Offshore companies in Georgia: Business interests and corruption risks


There are about 3,200 companies registered in the Georgian Business Registry, all or part of which are owned by an offshore company. Since high-ranking public officials are restricted from doing business, they may have used offshore-based companies to maintain their privacy. It will also allow them to participate in state projects, privatization, and public procurement.

Offshore-based companies own Tbilisi Energy, Beeline, IDS Borjomi, Chiaturmanganum Georgia, Rustavi Steel, Silk Road Group Holding, Batumi International Container Terminal, Rustavi Auto Market, Poti Grain Terminal, Clean House and up to 160 other Georgian companies.

In 2011-2020, up to USD 5.2 billion in foreign direct investment came to Georgia from countries with offshore territories, which is 38% of the total foreign investment attracted by Georgia during this period.

The study managed to identify 11 offshore companies allegedly affiliated with Bidzina Ivanishvili. These 11 companies, in turn, own 27 Georgian companies.

In 2012-2020, 6 offshore companies received state property through direct privatization, including three, at a symbolic price of one GEL 1. 15 offshore companies received state property through public auctions. The total privatization value of this property is about GEL 77 million.

The anonymous ownership of companies registered offshore is a contributing factor to high-level corruption in the country. At the Anti-Corruption Summit in London in May 2016, Georgia announced the creation of a register of beneficial owners of companies registered offshore, but to date, the Georgian government has not taken any steps in this direction.

In recent years, the EU and the United States have tightened standards for offshore companies to operate in their territory, mainly in terms of mandatory disclosure requirements for beneficial owners. In 2020, the European Commission issued a recommendation to EU member states not to allow offshore companies to receive funding from government programs to help businesses affected by the pandemic.

Company assets include:

  • Georgian Tourism Development Foundation LTD – previously owned by Panama-based JSC Frankston International S.A – and the assets in its ownership.
    • Tourism Development Foundation owns among others, Tbilisi City LTDSololaki Hills LTDSololaki Rise LTDTabori Resorts LTD, and Georgian Eco Transport LTD, all of these are the parts of the Panorama Tbilisi – the ambitious and controversial multifunctional project still under construction which is going to significantly alter the outward appearance of the downtown Tbilisi and the old part of the capital city.
    • Other companies owned by the Tourism Development Foundation  – now transferred to the Cartu Foundation – are Business Development LTDSeaside LTDBlack Sea Resorts LTDand Black Sea Riviera LTD – all implementing hospitality projects or owning properties in Georgian seaside resorts, including Mtsvane Kontskhi – ‘Cap Green’ in the Adjara region where Ivanishvili’s pet-project, a sizeable Botanical Garden is located, and the Paragraph seaside hotel in Shekvetili, Guria region.
    • With the Georgian Tourism Foundation, Cartu Foundation also acquired 51% of shares of Tsisartkela LTD – which was created to reconstruct a mountain resort in Abastumani, in the Samtskhe-Javakheti region of Southern Georgia.

Recommendations:

  • According to the experience of developed countries, certain rules regarding offshore companies must be developed in Georgia;
  • Georgia must comply with the recommendations of the Anti-Corruption Network of the Organization for Economic Co-operation and Development (OECD) and require disclosure of beneficial owners of offshore companies, at least when these companies or their subsidiaries participate in the privatization of state property, public procurement or any other state-funded program.

II.Introduction

To reduce the level of corruption in the country, it is important to identify and study potential sources of corruption. For that reason, Transparency International Georgia is interested in the activities of offshore companies in Georgia. Since high-ranking public sector employees are restricted from doing business, they may have used offshore companies to maintain their privacy. This will make it easier for them to participate in state projects, privatization and public procurement. In fact, the current legislation of Georgia leaves the possibility for a state decision-maker and the owner of an offshore company, which, for example, received money from the budget, to be the same person. In Western democracies, cooperating with offshore companies is unacceptable not only for public officials but also for those involved in politics in general.

Companies registered offshore are distinguished by the fact that it is difficult to obtain information about them. However, Transparency International Georgia sought to gather comprehensive information from open data and other sources about large and medium-sized offshore companies operating in Georgia.

The initial chapters of the study provide both general information on the practice of registering offshore companies and Georgian business connections with offshore zones. The following chapters briefly describe the offshore companies that have been identified and which are important players in Georgian market. In addition, information is provided on state property that has been transferred to offshore and related companies in the last decade. The last chapter of the study is about the international experience how offshore-related issues are handled.

1.What is offshore and why is it used?

An offshore zone also called a tax haven, is a country or a specific territory of a country where companies enjoy special concessional terms. Lower tax rates, the secrecy of company owners, simpler financial reporting rules, and ease of company registration and operations can be among such terms.[1] It is also very important that you do not have to be a resident of this country or have a registered office (business representation) for having an offshore company. If you want to escape the state bureaucracy, legal control, and taxation, offshore can be a solution. Offshore companies are registered to avoid certain legal controls and taxes.

There are dozens of offshore areas in the world. Such a legal system is profitable for offshore countries. In addition to companies paying a certain amount for offshore registration, foreign companies in offshore countries are served by local companies, the use of which is mandatory.

The most popular offshore countries and territories are: Panama, the British Virgin Islands, Cyprus, the Bahamas, Malta, the Cayman Islands, Belize, Barbados, Luxembourg, Jersey, Maine, Hong Kong, the Marshall Islands, Macau and Lebanon.[2]

Tax break is the main incentive for registering a company in offshore zones. This applies to corporate taxes like profit tax, dividend, and income taxes. For some businesspersons, confidentiality and low standards of verification of the origin of money are among the primary drivers for using offshore zones. However, these conditions also simplify the possibility of money laundering. Through offshore companies, individuals can engage in active business without their identity being disclosed.

Offshore is often used by both current and former politicians and government officials who are prohibited / restricted from doing business or do not want to show off their wealth so as not to harm their reputation. A striking example of this was the Panama Papers[3] published by the International Consortium of Investigative Journalists in April 2016. Based on the confidential database of offshore companies, it turned out that more than a hundred politicians, including the current ones, were using offshore companies to evade taxes and launder illegal money. The documents revealed not only pure connections of politicians with offshore companies but also some illegal actions.

Registration of a company in an offshore zone is generally not prohibited, but it increases the risk of corruption and fraudulent transactions. For example, as government officials are restricted to participate in public procurement or programs, they may have offshore companies and receive money from the state budget through these companies or their affiliates. Moreover, when a government official owns a beneficiary company he or she is likely to ensure a non-competitive environment. In another case, a person who is responsible for the distribution of public money can simultaneously be the recipient of this money.

Full prohibition of the entry of offshore capital into a country is hardly justifiable and no country does it. However, it is unacceptable for the political culture of developed countries to have such politicians who are directly or indirectly connected with offshore companies. A good example of this was the scandal of Panama Papers, when, for example, the British Prime Minister had to explain the sale of a 30,000-pound share of an offshore company.[4] This was related to the story of 6 years ago when he got rid of his shares of an offshore company after being elected Prime Minister.

