Contract of a sole entrepreneur or LLC with a foreign client: what to do under Georgian law

What to do

1. Structure: the parties freely determine the content of the contract, including an unnamed contract (Civil Code, Art. 319); services or development resulting in a deliverable. Signing: the written form is satisfied by an exchange of letters or messages (Civil Code, Art. 328); by agreement of private parties, an electronic document and electronic signature are equivalent to paper (Law on Electronic Document and Electronic Trust Services, Art. 3) — write this into the contract.
2. Law and disputes: the contract is governed by the law chosen by the parties (Law on Private International Law, Art. 35); absent a choice — the law of the country of the party rendering the characteristic performance (the service provider) (Law on Private International Law, Art. 36); the parties may agree on a foreign court if one party is abroad (Law on Private International Law, Art. 18); an arbitration clause must be in writing; an electronic message is sufficient (Law on Arbitration, Art. 8), but if a party is a natural person (a sole entrepreneur included), the clause must be contained only in a document signed by the parties (Law on Arbitration, Art. 8).
3. Money: a monetary obligation may be expressed in foreign currency (Civil Code, Art. 383); work is deemed accepted if the client does not accept it within the period set by the contractor (Civil Code, Art. 649) — set an acceptance period and the tacit-consent rule.
4. Rights in the result: contracts transferring copyright and contracts for creating a work must be in writing (Law on Copyright and Related Rights, Art. 42); property rights in a commissioned work belong to the client unless the contract says otherwise (Law on Copyright and Related Rights, Art. 43) — if the rights stay with you, state this expressly.
5. Tax and bank: a service to a business client is deemed rendered where the client is established — a foreign company outside Georgia means no Georgian VAT (Tax Code of Georgia, Art. 162¹); the primary document (invoice or act) must show the parties, the date, the list and cost of services (Tax Code, Art. 72); keep it for at least 3 years after the end of the year (Tax Code, Art. 72); foreign-currency income is converted at the official NBG rate on the day of the transaction (Tax Code, Art. 73); the bank may itself determine what it needs and request additional information (contract, invoice, act) (Law on the Activities of Commercial Banks, Art. 21¹) — the contract, invoice and act for each payment.
6. Where to apply: bank (compliance); Revenue Service (rs.ge); court or arbitration under the clause.
7. Evidence: the contract or SOW, invoices, acts, correspondence on acceptance, bank statements of receipts.
8. Pitfalls: a contract without a clause on governing law and disputes — any dispute will be decided under someone else’s rules; an invoice without subject, period and amount — the bank will hold the payment; a contract silent on rights — the rights to the code belong to the client.

Be sure to check

• form and signing (correspondence; electronic signature by agreement)
• choice of applicable law and of court or arbitration
• invoice and act as primary documents for tax and the bank
• rights in the result pass to the client unless otherwise agreed
• place of supply for VAT and the conversion rate for income