefully segregating qualifying FIZ operations from other business lines.

Facility arrangements involve either leasing space within existing zone buildings or, for larger operations, constructing dedicated facilities on zone land. Zone administrators offer various options from small warehouse spaces to large manufacturing facilities. Lease rates vary by zone, location within the zone, and facility specifications but generally remain competitive with non-zone industrial space while offering tax benefits. Construction of owned facilities requires coordination with zone administration and compliance with zone regulations.

Approval timeline varies from a few weeks for straightforward warehouse operations to several months for complex manufacturing requiring extensive facilities and approvals. Responsive communication, complete documentation, and realistic business plans accelerate approval. Once approved, companies can begin operations, though buildout of facilities for manufacturing operations may require additional time before full-scale production commences.

Operational Considerations and Compliance

Physical operations must occur within zone boundaries to receive tax benefits. Goods must be physically located in the zone during processing, manufacturing, or storage. Moving goods outside the zone, even temporarily, can trigger tax obligations unless properly documented as export. This territorial limitation requires careful logistics planning and inventory management to maintain FIZ status for operations.

Record-keeping requirements are substantial to prove FIZ qualification and calculate any domestic sales triggering taxation. Companies must maintain detailed records of all goods entering the zone (quantity, value, origin), all processing and manufacturing activities, inventory positions, and all goods leaving the zone (destination, purpose, value). These records support both FIZ compliance and customs declarations for international shipments.

Employment can include both zone-based workers and off-site staff, though manufacturing and logistics personnel must work within zone facilities. Administrative staff, sales teams, and management can be located in Tbilisi or elsewhere, though their compensation and overhead costs must be properly allocated between FIZ and non-FIZ activities if the company operates both. Labor costs in Georgia remain competitive, with skilled manufacturing workers available at a fraction of Western European or North American wages.

Customs procedures for FIZ operations are streamlined but require proper documentation. Goods entering zones from abroad receive simplified customs processing with suspension of duties and VAT. Goods leaving zones for export follow export procedures. Goods moving from zones to Georgian territory face import procedures with applicable taxes and duties. Working with experienced customs brokers familiar with FIZ operations helps navigate these procedures efficiently.

Annual reporting to Revenue Service and zone administration documents activities, revenues, employment, and continued compliance with FIZ requirements. These reports ensure ongoing qualification and provide oversight of zone operations. Maintaining good standing requires timely reporting, payment of any applicable taxes on domestic sales, and adherence to zone regulations regarding facility use and business conduct.

Strategic Advantages and Use Cases

Geographic positioning enables FIZ operations to access multiple major markets efficiently. Georgia's free trade agreements with the EU provide duty-free or reduced-tariff access to European markets for many products. Similar agreements with China, CIS countries, Turkey, and others create a unique network of market access. A manufacturing operation in Georgian FIZ can potentially sell into markets covering 2+ billion consumers with preferential trade terms.

Cost arbitrage opportunities arise from combining low Georgian costs with tax-free operations and market access. Labor costs are 70-80% below Western European levels while skills remain adequate for many manufacturing sectors. Facility costs, utilities, and overhead run far below developed country levels. The tax elimination provides further 15-30% savings versus standard taxation. The cumulative cost advantage enables competitive pricing in export markets despite transportation from a smaller country.

Specific winning business models include importing components from Asia, assembling or processing in Georgia, and exporting to European or CIS markets. The Georgian location sits midway between Asian suppliers and European customers, enabling efficient logistics. Companies also import raw materials from various origins, process them in Georgia, and distribute finished products across multiple regional markets. The FIZ structure eliminates tax friction while trade agreements provide market access.

Regional distribution centers operated from FIZ locations serve companies needing inventory positions near key markets without holding stock within those markets' higher-tax jurisdictions. Import large quantities from global suppliers, warehouse in Georgian FIZ, and ship smaller quantities to regional markets as demanded. This model suits pharmaceutical distribution, electronics, automotive parts, and similar industries where regional warehousing enables responsive delivery without tax burden.

Challenges and Limitations

The domestic market limitation prevents using FIZ benefits for serving Georgian customers. While Georgia's market is small (less than 4 million people), some businesses value domestic market access. FIZ operations targeting Georgian consumers face full taxation, eliminating the benefits. Companies must decide whether international market focus compensates for losing preferential treatment on domestic sales.

Infrastructure variations between zones mean not all locations suit all businesses. Poti offers port access but limited airport freight capacity. Kutaisi provides airport access but less developed industrial facilities. Tbilisi offers skilled labor but no direct port or specialized freight airport. Companies must carefully match zone selection to their specific logistics and operational needs, potentially accepting some infrastructure limitations for other advantages.

Territorial limitations require operations truly occur within zone boundaries, which may constrain facility layout, expansion options, or operational flexibility. Companies needing facilities outside zones for customer interaction, retail operations, or other purposes must structure these as separate non-FIZ activities, creating administrative complexity and potentially limiting tax benefits to only a portion of overall operations.

Competition within zones and globally means FIZ status alone doesn't guarantee success. Other companies also operate in FIZ or similar structures worldwide. Success requires competitive products, efficient operations, strong customer relationships, and sound business fundamentals beyond just tax benefits. The tax advantages enable better margins and pricing but don't replace the need for competitive business operations.

Who Benefits Most from FIZ

Manufacturing companies producing for export markets represent ideal FIZ candidates. Businesses importing components and assembling finished goods, processing raw materials into finished products, or conducting light to medium manufacturing all benefit substantially. The combination of tax-free operations, low labor costs, and market access creates compelling economics for manufacturers willing to establish Georgian operations.

Import-export trading companies using Georgia as a hub benefit from zero taxation on trading margins while leveraging free trade agreements for market access. Traders in commodities, manufactured goods, agricultural products, and consumer items can structure operations through FIZ to eliminate tax friction on international transactions while maintaining inventory and distribution capabilities near key markets.

Logistics and distribution companies establishing regional warehousing and distribution networks benefit from FIZ's zero-tax treatment on warehousing and distribution operations. The model suits companies serving multiple regional markets requiring inventory positions without tax burdens, particularly in sectors like pharmaceuticals, electronics, automotive parts, and fashion where regional distribution creates value.

Companies less suited to FIZ include pure service businesses without physical goods handling (better served by Virtual Zone), businesses primarily targeting the Georgian domestic market (better served by standard taxation or IE status), and operations requiring extensive facilities outside zone boundaries. FIZ works best for genuine manufacturing, trading, and logistics operations with predominantly international customer base and ability to operate within zone constraints.

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