In addition to the fact that the links of politicians with offshore companies encourage corruption, there is a problem with so-called political moral. It is strange when a politician being in power and able to make important public decisions, finds the business environment of another country more favorable for company registration and taxation than his own country while other citizens do not use such privileges.

2.Offshore zones and Georgia – general information

Offshore is a hot topic in Georgia as many offshore or affiliate companies operate in the country. Today, there are about 3,200 companies registered in the Georgian Business Registry, all or part of which are probably owned by an offshore company. For example, up to 1,000 companies are registered offshore in the UK, up to 500 in the Netherlands, around 220 in the Virgin Islands, 310 in Cyprus, 71 in Panama, 59 in Seychelles, 47 in Belize, 13 in the Bahamas, and so on.

On September 13, 2019, then the Minister of Finance of Georgia Ivane Machavariani, while commenting on foreign direct investment, said:[5] „you should know that 60-70% of FDIs flowing in Georgia during various years by nature were Georgian, local investments. This money has been transferred abroad and then returned through different countries or offshore zones.“

From the official statistics on FDI, it is difficult to distinguish exactly how many investments are coming from offshore zones. In addition, the official statistics provide information only on FDIs and not about other types of investment.

According to the official statistics, in 2010-2020, the FDIs coming from those countries which have offshore territories amounted to USD 5.2 billion. This is 38% of total FDIs attracted by Georgia during this period. Most investments – USD 3.7 billion in total – came from the Netherlands and the United Kingdom. It does not mean that these investments solely came from offshore territories of the mentioned countries. As stated above, it is difficult to sort the FDI data by this criterion. USD 776 million came from Luxembourg.

With USD 168 million Panama tops the list of investors of those countries that are entirely offshore zones followed by the Marshal Islands with USD 79 million, Belize with USD 45 million, Mauritius with USD 32 million, Seychelles with USD 31 million, Cayman Islands with USD 13 million, Lebanon with USD 11 million and Gibraltar with USD 6 million.

In 2012-2020, 784 such companies invested in Georgia, the full or part of which is registered in an offshore country or in a country with an offshore territory.

Risks coming from offshore companies are higher in Georgia, as one of the major challenges facing our country today is the so-called high-level corruption. Anonymous ownership of offshore companies is a contributing factor to high-level corruption. According to the resolution of the European Parliament on the implementation of the Association Agreement with the European Union (14 November 2018), high-level corruption remains a serious issue for Georgia.[6] The European Parliament’s resolution[7] of September 16, 2020, also states that Georgia must fight corruption and state capture. According to the World Bank, state capture is a form of systemic political corruption in which a person’s private interest for personal gain has a significant impact on the decision-making process of the government.[8]

In May 2016, Giorgi Kvirikashvili, the former Prime Minister of Georgia and Tea Tsulukiani, the Minister of Justice attended the Anti-Corruption Summit that was held in London.[9] The London Anti-Corruption Summit coincided with the publication of the Panama Papers. Six countries participating in the summit (Afghanistan, France, Kenya, the Netherlands, Nigeria, and the United Kingdom) pledged to maintain a register of real beneficiaries of offshore companies. An additional six countries (Georgia, Australia, Indonesia, Ireland, New Zealand, and Norway) said they would consider creating such a register.[10] However, to date, the Georgian government has not taken any steps in this direction.

III. Large offshore companies in Georgia

Offshore companies mainly operate through subsidiaries registered in Georgia. By examining the databases of the Business Registry, we found companies whose full or partial shareholder is likely to be an offshore company. However, this may not be a complete list, as the owner of a company registered in Georgia may be a company registered in another non-offshore country, which in turn is owned by an offshore company. Such companies are not included in this study.

There are about 3,200 companies in Georgia that are owned by an offshore legal entity, so it is very difficult to get information about all of them, especially small companies. Therefore, we have studied in detail only large and medium-sized companies[11]. The main source of information is the Business Registry and Reporting Portal[12].

160 large and medium-sized legal entities were identified as offshore companies, and we have focused on 22 of them, depending on their field of activity, size, public interest and access to information. Especially interesting are the companies whose beneficial owners are unknown. We have also reviewed a few companies the owners of which are known.

Tbilisi Energy LLC

Until July 2019, the legal name of Tbilisi Energy LLC was KazTransGas-Tbilisi LLC. Until 2018, the official owner of the company was JSC KazTransGas, which is controlled by the Government of the Republic of Kazakhstan through the JSC Samruk National Welfare Fund. On October 4, 2018, a 100%-stake in the company was acquired by Waltbay LLC, registered on Marshall Islands on August 30, 2016. In 2018, the final controller of the company was Khvicha Makatsaria, a citizen of Georgia.[13]

In 2019, a 50%-stake in Waltbay was acquired by Weco Investment and Finance S.A., which is registered in the British Virgin Islands. Weco Investment and Finance S.A. is fully owned by HARRIMAN HOLDINGS LTD, which is also registered in the British Virgin Islands. The beneficial owner of this company is Nasib Hasanov, a citizen of Azerbaijan. Weco Investment and Finance S.A. acquired 100% of Caucasus Online in 2019-2021. However, the Georgian National Communications Commission (GNCC) found the deal illegal and gave Caucasus Online three months to return the sold 100% stake.[14] The owner of both Tbilisi Energy and Caucasus Online is the same person Nasib Hasanov.

Based on the decision of the Kutaisi City Court of March 16, 2009 (N3 / 52-2009), until May 2019, KazTransGas-Tbilisi was headed by a special manager. As the National Energy and Water Supply Regulatory Commission (GNERC) argued in a lawsuit, this company was unable to provide natural gas to its customers due to the accumulation of large overdue natural gas debt (GEL 79.6 million) towards Georgian Oil and Gas Corporation, a state-owned company. The debt was transferred to the Ministry of Finance of Georgia on July 14, 2010, with a daily interest of 0.05%. The dispute between Georgian government and the company continued in the International Court of Arbitration. On September 13, 2018, the Government of Georgia and JSC KazTransGas signed an arbitration agreement on the peaceful settlement of the dispute. KazTransGas sold its stake in the company and transferred all its claims to the company in exchange for USD 40 million from Waltbay LLC. In addition, the company’s debt to the Ministry of Finance was written off.[15]

According to the financial report audited by the auditing company EY LLC, as of December 31, 2019, the assets of Tbilisi Energy LLC were valued at GEL 161 million. Compared to 2018, its assets increased by 18%. In 2019, the company had a profit of GEL 81 million, and in 2018 it had a loss of GEL 18 million.

