The 4% tax applied to Free Industrial Zones (FIZs) in Georgia is ambiguous and requires reconsideration, according to Kreston Georgia Managing Partner Davit Papiashvili. Speaking to BMG, he said the country’s Tax Code contains several unclear provisions and structural gaps regarding the taxation regime in FIZs.
Papiashvili noted that one of the main issues is the 4% levy applied to companies operating in free industrial zones when they sell goods to the domestic market or purchase goods locally. He argued that the tax lacks a clear legal classification, pointing out that Georgia’s Tax Code defines only six types of taxes, leaving uncertainty about how this 4% charge should be categorized.
According to him, the ambiguity also creates the impression of double taxation, as the 4% applies both to purchase and sale transactions involving goods. Similar uncertainty exists in relation to VAT rules, particularly when it comes to services provided between FIZ companies and domestic firms, where exemptions are not clearly defined in all cases.
Papiashvili added that the current framework reduces the attractiveness of Free Industrial Zones for foreign investors and limits their potential role in the economy. He emphasized the need for a clearer, more predictable taxation system and broader policy discussion to address existing inconsistencies. Today, Georgia operates four Free Industrial Zones, while additional projects are also being considered.
