On Free Industrial Zones

Law of Georgia

On Free Industrial Zones

Article 1. Scope of regulation and purpose of the Law🔗

1. This Law establishes the procedure for the creation and liquidation of free industrial zones, determines the procedure for the management of free industrial zones and for the creation and operation of governance and service/supervision bodies within these zones, establishes additional conditions for enterprises of a free industrial zone, tax benefits and other issues related to the activity of these zones.

2. The purpose of this Law is to create an attractive environment for economic activity and to facilitate the inflow of capital and technologies into Georgia.

Article 2. Legislation of Georgia on Free Industrial Zones🔗

Relations related to free industrial zones shall be regulated by this Law, the Customs Code of Georgia, the Tax Code of Georgia and other normative acts.

Law of Georgia of 12 November 2010 No. 3806 - LHG I, No. 66, 03.12.2010, Art. 414

Law of Georgia of 28 June 2019 No. 4909 - website, 04.07.2019

Article 3. Free Industrial Zone🔗

1. A free industrial zone is a type of free zone provided for by the Customs Code of Georgia, where additional conditions and tax benefits apply.

2. A free industrial zone is a part of the territory of Georgia with defined borders and a special status conferred by law.

3. A free industrial zone shall be allocated for economic activity for a defined period, and within it persons shall be subject to the special economic and legal regime established by this Law.

4. The powers of municipal bodies shall not extend to a free industrial zone.

5. A free industrial zone may be created in any territory whose area exceeds 10 hectares, except for protected areas defined by the legislation of Georgia.

6. The rules for the creation, arrangement and functioning of a free industrial zone shall be determined by a Resolution of the Government of Georgia.

7. In a free industrial zone, entry and exit shall be determined in accordance with the procedure established by the customs legislation of Georgia – a customs checkpoint shall be arranged.

Law of Georgia of 12 November 2010 No. 3806 - LHG I, No. 66, 03.12.2010, Art. 414

Law of Georgia of 27 March 2012 No. 5951 - website, 12.04.2012

Law of Georgia of 28 June 2019 No. 4909 - website, 04.07.2019

Law of Georgia of 15 July 2020 No. 6891 – website, 28.07.2020

Article 4. Creation of a free industrial zone🔗

1. A free industrial zone may be created:

a) on the initiative of the Government of Georgia;

b) at the request of a natural or legal person – the organiser (hereinafter – the organiser).

2. For the creation of a free industrial zone, the organiser shall submit a guarantee, the amount and conditions of which are determined in accordance with the Resolution of the Government of Georgia on the rules for the creation, arrangement and functioning of a free industrial zone.

3. The decision on the creation of a free industrial zone shall be taken by the Government of Georgia.

Article 5. Creation of a free industrial zone at the request of the organiser🔗

1. The organiser shall submit to the Government of Georgia an application on the creation of a free industrial zone, which shall contain:

a) the identification data of the person;

b) a description of the boundaries of the free industrial zone;

c) the plan for the arrangement of the free industrial zone;

d) an extract from the public register on the right of ownership of the organiser or another person/persons to the land. For the arrangement of a free industrial zone on land owned by another person/persons, the consent of the owner/owners is also necessary for the creation of a free industrial zone on the relevant land plot for a defined period;

e) evidence that the conditions established by the legislation of Georgia for the creation of a free industrial zone have been satisfied, or an obligation that it will satisfy the requirements established for the creation of a free industrial zone within the period determined by the relevant Resolution of the Government of Georgia.

2. Before the fulfilment of the obligation determined by subparagraph "e" of paragraph 1 of this Article, the free industrial zone shall not function.

3. The Government of Georgia shall, within 50 days of the receipt of the application referred to in paragraph 1 of this Article, consider it and adopt a Resolution on the creation of a free industrial zone or give the organiser a reasoned refusal.

Article 6. Creation of a free industrial zone on the initiative of the Government of Georgia🔗

1. In the case determined by subparagraph "a" of paragraph 1 of Article 4 of this Law, the Government of Georgia or another state body authorised by it shall hold a tender to select the organiser of the free industrial zone.

2. The Government of Georgia or another state body authorised by it shall determine the conditions of the tender referred to in paragraph 1 of this Article and the composition of the tender commission.

