Georgia is one of the world’s leading mining nations. It has no legal limits on cryptocurrency exchanges and does not require a license for this business. In comparison to Europe and the United States, the Georgian government sells energy for half the price. The currency venture consumes 10% of the company’s energy output. To entice foreign investment, it has established tax-free zones. Georgia was included among the top 10 bitcoin-friendly countries by the popular Internet portal 99bitcoins.com in March 2020.
This is a fairly popular business in Georgia. In total, 100 000 people are involved in bitcoin mining around the country.
What are the benefits of cryptocurrency mining in Georgia?
There are no regulatory limits on cryptocurrency trading in Georgia, and no particular legislation exists. As a result, when registered in Georgia, both miners and trading exchanges may be easily controlled.
Georgia’s corporate tax rate is only 15% on worldwide-distributed revenue, and re-invested profits are tax-free if no dividends are issued throughout the year.
Georgia is now the world’s third-largest Bitcoin mining hotspot, behind China and Venezuela.
Crypto arbitrage is exempt from VAT.
How to set-up a crypto business in Georgia?
First, the documentation must be created with the assistance of a lawyer, followed by the registration of a company with the National Agency of Public Registry (which takes one working day), the opening of a corporate bank account, and the search for a physical warehousing solution for mining operations. Foreign shareholders are not subject to any restrictions, and no minimum capital commitment is necessary.
According to the Georgian Ministry of Finance, if a person becomes a Georgian resident, he or she will not be taxed on the profit made from selling bitcoin, nor would VAT be charged on such a transaction. If the identical activity is carried out by a legal entity in Georgia, no VAT is due, but there is a 15% CIT and a 5% withholding tax.
If a Georgian resident sells hash power to a nonresident, it is deemed a providing of electronic service and is not subject to VAT. If a Georgian resident buys hash power from another country, the transaction is liable to reverse VAT in Georgia. Furthermore, a 10% withholding tax may be imposed on the subsequent transaction, which may be avoided by applying the relevant tax treaty signed by the Georgian government.
BitFury, the world’s largest Bitcoin data center, has committed $30 million in the Tbilisi free zone to build a data center.
Many people are starting to set up mining farms in the free industrial zones of Tbilisi, Kutaisi, and Poti, as well as in the high mountain regions.
Registering crypto currency business in Georgia is very profitable, here is why:
Cryptocurrency mining in the world is becoming very popular and Georgia creates a favorable condition for attracting foreign investors who want to develop in this area.
Key attractions of Georgian jurisdiction for cryptocurrency market participants:
Cheap electricity – about from 9-11 cents per 1 kW and free in mountainous areas of the country.
Affordable banking– one can open a personal account in a Georgian bank and receive a payment card of the international system as part of package services for 50 GEL per year (about 15 USD). In addition, Georgian banks have premium packages that provide users with many advantages, one of which is free cash withdrawal from ATMs around the world
Lack of currency regulation – Georgian banks do not set restrictions on operations with foreign currency. All transactions done quickly, even at an international scale.
Highest business confidentiality – Georgia is not a participant in the automatic exchange of CRS information, which means that no one will know about the financial turnover that takes place in local banks.
Fast registration of a business – without any obstacles foreigners as well can register a company in one business day.
Loyal taxation – If a foreigner registers a company in the Free Industrial Zone of Georgia and receives revenue only from foreign counterparties, the tax burden will decrease to nil.
A special tax regime – “Small Business” (annual turnover of up to 500,000 GEL) has been specially developed for private entrepreneurs. With this status an entrepreneur pays only 1% of revenue per year.
Loyal migration policy– foreigners from more than 90 countries can visit Georgia and stay in the country 365 days a year without a visa.
All of the above makes it very profitable to register a crypto exchange in Georgia.
Cryptocurrency and hash taxes
Although the National Bank of Georgia does not consider bitcoin and other cryptocurrencies legal payment instruments, yet it does not control operations with virtual money. The loyalty of the Georgian authorities to crypto is also evidenced by the fact that on June 28, 2019, the Ministry of Finance of Georgia even provided an explanation of the taxation of cryptocurrency market participants.
The main points of the normative document are as follows:
- personal income from cryptocurrency transactions is exempt from income tax;
- the sale and exchange of cryptocurrency into national or foreign currency is exempt from VAT;
- sale of the hash abroad is not subject to VAT;
- hash export entitles you to input VAT;
- Hash operations between residents in Georgia and the purchase of a hash by a resident from a non-resident are subject to VAT.
The last paragraph requires mining companies that are registered in Georgia to pay VAT (18%), which leads to added costs and detriments the attractiveness of the jurisdiction. However, all other conditions increase the attractiveness of the sale and crypto exchange and of course, we should not forget about the Free Industrial Zones, where legal entities, including mining companies, are exempted from paying VAT on export earnings.
Selling currency by legal entities (unlike natural person, if he is resident of Georgia) is subject to taxation (15% corporate income tax). If the entity decides to distribute the profit (dividend) to shareholders, it pays 5% (withholding tax) above 15% (CIT) of corporate tax. However, if it will be reinvested, then they don’t pay anything.
Trading bitcoin in Georgia
The minimum amount to start bitcoin trading is 10 USD
From 2017 a telemarketing system for cryptocurrency exchange started to operate in Georgia. Its web address is coinmania.ge. Bitcoin, Litecoin, Ethereum, and other digital currencies are bought and sold there.
Popular exchanges to buy bitcoin and crypto in Georgia:
Coinmania
Bitstamp
Paxful
OkCoin
Changelly
It’s noteworthy that Bitcoin ATMs exist in Tbilisi in many locations.
Conclusion
Georgia’s eagerness for cryptocurrency mining has surprised many nations and more people are ready to come on board with cryptocurrency, due to its favorable conditions in Georgia. Georgia doesn’t have any legislative restrictions for crypto exchange and doesn’t require license for this activity. Georgian government is selling energy half a price compared to Europe and US. Georgian government is selling energy half a price compared to Europe and US. Cheap utility made Georgia third biggest Bitcoin mining hub after China and Venezuela. . If a legal entity in Georgia does the same activity, no VAT is payable in that case as well but CIT of 15% and withholding tax 5% will be due only in case of distribution dividends to shareholders. Selling hash power is considered as a provision of electronic service and is not taxable by VAT if a Georgian resident sells it to a nonresident. However, that transaction is subject to reverse VAT in Georgia if a Georgian resident purchases hash power from abroad.