Veon Georgia LLC

Veon Georgia LLC is owned by three companies registered in the British Virgin Islands: WaterTrail Industries LLC – 51%, Investico Alliance – 29% and Miren Invest LLC – 20%. The members of the supervisory board of the company are Nikoloz Chiaureli, Muhterem Kaan Terzioglu (Turkey) and Sergi Errero Noguera (Spain), and the director is Andrzej Edward Malinowski (Poland).

Veon Georgia was founded in 2003. According to the 2019 financial report audited by PriceWaterhouseCoopers LLC, the final control of the company is exercised by Veon LLC, which is registered in the Netherlands. The beneficial owners of Veon are unknown. According to the financial report, as of December 31, 2019, the company has no final controlling shareholder.

Veon Georgia owns the Beeline trademark and earns its income mainly through the provision of cellular telecommunication services. As of December 31, 2019, the assets of Veon Georgia LLC were valued at GEL 115 million. Compared to 2018, in 2019 its assets increased by 90%. In 2019, the company had a loss of GEL 40.2 million, and in 2018 – GEL 194 million.

IDS Borjomi LLC

A producer company of Borjomi, Likani and Bakuriani Mineral and Natural Waters is a subsidiary of IDS Borjomi Beverages Company LLC, registered in Curacao, Antilles, Netherlands. The company has been operating in Georgia since 1997. Until 2009, it was called Georgian Glass and Mineral Water Co. NV. The branch has a license to use the Borjomi gorge and other water sources in Georgia. 60% of the parent company (as of 2019) was owned by CTF Holding SA, a company registered in Luxembourg. The beneficial owners of the company are unknown. The director of the Georgian branch is Mikhail Provotorov, a Russian citizen.

According to the company’s financial report audited by PriceWaterhouseCoopers LLC, as of December 31, 2019, the assets of the Georgian branch of IDS Borjomi Beverages Company LLC amounted to USD 159 million and, compared to 2018, they increased by 19%. In 2019, the company had a net profit of USD 17.3 million, and USD 14.5 million – in 2018.

Chiaturmanganum Georgia LLC

A 95%-stake of Chiaturmanganum Georgia is owned by Greenfield Financial Corp., a company registered in Seychelles, and 5% is owned by Horst Costa Jicha, a German citizen. The director of the company is Mamia Beridze. As of December 31, 2018, Greenfield Financial Corp., the final owner of which was Shmagi Kemertelidze, fully owned Chiaturmanganum Georgia. It is unknown whether the owner of the offshore company has changed since 2018.

Chiaturmanganum Georgia owns two subsidiaries: Kvirila-2007 LLC and Georgian Ferroalloys LLC. The main activity of Chiaturmanganum Georgia is the production and sale of various types of manganese ferroalloys.

According to the company’s financial report audited by PriceWaterhouseCoopers LLC, as of December 31, 2019, the assets of Chiaturmanganum Georgia LLC amounted to GEL 84.3 million and increased by 36% compared to 2018. In 2019, the company had a net profit of GEL 1.5 million, and GEL 6.4 million – in 2018.

Rustavi Steel LLC

A 100%-stake of Rustavi Steel LLC is owned by Tolanius Beheer B.V. LLC, registered in the Netherlands. Nugzar Kachukhashvili is the director of Rustavi Steel. The ultimate owner of the company is Park Street Capital L.P., the beneficial owners of which are unknown.

Rustavi Steel is the owner of Rustavi Metallurgical Plant, which produces more than 1 million tonnes of steel per year. Rustavi factory was established in 1948. In 1999-2006 it was virtually closed. In 2006, the full package of shares of the factory was acquired by the English-Georgian company, Energy and Industry LLC. Rustavi Steel became the owner of the factory in 2011.[16]

According to the company’s financial report audited by PriceWaterhouseCoopers LLC, as of December 31, 2019, the assets of Rustavi Steel were valued at GEL 192 million and compared to 2018, they increased by 26%. In 2019, the company had a net loss of GEL 592 thousand, while in 2018 it had a profit of GEL 8.8 million.

SOCAR Gas Export-Import LLC

A 50%-stake of SOCAR Gas Export-Import LLC is owned by the State Oil Company of the Republic of Azerbaijan, a 16.7%-stake – by Well Trading FZE (United Arab Emirates) and 16.65-16.65% stakes by companies registered in the British Virgin Islands – Ornon International SA and Semiston Group Inc. The beneficial owners of companies registered in the Virgin Islands are unknown.

The main activity of SOCAR Gas Export-Import is wholesale trade in natural gas. The company’s clients are natural gas supply companies and large gas consumers, including thermal power plants, throughout Georgia.

According to the financial report audited by the auditing company ECOVIS ATA Finance LLC, as of December 31, 2019, the assets of SOCAR Gas Export-Import LLC were valued at GEL 244 million and compared to 2018, they increased by 55%. In 2019, the company had a loss of GEL 41.4 million, and GEL 21.3 million – in 2018.

Silk Road Group Holding LLC

A 100%-stake of Silk Road Group Holding LLC is owned by Comodon Holding, a Malta-based company. The beneficial owners of the company are Giorgi Ramishvili (61.9%), Alexi Topuria (28.6%) and David Franz Borger (9.5%).

Silk Road Group Holding owns 4 subsidiaries: Silk Energy Holding LLC, SRG Real Estate LLC, Silk Road Energy LLC and Silknet Holding LLC.

As of December 31, 2019, the assets of SRG Real Estate LLC amounted to GEL 865 million. In 2019, it got a profit of GEL 9.2 million. The company owns Radisson Blu hotels in Tbilisi and Batumi, Radisson Collection in Tsinandali and Iveria casinos in Tbilisi and Batumi. The group also owns various real estate properties in Tbilisi, Adjara and Kakheti.

As of December 31, 2019, the assets of Silk Road Energy LLC were valued at GEL 26.4 million. In 2019, it had a loss of GEL 4.7 million. The main activity of the company is the construction of distribution facilities to provide electricity and telecommunications. It owns Bakhvi Energy LLC, Machakhela HPP LLC and Bakhvi 5 LLC.

As of December 31, 2019, the assets of Silknet Holding LLC were valued at GEL 852 million. In 2019, the company had a loss of GEL 48 million. The main activity of the company is telecommunication services. In 2018, JSC Silknet, a subsidiary of the holding, purchased a 100%-stake in Geocell LLC for USD 152 million.

Silk Energy Holding LLC is registered on December 28, 2020 and has not yet published its annual financial report.

Silk Road Group Holding also owns Silk Road Bank, operating in Georgia, the assets of which, as of December 31, 2020 amounted to GEL 80 million. The bank ended 2020 with a loss of GEL 1 million.

Clean House LLC

A 5%-stake of Clean House LLC is owned by Tamar Ghviniashvili and 95% is owned by GRG Trading LLC, a company registered in the British Virgin Islands, the beneficial owners of which are unknown. The director of Clean House is Irakli Ghviniashvili. The company’s field of activity is the supply of hygienic, household chemicals, cosmetics, perfumes and sanitary-hygienic equipment through the network of stores throughout Georgia.