3. In the case of the initiative of the Government of Georgia, a free industrial zone shall be created on land owned by the state and/or, in agreement with the relevant body of the municipality, on land owned by the municipality.

4. The land plot determined by paragraph 3 of this Article shall be leased for a period of not more than 59 years or transferred to a person with the right of ownership or of superficies.

Law of Georgia of 15 July 2020 No. 6891 – website, 28 July 2020.

Article 7. Enterprise of a free industrial zone🔗

1. An enterprise of a free industrial zone may be an enterprise of any organisational-legal and ownership form, which is registered in the free industrial zone in accordance with the enterprise registration norms established by the legislation of Georgia.

2. Activities in the free industrial zone are carried out by enterprises registered in this zone. Enterprises registered outside the free industrial zone (both Georgian and foreign) carry out activities in the free industrial zone through permanent establishments registered in this zone, except for Georgian enterprises carrying out in the free industrial zone the distribution of electricity, water, natural gas, communications and sewerage services and activities related thereto.

3. An enterprise of a free industrial zone carries out activities in the other territory of Georgia (outside the free industrial zone) as a permanent establishment of a foreign enterprise.

4. The organiser and/or administrator does not constitute an enterprise of the free industrial zone and shall be registered in the other territory of Georgia (outside the free industrial zone) in accordance with the procedure established by the legislation of Georgia.

Law of Georgia of 28 June 2012 No. 6575 – website, 10.07.2012.

Article 8. Characteristics of a free industrial zone🔗

1. In the free industrial zone, settlements are made in any currency.

2. Settlements between an enterprise of the free industrial zone and a Georgian enterprise are made in any currency.

3. By Resolution of the Government of Georgia, the obligation to obtain a licence/permit may be abolished in respect of individual activities carried out in the free industrial zone, or a simplified procedure for obtaining a licence/permit may be established in accordance with the Law of Georgia "On Licences and Permits".

4. In the free industrial zone, the use of a building for residential purposes is not permitted.

Article 9. Taxes in the Free Industrial Zone🔗

1. Matters related to taxes in the free industrial zone shall be governed by the Tax Code of Georgia and the Customs Code of Georgia.

2. In the free industrial zone, profit received by an enterprise of the free industrial zone shall be exempt from profit tax in accordance with the Tax Code of Georgia, except for the case provided for by the same Code.

3. In the free industrial zone, the entry of foreign goods shall not be subject to value added tax.

4. Operations carried out in the free industrial zone shall not be subject to value added tax.

5. Property located in the free industrial zone shall be exempt from property tax.

6. In the free industrial zone, the entry of foreign goods shall be exempt from import duty.

7. The entry (import) of goods produced in the free industrial zone from the free industrial zone into the rest of the territory of Georgia (outside the free industrial zone) shall be exempt from import duty.

8. In the free industrial zone, income tax shall be paid by the hired person on the basis of income declaration.

Law of Georgia of 12 November 2010 No 3806-LHG I, No 66, 03.12.2010, Art. 414

Law of Georgia of 24 June 2011 No 4964 – website, 30.06.2011

Law of Georgia of 10 April 2012 No 6016 – website, 30.04.2012

Law of Georgia of 28 June 2019 No 4909 – website, 04.07.2019

Article 10. Movement of Goods into and out of the Free Industrial Zone🔗

1. The entry of Georgian goods into the free industrial zone shall be considered as export of goods.

2. The removal of goods from the free industrial zone to another country shall be considered as export of goods.

3. Upon the entry of goods from the free industrial zone into the rest of the territory of Georgia, the customs procedure provided for by the Customs Code of Georgia shall be applied to such goods. At the same time, when applying the release for free circulation procedure to goods produced in the free industrial zone, such goods, regardless of quantity, shall be subject only to value added tax.

4. Upon the entry of goods into the free industrial zone and the removal of goods from this zone, the rules of customs declaration and customs control of goods shall be established by the customs legislation of Georgia.

Law of Georgia of 12 November 2010 No 3806 – LHG I, No 66, 03.12.2010, Art. 414

Law of Georgia of 27 March 2012 No 5951 – website, 12.04.2012

Law of Georgia of 28 June 2019 No 4909 – website, 04.07.2019

Article 11. Activities permitted in a free industrial zone🔗

1. In a free industrial zone, the production or processing of any goods or the provision of services shall be permissible, except for the activities defined by Article 12 of this Law.

