A free industrial zone is tax-free until you sell into Georgia
Invest in Georgia's own description of the free industrial zone regime is unusually blunt about where the benefit ends. Goods produced for export out of a zone are exempt from all taxes except the 20% personal income tax paid from employee salaries. Sell the same goods into the Georgian domestic market and you trigger personal income tax, VAT, and a charge of 4% of the revenue from those national sales. The zones are privately run — investors rent space from an operator — and Invest in Georgia names Poti, Kutaisi and Tbilisi among four in operation.
What the exemption actually covers
The exemption is tied to production for export, not to being inside a fence. A company making goods in a zone and shipping them abroad pays no profit tax, no VAT and no import tax on that activity, and its only standing tax obligation is the 20% personal income tax withheld from salaries. That is a manufacturing incentive in the plainest sense: it rewards making a physical thing in Georgia and selling it somewhere else. It does not reward holding assets, invoicing services or trading inside the country.
The domestic sale is the wall
The moment production is sold into Georgia rather than exported, three charges appear: personal income tax, VAT, and 4% of the revenue on those national sales. In other words the regime is not a lower tax rate on a Georgian business; it is a different treatment for export output, with a specific penalty on turning inward. Any model that assumes a zone company can also serve the Georgian market at zone rates has the arithmetic wrong, and that assumption is the single most common error in free-zone planning.
You are a tenant, not a beneficiary of the state
The zones are operated privately, and an investor rents space from the operator. That makes the commercial terms of the lease as decisive as the tax terms of the regime: rent, available utilities, customs handling on site, the operator's track record and what happens at renewal. The tax treatment is set by law and is the same across zones; the cost base is set by a private counterparty and is not. Due diligence on the operator deserves at least as much time as due diligence on the tax position.
A lighter alternative for exporters
The same source describes an internal processing customs regime that gives part of the benefit without moving into a zone. An exporter can apply to the Ministry of Finance to import raw materials without paying import tax or VAT, posting a bank guarantee equal to those taxes, which is released once the finished goods leave the country. If any of the output is sold domestically, import tax and VAT fall due on the raw materials used in it. For a business that exports most but not all of what it makes, that route is often the more realistic one.
Written by us from the source linked above, not investment, legal or tax advice. Figures and rules change — confirm anything that matters before acting on it.