According to the financial report audited by the auditing company Alter Ego, as of December 31, 2019, the assets of Clean House LLC were valued at GEL 83.3 million and, compared to 2018, its assets increased by 187%. In 2019, the company had a net profit of GEL 4.9 million, and GEL 3.9 million – in 2018.

GMT Hotels LLC

An 80%-stake of GMT Hotels LLC is owned by Hotel Tbilisi Holding Company, registered in St. Kitts and Nevis, and 20% is owned by GMT Real Estate LLC, registered in Georgia. GMT Real Estate LLC is fully owned by Tbilisi Real Estate Holding Company, which is also registered in St. Kitts and Nevis. Therefore, GMT Hotels LLC is owned by the companies registered in St. Kitts and Nevis the beneficial owners of which are unknown. Giorgi Tavadze is the director of the company.

GMT Hotels was established in 1996 as a JSC Hotel Tbilisi. In 2004, it was renamed as GMT Hotels. The main activity of the company is the ownership of hotels and business centers. The company is also involved in the management of hotels and business center services. The company currently owns Tbilisi Marriott Hotel, Tbilisi Courtyard by Marriott Hotel, Moxy Tbilisi Hotel and GMT Plaza.

According to the financial report audited by the auditing company KPMG, as of December 31, 2019, the assets of GMT Hotels LLC were valued USD 64.3 million and, compared to 2018, they decreased by 7%. In 2019, the company had a loss of USD 9.6 million, and USD 5.7 million – in 2018.

Sunshine LLC

A 90%-stake of Sunshine LLC is owned by GANNADO WORLDWIDE S.A., a company registered in the British Virgin Islands, and 10% is owned by Solna Leisure Holdings Limited, registered in Cyprus. Nino Bakradze is the director of Sunshine LLC, which was founded in 2000 and has operated under the name Casino Adjara LLC until February 2016. Gambling business is the main activity of the company. The beneficial owners of the mentioned companies registered in the Virgin Islands and Cyprus are unknown.

According to the financial report audited by the auditing company Alkani Group, as of December 31, 2019, the assets of Sunshine LLC were valued at GEL 75 million, and compared to 2018, they increased by 134%. In 2019, the company had a profit of GEL 4.8 million, and – GEL 3.7 million – in 2018.

Georgian Petroleum LLC

A 50%-stake of Georgian Petroleum LLC is owned by Akert Group SA LLC, registered in Seychelles, 25% – by Gateline Projects Limited LLC, registered in the British Virgin Islands, and 25% – by Franfield Georgia LLC, registered in Georgia. Franfield Georgia LLC, in turn, is owned by Franfield Holdings, a company registered in the British Virgin Islands. The beneficial owners of these companies are unknown. Nodar Kvirikashvili is the director of Georgian Petroleum, and Irakli Iashvili, Giorgi Japaridze and Rovshan Mammadov (Azerbaijan) are the members of the Supervisory Board.

Georgian Petroleum provides aviation fuel for airplanes. It sells fuel on the territory of Georgia at three airports: Batumi, Kutaisi and Tbilisi. The main suppliers of the company are the largest oil refining companies in Azerbaijan and Turkmenistan: Maddox DMCC and SOCAR.

According to the financial report audited by the auditing company ECOVIS ATA Finance LLC, as of December 31, 2019, the assets of Georgian Petroleum LLC were valued at GEL 41.8 million, and compared to 2018, they increased by 171%. In 2019, the company had a profit of GEL 5.1 million, and GEL 4.9 million – in 2018.

Geosteel LLC

A 90%-stake of Geosteel is owned by Georgian Steel Group Holdings Limited, a company registered in the British Virgin Islands, and 10% is owned by JSW Steel B.V., a company registered in the Netherlands. Balakrishnan Sajivi, an Indian citizen, is the Director-General of the company. The beneficial owners of the companies registered in the Virgin Islands and the Netherlands are unknown.

The main activity of Geosteel is the production of construction fittings. Its office and production plant are located in Rustavi.

According to the financial report audited by the auditing company BDO LLC, as of December 31, 2019, the assets of Geosteel LLC were valued at GEL 124 million and, compared to 2018, they decreased by 29%. In 2019, the company had a net profit of GEL 20 million, and GEL 25.8 million in 2018.

Service Net Group LLC

Jupiter Finance Limited, a company registered in Malta, owns 100% of Service Net Group LLC, the director of which is Levan Urushadze. The owner of Jupiter Finance Limited is Artio Trustees Limited, a company registered in Malta in 2012, the beneficial owners of which are unknown.[17]

The main activities of Service Net Group are arrangement / construction of various linear structures, arrangement of air and underground infrastructure, as well as internal network (Internet, electricity, gas and water supply). The company operates in both eastern and western Georgia.

According to the financial report audited by the auditing company RSM Georgia LLC, as of December 31, 2019, the assets of Service Net Group were valued at GEL 5.5 million and, compared to 2018, they decreased by 1%. In 2019, the company had a profit of GEL 569 thousand, and GEL 770 thousand – in 2018.

Mars LLC

A 51%-stake of Mars LLC is owned by Bwin Holdings (Malta) Limited, a company registered in Malta, 24% is owned by Levan Akhvlediani, 10% – by Russian citizen Kniaz Dasen (son of MP Isko Dasen), 5-5% – by Vano Giglemiani, Koba Giglemiani and Giorgi Chkhaidze. Until July 2019, Bwin Holdings (Malta) Limited had the name of Kaiane Services (Malta) Limited. Kaiane Services (Malta) Limited acquired a 51%-stake in Mars LLC in May 2019. The beneficial owners of Bwin Holdings (Malta) Limited are unknown.

The main activity of the company is to operate a multi-brand internet platform www.crystalbet.com, which includes online bookmakers, online casinos and other online games.

According to the financial report audited by the auditing company KPMG LLC, as of December 31, 2019, the assets of Mars LLC were valued at GEL 89.6 million and, compared to 2018, they increased by 69%. In 2019, the company had a profit of GEL 94 million, and GEL 49 million – in 2018.

GDG LLC

An 85%-stake of GDG LLC is owned by Mandalor LTD, a company registered in Malta, 10% is owned by Vladimer Darchiashvili and 5% – by Maia Bitskinashvili. The director of the company is Levan Landia. The beneficial owners of Mandalor LTD are unknown. The main activity of GDG LLC is trade in alcoholic beverages.

According to the financial report audited by the auditing company RSM Georgia LLC, as of December 31, 2019, the assets of GDG LLC were valued at GEL 38.4 million, which is 0.3% more than in 2018. In 2019, the company had a profit of GEL 5.4 million, and in 2018 it had a loss of GEL 406 thousand.