2. For goods produced in a free industrial zone, the Legal Entity of Public Law within the sphere of governance of the Ministry of Finance of Georgia – the Revenue Service – shall issue a certificate of the appropriate form confirming the origin of the goods in Georgia.

Law of Georgia of 22 March 2011 No. 4469-website, 01.04.2011.

Law of Georgia of 27 October 2015 No. 4405 - website, 03.11.2015.

Article 12. Activities prohibited in a free industrial zone🔗

1. In a free industrial zone the following shall be prohibited:

a) production of weapons, ammunition, trade in weapons, ammunition;

b) production of nuclear, radioactive substances, trade in nuclear, radioactive substances;

c) import, storage, production and/or sale of narcotic and psychotropic substances;

d) import, storage, production and/or

of tobacco products and/or raw tobacco, except for the case provided for by paragraph 2 of this Article.

2. In a free industrial zone, the import of the goods provided for by subparagraph „d“ of paragraph 1 of this Article for on-site consumption shall be possible, and this shall not be considered as export of goods.

3. By a Resolution of the Government of Georgia on the rules for the creation, arrangement and functioning of a free industrial zone, prohibitions and restrictions may be imposed on individual types of activity. Only those prohibitions and restrictions that are established before the creation of the free industrial zone shall apply to the free industrial zone.

Law of Georgia of 24 June 2011 No. 4964 - website, 30.06.2011.

Law of Georgia of 10 April 2012 No. 6016 – website, 30.04.2012.

Article 13. Service/supervision bodies of a free industrial zone🔗

1. In a free industrial zone, representations of those state bodies which are necessary for the functioning of the free industrial zone shall operate, and they shall serve only enterprises registered in that zone.

2. By a decision of the Government of Georgia, individual representations referred to in paragraph 1 of this Article may be merged into a single service/supervision body.

3. Supervision of the functioning of free industrial zones shall be exercised by the Government of Georgia.

4. Supervision of compliance with safety norms in a free industrial zone shall be exercised by the relevant state body, unless the said authority is conferred on the service/supervision body defined by paragraph 2 of this Article.

Article 14. Administrator of a free industrial zone🔗

1. The management of a free industrial zone shall be exercised by an administrator.

2. The administrator may be the organiser itself or a person appointed by it (whether a natural or a legal person).

3. The administrator of a free industrial zone shall ensure compliance with safety norms in the free industrial zone.

Article 15. Rule for dispute resolution🔗

1. The rules (statute) of a free industrial zone may provide that disputes in the free industrial zone in which the state is not one of the disputing parties shall be considered and resolved by an international arbitration operating in the free industrial zone.

2. By registration in the free industrial zone, an enterprise recognises the requirements and conditions established by the rules (statute) of the free industrial zone.

Article 16. Liquidation of a free industrial zone🔗

1. The grounds for liquidation of a free industrial zone are:

a) expiry of the term;

b) the organiser's application on the liquidation of the free industrial zone;

c) a court judgment on the basis of a motion of the Government of Georgia.

2. A liquidation commission shall be created by agreement between the organiser and the Government of Georgia.

3. Disputes related to the liquidation of a free industrial zone shall be considered in accordance with the procedure established by the legislation of Georgia.

Article 17. Transitional provisions🔗

The Government of Georgia shall be instructed:

a) within two months of the publication of this Law, to prepare a resolution on the rules for the creation, arrangement and functioning of a free industrial zone;

b) within one month of the publication of this Law, in order to bring the legislation of Georgia into compliance with this Law, to prepare amendments to be made to the Customs Code of Georgia, the Tax Code of Georgia, the Law of Georgia "On Licences and Permits" and other laws;

c) within two months of the publication of this Law, to prepare simplified construction rules for a free industrial zone.

Article 18. Final provisions🔗

1. This Law, except for Articles 1–16 of this Law, shall enter into force upon publication.

2. Articles 1–16 of this Law shall enter into force from 1 January 2008.

President of Georgia M. Saakashvili

Tbilisi,

3 July 2007.

No. 5175–rs