Introduction: Entering the market without a new legal entity
Take a German engineering company that wants to work on a construction project in Georgia, or a Turkish trading company that needs local representation to fulfill contracts, as examples. Both face the same question: is it necessary to establish a new, independent LLC, or is there a way for a foreign company to enter the Georgian market directly, under its own name?
The answer is a branch. Georgian legislation allows a foreign enterprise to establish a branch without creating an additional legal entity, though this form comes with its own particularities - both in registration and, especially, in taxation.
What a branch is and how it differs from a subsidiary company
Under Article 15 of the Law of Georgia "On Entrepreneurs," a branch is not an independent legal entity - it is an organizational part of the entrepreneur, i.e. of the founding foreign company, and it acts under that company's own name and its own liability. A branch of a locally registered Georgian entrepreneur does not require separate registration at all, but a branch of an entrepreneur registered abroad, on the contrary, is subject to mandatory registration in the Register of Entrepreneurs and Non-Entrepreneurial (Non-Commercial) Legal Entities.
This distinction has significant practical consequences. In a subsidiary company, such as an LLC, the founder's liability is limited to the contributed capital. In the case of a branch, however, full liability rests with the foreign parent company - the branch's obligations are, directly, the parent company's obligations. A branch also lacks legal personality in its own right: it cannot independently be a party to court proceedings or hold property in its own name; everything formally belongs to the parent company. The management structure is correspondingly simple - there is no partners' meeting, board of directors, or other corporate bodies; a branch has only a manager, appointed by the foreign company.
It is worth highlighting one conceptually important rule: since a branch is not an independent legal entity, the termination of the parent company's existence automatically terminates the branch's existence as well. This is precisely the principle from which the branch's dependent legal nature follows.
Registration procedure
Branch registration is carried out at the National Agency of Public Registry, and under the law, the registering authority is obligated to register the branch as soon as the documents are submitted.
The registration application must contain the entrepreneur's, i.e. the parent company's, business name and legal address, its principal place of business, the company's legal form and the country whose legislation it is subject to, the name of the foreign registering authority and the registration number, the branch's business name (which must include the addition "branch" or a different name), the branch's legal address in Georgia, the manager's details and the scope of representative authority, the scope of business of both the entrepreneur and the branch, and, if it exists, the amount of the parent company's placed capital.
This must be accompanied by a document confirming the parent company's registration, the founding documents and charter, a document confirming the identity of the person authorized to manage and represent the company (which must also indicate whether this person represents the branch as a member of the parent company's body or as a permanent representative), a decision on establishing the branch, and the consent of the person appointed as the branch's manager - all documents certified in accordance with Georgian legislation, meaning apostilled or consular-legalized, and translated into Georgian.
Registration of business entities at the Public Registry, including branches, is free of charge in the standard case and is usually completed within one business day, while expedited service, on the same day, is available for an additional fee. In reality, the main time cost comes from apostilling and translating the documents, not from the registration itself - this is a detail clients often misjudge, expecting the process to move faster than it actually can given the documentation requirements.
Along with branch registration, tax registration and assignment of an identification number happen automatically - a separate application to the tax authority is no longer necessary.
Even after registration, the person authorized to manage the branch is obligated to notify the registering authority of any change to registered data, the closure of the branch, the commencement or completion of the parent company's liquidation procedure, or the opening of insolvency proceedings. It is worth separately noting that a branch of a joint-stock company or an LLC is additionally obligated to publish or post on its own or the parent company's website the parent company's financial statements - prepared, audited, and published in accordance with the legislation of the parent company's country of registration. This obligation is often overlooked when planning branch registration, though failing to comply with it triggers administrative liability.
Tax consequences: this is where the real complexity hides
For tax purposes, a branch is treated as a permanent establishment - a concept defined by Article 29 of the Tax Code. It is precisely this status that determines how the branch's activity will be taxed in Georgia. It is worth noting, however, that branch registration does not automatically mean permanent establishment status in every case - if the activity is only preparatory or auxiliary in nature, for example storage of goods, purchasing, or gathering information, a permanent establishment may not arise at all, even if the branch is registered. In practice, of course, a branch that carries out active commercial activity will almost always be considered a permanent establishment.
Corporate profit tax operates under the Estonian model, which applies to branches as well: an enterprise does not pay tax on profit received but not distributed - the tax arises only at the moment of profit distribution, at a rate of 15%. This rule applies not only to Georgian LLCs, but also to a non-resident's permanent establishment. The difference lies in what "distribution" means for a branch - since a branch has no partners and does not issue dividends in the classic sense, the law treats profit transferred (attributed) to the parent company as distributed profit. In other words, when a branch transfers its profit to its foreign parent company, this operation is taxed the same way as a dividend payment, at the same 15% rate.
For VAT, the rule is the same as for local companies - if the branch's taxable turnover exceeds 100,000 GEL within any continuous 12-month period, mandatory registration becomes required, within two business days.
If a branch employs personnel in Georgia, it is obligated to withhold income tax at source and remit it to the budget, standardly at a rate of 20%, just like any other employer in Georgia. In addition, the branch is obligated to participate in the funded pension scheme - it must withhold the employee's contribution from salary and add its own contribution, except in cases provided by law, for example when an employee has passed retirement age or personally opts out in the manner established by law.
If the parent company's country has concluded a double taxation avoidance agreement with Georgia, this may reduce or fully eliminate additional taxation in the parent company's country of residence. Georgia has concluded such agreements with more than 50 countries, though the specific question - whether it eliminates or merely reduces taxation, and under what conditions - needs to be checked separately, according to the text of each individual agreement.
Branch or subsidiary LLC - which is the right choice
From a practical standpoint, the choice often depends on the scale and duration of the activity. A branch is convenient when a foreign company is carrying out a specific, relatively short-term project in Georgia and does not want to maintain a separate corporate structure. Establishing a subsidiary LLC is more justified when the business wants to isolate liability from the parent company and wants a long-term, independent operational presence on the market. In both options, the tax burden is fundamentally similar - profit is taxed only upon distribution, at a 15% rate - but the distribution of liability is radically different.
Registering a branch in Georgia is a technically simple procedure - the Public Registry is obligated to register the branch as soon as the documents are fully submitted, without the bureaucracy comparable to founding a new company.
The real complexity begins after registration - in correctly reading and planning the tax regime, as well as in maintaining ongoing compliance, including publication of financial statements. Permanent establishment status, application of the Estonian model to profit, taxation of profit transfers to the parent company, and the effect of double taxation agreements - all of this requires individual analysis before specific decisions are made, especially when Georgia has a tax agreement in place with the parent company's country.
For a foreign company seriously considering entering Georgia, the branch model can be an effective and quick route - provided that what this means in terms of taxes, liability, and long-term strategy is understood in advance.