Retail Group LLC

A 26.7%-stake of Retail Group LLC is owned by Dolnay Consultants LLC, a company registered in Cyprus, 30% is owned by Keystone Investments LLC, which is registered in Georgia, 20% – by GBC Invest LLC, 13.3% – by Meidan LLC, and 10% – by Retail Investments LLC. The beneficial owners of Dolnay Consultants LLC, a company registered in Cyprus, are unknown. Lasha Chocheli, a brother of Tsezar Chocheli, is the director of Retail Group. Tsezar Chocheli became a member of the Parliament of Georgia for the second time in 2020. He was an MP for the first time in 2004-2008.

The main activity of Retail Group is to operate retail stores under the brand name of Magniti. The company has 260 stores.

According to the financial report audited by the auditing company PriceWaterhouseCoopers LLC, as of December 31, 2019, the assets of Retail Group LLC were valued at GEL 64.5 million. Compared to 2018, its assets increased by 74%. In 2019, the company had a net loss of GEL 7.8 million, and GEL 3.4 million – in 2018.

Aliud Unitas Georgia LLC

A 65%-stake of Aliud Unita Georgia LLC is owned by Peftersona Limited, a company registered in Cyprus, 30% is owned by Ilia Bulichev, a Russian citizen, and 5% – by Levan Korkashvili. Aliud Unita Georgia was founded in November 2015 and its director is a Russian citizen Alexander Yudin. The beneficial owners of the Cyprus-based company Peftersona Limited are unknown.

Gambling business is the main activity of Aliud Unita Georgia. Its additional activities include restaurant services and currency exchange. The company owns the entertainment center ECLIPSE, which is located in Batumi.

According to the financial report audited by the auditing company Prestige-Audit, as of December 31, 2019, the assets of Aliud Unita Georgia LLC were valued GEL 72 million. Compared to 2018, its assets decreased by 9%. In 2019, the company got a net loss of GEL 18 million, and GEL 17 million – in 2018.

Gudauri Ski Resort LLC

Gudauri Ski Resort LLC is fully owned by Georgian Investment Limited LLC, a company registered in Mauritius. Irakli Minashvili is the director of Gudauri Ski Resort. The beneficial owners of Georgian Investment Limited LLC are unknown.

Providing hotel services is the main activity of Gudauri Ski Resort. It owns two hotels in Gudauri: Hotel Gudauri Marco Polo and Hotel Alpina. This company has owned Gudauri Marco Polo since 2009 and Alpina – since 2014. Gudauri Ski Resort is also implementing an investment project in a fruit orchard near the Tbilisi Sea. In accordance with the agreement signed with the Tbilisi City Government in 2011, the government transferred ownership of the land plots in the vicinity of the Tbilisi Sea to the company that in turn committed to investing USD 5 million. The company has set up a football base and a nursery in the investment area. It also builds residential houses and a sports and recreation center.

According to the financial report audited by the auditing company Economaudit LLC, as of December 31, 2019, the assets of Gudauri Ski Resort LLC were valued at GEL 51.4 million. Compared to 2018, its assets increased by 48%. In 2019, the company had a profit of GEL 10.6 million, and GEL 980 thousand – in 2018.

Alma LLC

Alma LLC is fully owned by Meridian Malta LLC, a company registered in Malta. Giorgi Trapaidze is the director of Alma LLC. The beneficial owners of Meridian Malta are Levan Pkhakadze (50% stake) and Samson Pkhakadze (50% stake).

Alma LLC has the exclusive right to place indoor advertisements at Tbilisi, Batumi and Kutaisi International Airports. Moreover, its advertising billboards are placed in almost all cities of Georgia. In 2019, the company acquired a 20-year exclusive right to place advertisements on the infrastructure, movable and immovable property owned by Tbilisi Transport Company LLC. Since 2002, it has also been owning a high-tech printing house.

According to the financial report audited by the auditing company BDO LLC, as of December 31, 2019, the assets of Alma LLC were valued GEL 131 million. Compared to 2018, its assets increased by 39%. In 2019, the company had a profit of GEL 11.8 million, and GEL 7.9 million – in 2018

Batumi International Container Terminal LLC

Batumi International Container Terminal LLC is fully owned by ICTSI Georgia Corp., a company registered in Cayman Islands. Nikoloz Gogoli is the director of Batumi International Container Terminal. The beneficial owners of ICTSI Georgia Corp. are unknown.

Batumi International Container Terminal owns a container terminal and ferry in Batumi.

According to the financial report audited by the auditing company EY LLC, as of December 31, 2019, the assets of Batumi International Container Terminal LLC were valued at GEL 52.2 million. Compared to 2018, its assets decreased by 18%. In 2019, the company had a profit of GEL 19 million, and GEL 12.6 million – in 2018.

Rustavi Auto Market LLC

Rustavi Auto Market LLC is fully owned by Mikado Investments LLC, a Belize-based company, and its director is a Ukrainian citizen Evgen Ustinov. The beneficial owners of Mikado Investments are unknown.

The main activity of Rustavi Auto Market is to provide a parking space for vehicles for sale, to lease the buildings located on the territory of the Rustavi Auto Market, to sell food, etc.

According to the financial report for 2019, the assets of Rustavi Auto Market LLC were valued at GEL 6.8 million. Compared to 2018, its assets increased by 240%. In 2019, the company had a profit of GEL 6.1 million, and GEL 4 million – in 2018.

Poti Grain Terminal LLC

A 51%-stake of Poti Grain Terminal LLC is owned by Tower Capital Trading, a company registered in the British Virgin Islands, and 49% is owned by Agricom LLC. The directors of Poti Grain Terminal are Ketevan Kublashvili and Abas Mammadov, a Russian citizen. The owner of Agricom is Konstantine Osipov, and the beneficial owners of Tower Capital Trading are unknown.

The main activity of Poti Grain Terminal is storing, loading and wholesale trade in grains. On November 30, 2020, this company established a subsidiary – Larsi Grain Terminal LLC.

According to the financial report audited by the auditing group Tsodna LLC, as of December 31, 2019, the assets of Poti Grain Terminal LLC were valued at GEL 23 million. Compared to 2018, its assets increased by 240%. In 2019, the company had a profit of GEL 4.2 million, and in 2018 – a loss of GEL 408 thousand.

IV. Offshore companies affiliated with Bidzina Ivanishvili

In October 2018, Transparency International Georgia published a study[18] on offshore companies related to Bidzina Ivanishvili, according to which at least 9 offshore companies were associated with the former Prime Minister of the country.

