During recent years, Georgia has undertaken broad and comprehensive reforms, including economic reforms, which have touched upon every aspect of people’s life. The main aim of those reforms was the creation of favourable environment for doing business and foreign direct investment (FDI) via liberalization of the economy, reduction of administrative barriers and tax burden, streamlining public services, fighting against corruption, etc. Due to these reforms, Georgia achieved high rates of economic growth and significant FDI inflows. Georgia’s economic policy was positively evaluated by different rating agencies and International Financial Institutions (IFIs) and the results are reflected in different indices and ratings evaluating economic freedom and policies. For example, Georgia was recognized as the top improver country by the WB/IFC Doing Business (2015).

Despite the improvement of general business environment, Georgia faces broadly the same challenges in terms of SMEs development as many developing countries. Notwithstanding the fact that SMEs constitute the largest share of operating enterprises, their contribution to GDP is still very low and their performance remains weak. The Government of Georgia (GoG) recognizes the importance and role of SMEs in economic development and is committed to the further improvement of the business environment in order to enable SMEs to develop and grow. Support of the private sector development in general, and especially the development of SMEs, is one of the main aims of the GoG’s economic policy. Consequently it is one of the priorities of the “SocioEconomic Development Strategy of Georgia” – Georgia 2020 (June, 2014), as well as the Programme “For a Strong, Democratic and United Georgia” (July, 2014).

Due to the reforms implemented by GoG during the recent years, business and investment environment of Georgia is significantly improved - administrative barriers were significantly reduced and public services streamlined, but there is still room for improvement of SMEs development.

Tax Policy: The number of taxes and tax rates were significantly declined along with improvements to tax administration. Georgia now has the most liberal tax jurisdiction in Europe. According to Forbes’ Tax Misery and Reform Index 2009 Georgia had the 4th lowest tax burden country globally after Qatar, United Arab Emirates and Hong Kong. Currently, Georgia has 6 flat taxes compared with the 21 that existed until 2004.

Customs Policy: Customs reforms have significantly simplified and sharply reduced the costs related to foreign trade. The number of import tariffs was abolished for approximately 85% of products and only 3 tariff rates (0%, 5% and 12%) exist instead of 16. Georgia sets custom taxes only on several kinds of agricultural goods and constructing materials. In addition, there are no quantitative restrictions (quotas) on imports and exports. As far as DCFTA provisionally applied from September 1 2014, trade between EU Member Countries and Georgia is conducted duty free.

Licenses and Permits: Due to the reform of the system, since 2005 the number of licenses and permits was reduced approximately by 90%. Currently, licenses and permits are only required in the production of highly risky goods and services, as well as for usage of natural resources and for some specific Draft 9 activities. The procedures of issuing licenses and permits were significantly simplified; the “One-Stop Shop” and “Silence is Consent” principles were introduced. Fees for licences and permits vary according to types of activities.

Public Administration: Procedures related to dealing with public institutions, including business related services, are provided according to “One Stop Shop” principle. Most of the services can be done online. In addition, Georgia established a unique system – Public service Halls (Houses of Justice) – throughout the country, where more than 400 types of services are provided in one space, decreasing cost and time for obtaining needed services and reducing risk of corruption.

The SME definition is based on employment size and turnover customized to Georgia’s specificities and is used for the compilation of official statistics on the SME sector. Medium enterprises employ up to 100 persons annually and have a turnover up to GEL 1,500,000 annually. Small enterprises employ up to 20 persons annually and have an annual turnover up to GEL 500,000.

Source: http://www.economy.ge/uploads/files/2017/ek__politika/eng_sme_development_strategy.pdf