A breakthrough in Georgian IT sector?
23 September, 2010
A breakthrough in Georgian IT sector?

 

The law on Virtual Zones’ exemption from taxes and special regulations supposed to be introduced in Georgia this fall seems suspended. Meantime the promised taxation preferences and definition of virtual zones are already built in the new code. But IT sector claims that without the promised law on virtual zones the tax code preferences cannot work.


Vera Kobalia, Minister of Economy of Georgia, having met with the leading American IT market players including Intel, HP, and Sisco during her recent

tour to US past week assures that the American IT giant companies are interested to enter Georgian market and seek for business partners in Georgia.
As Kobalia is reported saying by GHN news agency in September 18, 2010,  Ministry of Economic and Sustainable Development of Georgia must conduct intensive works in this direction [to attract IT investors to Georgia], and the Ministry is actually making its first steps,  but it is up to Georgian business  to undertake following steps. According to Kobalia, Intel has already decided to visit Georgian in October so as to get closer with Georgian IT market. Sisco’s general manager for Baltic, Central Asia and Eastern European  countries, plans to establish a Sisco center in Georgia so as to work on education, as well as on Small and Medium Enterprises (SME) development. 
However Georgian IT sector players appear skeptical to this end. They believe that no big western IT giant company will enter Georgia without serious taxation preferences and it is up to government to attract investors via the promised law on virtual zones [that is suspended as of yet] rather than to private companies to act.


A bill for IT Zones aimed at creation several tax—and-regulations free virtual zones across Georgia was initiated by Georgian government in June and supposed to be approved and put into effect in September of 2010. However works over the bill are halted for uncertain reasons.
“No IT giant is supposed to enter Georgia without taxation preferences,” Irakli Tushishvili, Executive Director of Alta Software, Tbilisi-based software company focused on  software service/product provision to  local banks, told Georgian Journal. “There are many other countries with serious taxation preferences that attract investors more than Georgia.”
“I do not think that anybody [IT giants] will enter Georgia without taxation preferences. They already have their representations in Russia, Ukraine and Turkey and Georgia is within either Ukrainian or to Turkish zones to them. I do not think that they will spend extra money to open office here without tax preferences,” Giorgi Gordeladze, a spokesperson of Saatec, a Tbilisi-based software development companies with focus on an offshore software development and handling with small and medium size software projects to foreign companies, told Georgian Journal.


“Georgia is enticing in the region by its low corruption level but investors cannot export their product to Russia that lures western investors in fact as Russia is a big market,” Vazha Goginashvili, Head of Systems Administration Department at Financial Analytic Service of the Ministry of Finances of Georgia and one of the authors of the governmental -initiated bill on free virtual zones, explains. “Only taxation preferences can entice big IT companies to Georgia.”
A bill for IT Zones aimed at creation several tax—and-regulations free virtual zones across Georgia was initiated by Georgian government in June and is supposed to be approved and put into effect in September of 2010.
Any local or foreign investors that will be operating in these zones and producing IT product are supposed to be free from income, excise, Value Add Tax (VAT), gain and customs taxes. More business regulation preferences are planned to be introduced however details of the upcoming preferences are still under vision [at government] and scheduled to be worked out but it is not clear when.
What is known for sure is that the export of both resident and non-resident IT companies operating in Georgia and producing product locally will be exempted from taxes.
The governmental understanding is that IT technologies the basement of modern world and economy are underdeveloped in Georgia and to boost the sector taxation and regulatory preferences are essential.  Government expects that the tax-free virtual zones enable companies to cut down business expenses by about 70-80% and lure international IT fames to enter Georgian market and give an impetus to it by creating market demand.
According to Goginashvili, they plan to build in the law an obligation for international companies to employ 70% of local people that is expected to have a spill-over effect and cause transfer of international know-how and experience to local companies. The key lure is cheaper local personnel plus tax exemption.


Georgian IT companies believe the upcoming Bill may be a breakthrough in Georgian IT sector but without proper educational back-up and state support it can give results only in 10-15 years.
However, the much touted Bill for virtual sector is shelved as of yet. On the other hand the taxation preferences proposed by the Bill are already built in the amendments made to the old tax code in this past July that entered into effect on August 1st, 2010.  But IT sector players cannot enjoy the preferences as far as nobody at MOF could explain them which IT business can be exempted from taxation – the tax amendment lacks clear definition of virtual zone players.
“The preferences built in the amended tax legislation are useless without the law on virtual zones as far as the law has to clearly define which business is a virtual zones representative, otherwise we cannot enjoy the taxation advantages,” Tushishvili said adding that some of his eastern European partners appear ready to enter Georgia as soon as the law on virtual zones comes true.

Print
Other Stories
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
19.02.2019
20.02.2019
USD
1
USD
2.6404
2.6404
EUR
1
EUR
2.9908
2.9908
GBP
1
GBP
3.4130
3.4130
RUB
100
RUB
3.9898
3.9898
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6404
EUR
1
EUR
2.9908
GBP
1
GBP
3.4130
RUB
100
RUB
3.9898
February 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28