For this study two more offshore companies affiliated with Bidzina Ivanishvili were identified. The representative of these companies is Kakha Kobiashvili (who, according to media reports, is Ivanishvili’s nephew[19]) and his other business partners. Bidzina Ivanishvili has also been mentioned in the Panama Papers published by the International Consortium of Investigative Journalists in April 2016.[20]  

The following offshore companies are allegedly affiliated with Bidzina Ivanishvili[21]:

  1. Finseck Limited (British Virgin Islands), which owns 4 companies in Georgia: Express Service LLC, Leasing Twenty-first LLC, Hazelnut Development and Processing Company LLC, Complex-Service LLC;
  2. Vanity Overseas (British Virgin Islands), which owns 2 companies in Georgia: Mada LLC, Aqua Center LLC;
  3. Gilmar Holding (Belize), which owns 2 companies in Georgia: Holding Twenty-first LLC, Georgian Holding LLC;
  4. Krista Investments Limited (British Virgin Islands), which owns 1 company in Georgia: Agro Cartu Research and Production Center for Seed and Planting Materials LLC;
  5. Ringold Finance Limited (British Virgin Islands), which owns 2 companies in Georgia: Horizon LLC, New Service LLC;
  6. Limestone Finance International SA (Panama), which owns 7 companies in Georgia: New Capital LLC, Coast View LLC, Cartu Consulting LLC, Abastumani 2019 LLC, Geofert LLC, Black Sea Arena LLC and Invest Capital LLC;
  7. Fresno Management Limited (Belize), which owns 3 companies in Georgia: Inter Consulting + LLC, Cartu Management LLC, Cartu Mshenebeli LLC;
  8. Vasilia Enterprises (Belize), which owns 2 companies in Georgia: Finservice-XXI LLC, Fin-Service LLC;
  9. Tarpan Management Limited (British Virgin Islands), which owns 2 companies in Georgia: Inter-Service LLC, Management Service LLC;
  10. Frankston International (Panama), which owns 1 company in Georgia: GCF Holdings Georgia LLC (co-investment fund).
  11. Brightstone Finance Limited (British Virgin Islands), which owns 1 company in Georgia: Eurasian Invest LLC (Poti Free Industrial Zone)

V. Participation of offshore companies in the privatization

Participation of offshore companies in the privatization of state property entails corruption risks, especially when it is done through direct sale – without an auction.

We have studied the data on the privatization of state property for 2012-2020, both on the property transferred through auction and direct sale. However, for two reasons, it cannot be claimed that it is a complete picture describing offshore companies’ participation in the privatization process: 1) we only checked the offshore companies we have identified, thus, this list may not be complete, and 2) we only checked the privatization databases of central government-owned property not municipal property.

The study revealed 6 offshore companies that got state property through direct privatization in 2012-2020 and 15 offshore companies that received state property through an auction. With the exception of the property transferred at a symbolic price, the mentioned companies received property worth up to GEL 77 million.

1.Direct privatization (without auction)

Neptune LLC

A 50%-stake of Neptune LLC is owned by Silk Road Group Holding, a company registered in the British Virgin Islands, and 50% is owned by Silk Road Trans LLC. Silk Road Group, a company registered in Switzerland, fully owns Silk Road Trans. This business group has been already discussed in the study.

In 2017, the state sold real estate to Neptune LLC without auction and investment commitments. The company paid GEL 73,000 for a 113 mof non-agricultural land plot with buildings on it, located at 49 Chavchavadze Street, Tbilisi.

Interplast LLC

A 66.66%-stake of Interplast LLC is owned by Limbolton International, a Panama-based company, 13.34% is owned by Tsezar Chocheli, and 10-10% – by Iago Chocheli and Devi Ovashvili. The beneficial owners of Limbolton International are unknown. This business group has also been discussed in the study.

In 2017, the state sold real estate to Interplast LLC without an auction and investment commitments at a symbolic price of GEL 1. The property was a 55,800 mof non-agricultural land plot with buildings on it, located in the village of Didi Lilo.  

JSC Representation of Dizon Limited in Georgia

Representation of Dizon Limited in Georgia is fully owned by Dizon Limited, a company registered in the British Virgin Islands the beneficial owners of which are unknown.  

Dizon Limited got property from the state without an auction twice. In 2014, non-agricultural land plots near Baratashvili Street in Borjomi were transferred to the company for GEL 95,000 without investment commitments, and in 2015, at a symbolic price of GEL 1, the government handed over 3,307 m2 of non-agricultural land plot and the buildings on it, located at 81 Rustaveli Street in Borjomi. The company committed to creating and equipping a 40-room hotel with an investment of not less than GEL 2 million.

Somgos Company LLC

Somgos Company LLC is fully owned by Sonata Alliance, a company registered in Seychelles, the beneficial owners of which are unknown.

In 2014, Somgos Company acquired a 35,000 mof non-agricultural land plot and the buildings on it, located at 26 Eka Bezhanishvili Street in Sighnaghi, from the state for a symbolic price of GEL 1. The company committed to building a hotel with at least 100 rooms in 3 years, on which at least GEL 20 million was to be spent. The investment obligation was not fulfilled. In 2018, the terms of the privatization were changed, the company paid GEL 292,101 and the term of fulfillment of the investment obligation was extended until June 4, 2021.

According to media reports of 2014[22], Somgos Company belonged to businessman Ivane Chkhartishvili. This was confirmed by the fact that in the above-mentioned privatization project Somgos Company became the legal successor of Hotel Sighnaghi LLC, 70% of which is owned by Sighnaghi Holding LLC, and 30% – by Real Estate & Development LLC. The owner of Sighnaghi Holding is Georgian Tourism Development Fund, a company affiliated with Bidzina Ivanishvili, and the owner of Real Estate & Development is Ivane Chkhartishvili’s company – Smart Capital Group LLC.

Askangel Alliance LLC

A 60%-stake of Askangel Alliance LLC is owned by Sertora Limited, a company registered in Cyprus, 20% is owned by Goga Chkhaidze, 10% – by Tengiz Sharashidze, 5% – by Nanuli Chkheidze, 2.5-2.5% by – Giorgi and Nino Chkheidzes. The beneficial owners of Sertora Limited are unknown.

In 2016, 30,294 m2 of non-agricultural land plot and buildings on it, located in the village of Dvabzu in Ozurgeti Municipality, were transferred to Askangel Alliance from the state for a symbolic price of GEL 1. The company committed to building a mineral product enterprise with an investment of GEL 175,896, which has already been completed.

In 2016-2017, Askangel Alliance purchased 3 assets from the state through an auction: 11,478 m2 of non-agricultural land plot and buildings on it, located on Besiki Street in Ozurgeti, were purchased for GEL 69,000; 2,045 m2 of non-agricultural land plot in the village of Mtispiri, and a 155.9 meter-long railway access track near Chokhatauri Street were purchased for, respectively, GEL 3,200 and GEL 18,000.

Georgian Vodka Company LLC

Georgian Vodka Company is fully owned by Zeus Property Holdings, a company registered in Seychelles. Georgian Vodka Company was founded in 2015 and its director is Zviad Abuladze. The beneficial owners of Zeus Property Holdings are unknown.

Georgian Vodka Company purchased 10,000 mof non-agricultural land plot from the state in 2016 in the area adjacent to Mshvidoba Street in Rustavi for GEL 75,000. The company committed to setting up an alcoholic beverage factory and investing at least GEL 650,000 in it. This commitment has already been fulfilled.

2.Privatization of state property through auction

Sea View LLC

Sea View LLC is fully owned by Limestone Finance International SA, a Panama-based company that, as already mentioned, is affiliated with Bidzina Ivanishvili. Ivane Bondirev is the director of Sea View.

In 2019, Sea View purchased 25,336 m2 of land plot and buildings on it in Abastumani from the state for GEL 3,612,000. The company committed to building a hotel or no more than 2 residential houses.

Geosteel LLC

As already mentioned, 90% of Geosteel LLC is owned by Georgian Steel Group Holdings Limited, a company registered in the British Virgin Islands, and 10% is owned by JSW Steel B.V., a company registered in the Netherlands. The beneficial owners of companies registered in the Virgin Islands and the Netherlands are unknown.

In 2014, Geosteel purchased a 5,007 mof non-agricultural land plot, located at Mshvidoba Street in Rustavi, through the state auction for GEL 112,000 without investment commitments.

Didube Mega Trade LLC

A 50%-stake of Didube Mega Trade LLC is owned by Turboline Invest, a company registered in the Marshall Islands, and 50% is owned by Isi Investments LLC, a company registered in Georgia. The full owner of Isi Investments is an Azerbaijani citizen Shamil Heydarov, and the beneficial owners of the company registered in the Marshall Islands are unknown.

In 2019, Didube Mega Trade purchased a 1,440 m2 of non-agricultural land plot, located at Vani Street in Tbilisi, through the state auction for GEL 191,000 without investment commitments.

K & L Investment LLC

K & L Investment LLC is fully owned by Alasta Enterprise, a company registered in Seychelles, the beneficial owners of which are unknown. K & L Investment LLC. Was founded in 2015 and its director is Zviad Gorgidze.

In 2019-2020, K & L Investment LLC purchased 3 assets from the state through an auction without investment commitments: 1) 10,495 m2 of non-agricultural land plot on Abashidze Street in Kobuleti for GEL 3,835,000, 2) 631 m2 of non-agricultural land plot in the village of Manavi, Sagarejo municipality for GEL 9,400, and 3) 631 m2 of non-agricultural land plot in the village of Manavi, Sagarejo municipality for GEL 100,000.

CBD Development LLC

CBD Development is fully owned by a Cyprus-based company EP Georgia Holdings Limited, which is controlled by Quadrum Investment Management Limited, a company registered in the Cayman Islands. The beneficial owners of the company are unknown. The Director-General of CBD Development is Tomas Gijas, a citizen of Lithuania. The company owns the shopping center East Point in Tbilisi.

In 2014, CBD Development purchased a 25,000 mof non-agricultural land plot, located on Tvalchrelidze Street in Tbilisi, for GEL 744,000 without investment commitments.

Batumi Tower LLC

Batumi Tower LLC is fully owned by Celwood Investment Limited, a company registered in Belize, the beneficial owners of which are unknown. Batumi Tower was founded in 2014 and its director is Andrei Kozyuk, a citizen of Ukraine.

In 2015, through a state auction Batumi Tower purchased a 4,504 mof non-agricultural land plot, located at the Ninoshvili / Zhgenti intersection in Batumi, for USD 25,004,626. The buildings on the land plot were under construction and there was a movable property, „surveillance wheel“ and the 740 m2 of outdoor media LED screen, located on the same buildings. The company committed to investing USD 15 million and building a 4-star hotel with at least 100 rooms.

Georgian Perlite LLC

A 52%-share of Georgian Perlite LLC is owned by Climer Limited, a company registered in the Marshall Islands, 37% and 11%, respectively, are owned by Mykola Stutsenko and Irina Korunskaya, citizens of Ukraine. The beneficial owners of the company registered in the Marshall Islands are unknown. The main activity of Georgian Perlite is extraction, processing and sale of perlite on the territory of Georgia.

In 2013, through a state auction, Georgian Perlite purchased 86,000 mof non-agricultural land plot in the town of Trialeti in Tsalka Municipality for GEL 65,000. The company committed to investing at least GEL 1 million in the privatized object.

Caucasus Mining Group LLC

Caucasus Mining Group LLC is owned by a Cyprus-based company Femtillon Holdings Limited, the beneficial owners of which are unknown. Dmitry Korzhev, a Russian citizen, is the chairman of the company’s supervisory board and Jondo Shubitidze is the Director-General.

In 2017, through a state auction Caucasus Mining Group purchased 1,295 mof 12 non-agricultural land plots in Bolnisi Municipality for GEL 9,000 without investment commitments.

Georgian Cement Company LLC

Georgian Cement Company LLC is owned by a Cyprus-based company Reinoso, the beneficial owners of which are unknown. Tevdore Partsvania is the director of the Georgian Cement Company. The company owns a cement factory in Poti.

In 2012, through a state auction Georgian Cement Company purchased 40,045 m2 of non-agricultural land plot in Poti, Nabadi district for GEL 1,930,000 without investment commitments.

Abastumani 2019 LLC

Abastumani 2019 is fully owned by a Panama-based company Limestone Finance International SA, which, as already mentioned, is affiliated with Bidzina Ivanishvili. Abastumani 2019 was founded in 2019 and its director is Gela Koberidze.

In 2019-2020, Abastumani 2019 purchased 3 assets through auction without investment obligations from the state: 1) 582 m2 of non-agricultural land plot located on Paliashvili Street, in Abastumani, Adigeni Municipality for GEL 71,000; 2) 105 m2 and 59 m2 of non-agricultural land plots in Abastumani, Adigeni Municipality for GEL 26,500; and 3). 759 m2 of non-agricultural land plot located on Paliashvili Street, in Abastumani, Adigeni Municipality for GEL 116,000.

Caucasian Metals Terminal LLC

An 85%-stake of Caucasian Metals Terminal LLC is owned by a Cyprus-based company, C.I.I. Clay Industries International Limited, and 15% is owned by Gocha Kurdghelia. The beneficial owners of the company registered in Cyprus are unknown. The main activity of Caucasian Metals Terminal is import / storage, further mixing / processing and export of copper concentrate.

In 2017-2018, Caucasian Metals Terminal purchased 3 assets from the state through auctions without any investment liabilities: 1) 4,934 m2 of non-agricultural land plot in the city of Poti, on the left bank of the Rioni River, for GEL 348,000, 2) 5,501 m2 of non-agricultural land plot in the city of Poti, on the left bank of the Rioni River for GEL 388,000, and 3) 3,002 m2 of non-agricultural land plot in the city of Poti, on the left bank of the Rioni River for GEL 214,000.

Global Recycling Co. LLC

Global Recycling Co. LLC is fully owned by H.I.P. Trade B.V, a company registered in the Netherlands the beneficial owners of which are unknown. Global Recycling Co. was founded in 2019 and its director is Chinese citizen Yusi Hong.

In 2020, Global Recycling Co through a state auction purchased 19,743 m2 and 280,273 mof two non-agricultural land plots in the village of Akhali Sopeli in Khobi Municipality for GEL 1,245,000. The company committed to setting up an enterprise on the privatized property in 48 months, which will employ at least 400 Georgian citizens.

New Star LLC

A 50%-stake of New Star LLC is owned by Carliston Venture, a company registered in the British Virgin Islands, 25% is owned by Greentree Holding, a company registered in St. Lucia, and 25% is owned by Avtandil Kvitsiani, a citizen of Georgia, who at the same time is the Director of New Star.

In 2020, New Star bought a building and a non-agricultural land plot on Davit Agmashenebeli Avenue in Tbilisi from the state through an auction for GEL 50,000. The company committed to dismantling the building located on the privatized real estate and removing the construction waste left over from the demolition works.

Gavelton Investments Limited

Gavelton Investments Limited is a Belize-based company the beneficial owners of which are unknown. It does not have a subsidiary in Georgia.

In 2018, Gavelton Investments Limited purchased a 4,613 mof non-agricultural land plot through a state auction for GEL 373,000. In 2020, it bought a 40 mof non-agricultural land plot on Paliashvili Street in Abastumani, Adigeni Municipality for GEL 8,000.

Due to the fact that the mentioned offshore company bought land plots on Paliashvili Street in Abastumani, it may be affiliated to Bidzina Ivanishvili. Ivanishvili’s companies Sea View and Abastumani 2019″ also bought land plots in this area.

Geras Investments Limited

Geras Investments Limited is a company registered in Cyprus, the beneficial owners of which are unknown. It does not have a subsidiary in Georgia.

In 2014, through a state auction Geras Investments Limited purchased a 1,099 mof non-agricultural land plot located in Sarpi settlement in Batumi for GEL 140,000 without investment commitments.

VI. International experience with offshore companies

After the scandal of Panama Papers, the attitude towards offshore zones and companies has significantly changed in developed countries, especially in EU member states, as this was an unprecedented case. Such volume of information about offshore companies and their clients has never „leaked“ before. The scandal has had major consequences with Iceland’s prime minister and sectoral ministers of various countries resigning, and some politicians having to explain, such as the prime ministers of Canada and the UK. An inquiry commission has been set up in the European Parliament. After 10 months of work, the EU has published a blacklist[23] of 17 offshore zone countries, to which it would pay more attention and has demanded high standards of transparency in certain operations.

The EU updates its „blacklist“ of offshore zones every year. The list was last updated in February 2021 and currently includes the following 12 countries: American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, Vanuatu, and US Virgin Islands. The EU also has a so-called „grey list“, which includes Australia, Barbados, Botswana, Eswatini, Jamaica, Jordan, Maldives, Turkey and Thailand.[24] The countries in the “grey list” fail to meet EU requirements for transparency and tax administration and are under surveillance, which will be ultimately blacklisted or given the status of a credible country.

In 2010, the United States issued the Foreign Account Tax Compliance Act (FATCA)[25], which obliges foreign financial institutions (banks, brokers, insurance companies, hedge funds, pension funds, and trust companies) to provide the US Revenue Service with information about their clients who are U.S. citizens. Since 2014, foreign financial institutions have been required to provide the US Revenue Service with annual reports (including liabilities and assets) of US citizens. In addition, FATCA requires any foreign company that is not listed on the stock exchange and at least 10% of its stakes are owned by a U.S. citizen to notify the Revenue Service of the beneficiary’s identity and tax identification number.

In recent years, developing countries have been actively considering opportunities to mitigate potential risks coming from offshore zones and are gradually adopting a high standard of disclosure to offshore companies, which is one of the recommendations of the anti-corruption network of the Organization for Economic Co-operation and Development (OECD).

Starting from 2014, the OECD has relied heavily on the experience of the US FATCA and developed a unified reporting standard.[26] This standard determines what kind of tax and financial information should be exchanged between countries at the global level.

In July 2020, the European Commission issued a recommendation[27] to member states that offshore companies should not receive funding from government programs to help companies affected by the pandemic. Prior to the recommendation, France, Poland, Belgium, and Denmark already had limited benefits and assistance for offshore companies.[28]

https://www.transparency.ge/en


[1] https://www.investopedia.com/terms/o/offshore.asp

[2] https://en.wikipedia.org/wiki/Tax_haven

[3] https://www.icij.org/investigations/panama-papers/

[4] https://bit.ly/3dbepWP

[5] https://bit.ly/3sCajvn

[6]  European Parliament resolution of 14 November 2018 on the implementation of the EU Association Agreement with Georgia, https://bit.ly/3tCokdX

[7] European Parliament resolution of 16 September 2020 on the implementation of the EU Association Agreement with Georgia, https://bit.ly/3fFoMCn

[8] https://documents1.worldbank.org/curated/en/537461468766474836/pdf/multi…

[9] https://idfi.ge/en/georgia-at-london-anti-corruption-summit

[10] Ibid.

[11] According to the Geostat methodology, large-sized enterprises include enterprises with an average annual number of employees exceeding 249 people or an average annual turnover of more than GEL 60 million; medium-sized enterprises include enterprises with an average annual number of employees from 50 to 250 people or an average annual turnover of GEL 12-60 million.

[12] https://reportal.ge/

[13] Financial report of Tbilisi Energy LLC for 2019, auditing company EY LLC.

[14] https://bit.ly/3vocG7w

[15] Financial report of Tbilisi Energy LLC for 2019, auditing company EY LLC.

[16] http://www.rmp.ge/about-us/history-heritage/

[17] Annual financial report for 2019, RSM Georgia LLC

[18] Offshore companies and other business connections of Bidzina Ivanishvili, Transparency International Georgia, 31 October, 2018: https://www.transparency.ge/en/blog/offshore-companies-and-other-business-connections-bidzina-ivanishvili

[19] https://rustavi2.ge/ka/news/27900

[20] https://offshoreleaks.icij.org/stories/bidzina-ivanishvili

[21] This list may not be complete.

[22] https://knews.ge/?p=23405

[23] https://bit.ly/3nAhpzJ

[24] https://ec.europa.eu/taxation_customs/sites/taxation/files/eu_list_update_22_02_2021_en.pdf

[25] https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act

[26] https://bit.ly/3nwTPnE

[27] https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1332

[28] https://www.cnbc.com/2020/05/19/coronavirus-eu-countries-deny-bailouts-to-firms-linked-to-tax-havens.html