Investment Climate & Gambling Business Opportunities in Georgia

Georgian National Investment Agency (GNIA)

2015

Georgia - Country Overview

Area: Population: Life expectancy: Official language: Literacy: Capital: Currency (code): www.investingeorgia.org

69,700 sq km 4.5 mln 75 years Georgian 100% Tbilisi Lari (GEL) GDP 2014 (est): USD 16.9 bln GDP real growth rate 2014 (est): 4.7% GDP CAGR 09 -14 (USD) (est): 5.6% GDP per capita 2014(est): Inflation rate 2014 : Total Public Debt to Nominal GDP (%) 2014 (est): US$ 3763 3.1% 34.6% 2

Advantages of Investment Climate in Georgia

        A politically stable investment destination Efficient, pro-business and corruption-free government Enlargement of market size by Free Trade Agreements Competitive cost of labor and energy Entry gate in the region Solid sovereign balance sheet Stable banking sector Very low crime-rate

BB- Stable

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BB- Positive Ba3 Positive

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Doing Business in Georgia

Country's impressive progress in improving business climate has been well documented in a number of international indices.

Ease of Doing Business

Singapore United States United Kingdom GEORGIA Latvia Netherlands Bulgaria Armenia Turkey Russia Azerbaijan China Ukraine 1 7 8 15 23 27 Up from 112 in 2005 38 45 55 62 80 90 96

Source: World Bank, DB 2015 (Rank out of 189 countries)

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Index Of Economic Freedom

Hong Kong United States United Kingdom Germany GEORGIA Sweden Armenia Kazakhstan Turkey France Azerbaijan China Russia Ukraine 1 12 13 16 22 23 Up from 99 in 2005 52 69 70 73 85 139 143 162

Source: The Heritage Foundation, 2015 (Rank out of 178 countries)

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Corruption Free Country

Georgia is considered as essentially a corruption-free investment destination

Global Corruption Barometer

Denmark Norway Korea (South) Hungary Canada Switzerland UK United States Armenia Turkey Ukraine 0% 1% 1% 1% 1% 2% 2% Percentage of users paying a bribe to tax authorities in the past year 4% 9% 9% 15% 18% Hungary Denmark Norway Korea (South) Canada Switzerland UK United States Armenia Turkey Ukraine 1% 2% 2% 2% 2% 2% Percentage of users paying a bribe in registry and permit services 5% 11% 14% 16% 20% 22%

Source: Transparency International 2013 (GLOBAL CORRUPTION BAROMETER)

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Economic Structure and Trends

GDP: Strong rebound after a relatively small contraction in 2009

18 16 14 12 10 8 6 4 2 0 5,9% 5,1 Nominal GDP (US$bln) 9,6% 9,4% 6,4 7,8 12,3% 10,2 Real GDP growth, y-o-y (%) 15,8 16,1 16,9 14,4 12,8 2,3% 10,8 11 -3,8% 6,3% 7,2% 6,2% 3,2% 4,7% 12,0% 7,0% 2,0% -3,0% -8,0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 E

Source: Geostat, MOF

Broad-based and diversified nominal GDP structure in 2013

Agriculture, forestry and fishing 9% Health and social work 6% Other sectors 12% Education 5% Public administration 10% Financial intermediation 3% Transport and Communication 11% Hotels and restaurants 3% Trade 17% Industry 17% Construction 7%

Source: Geostat, MOF

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Rapidly growing GDP per capita

4000 3500 3000 2500 2000 1500 1000 500 0 1188 1484 1764 2315 2921 2455 2623 3231 3523 3600 3763 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 E

Source: Geostat, MOF

Favorable public debt situation

Total Public Debt to Nominal GDP (%) External Public Debt to Nominal GDP (%) 70% 60% 50% 40% 30% 20% 10% 0% 63,2% 50,5% 44,9% 40,0% 32,0% 25,5% 31,2% 41,0% 42,4% 36,5% 34,9% 34,7% 34,5% 26,8% 21,1% 16,8% 23,5% 31,7% 33,6% 28,8% 27,6% 27,2% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Geostat, MOF

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Liberal Trade Regimes

• • • Very simple and service oriented customs policy and administration – customs clearance in 15 minutes ~80% of goods free from import tariffs No quantitative restrictions

Preferential Trade Regimes:

• FTA with CIS countries and Turkey • DCFTA (Deep and Comprehensive Free Trade Agreement ) with EU was • singed on June 27, 2014 GSP agreement with USA, Norway, • Switzerland, Canada, Japan Member of WTO

Duty free access to ~0.9 billion market provided by FTAs and DCFTA

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Taxation - simple, low, efficient and fair

Before Current Change year

Number of Taxes VAT Personal Income Tax Social Tax Corporate Profit Tax Customs/ import Tax Excise Tax Property Tax 21 20% 12 20% 33% 20% 6 18% 20% 15% 2005-2007 2004 - 2009 0%, 5% or 12% 2005 2008 Depends on goods Up to 1% www.investingeorgia.org

    No payroll tax or social insurance tax No capital gains tax No wealth tax and inheritance tax Personal income tax for interest, dividend, royalty – 5%  Foreign-source income of individuals fully exempted   Accelerated depreciation on capital assets Loss carry forward for corporate profit tax purposes (10 years)  No restrictions on currency convertibility or repatriation of capital & profit  Double taxation avoidance treaties with 47 countries 8

Leader in Forbes rating (Tax Misery & Reform Index)

According to the latest Tax Misery & Reform Index, released by Forbes Business & Financial News, Georgia is the fourth least tax burden country after Qatar, UAE and Hong Kong www.investingeorgia.org

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Georgia is expecting significant growth trajectory in tourist arrivals

Number of international visitors has been growing rapidly 1 1,1 1,3 0,6 2005 2006 2007 2008

Source: Georgian National Tourism Administration

2009

+38%

1,5 2.0

+56%

2.8

+22%

4.4

2010 2011 5.4

2012 2013 www.investingeorgia.org

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Hospitality - Fast Growing Sector

Fast growing sector

• Tourism contributed 6.5% of GDP in 2013.

• Number of visitors increased by 38% reaching 2.8 million in 2011 and by 56% in 2012 reaching 4.4 million. Georgia had 22% more visitors in 2013 reaching 5.4 million. Number of international arrivals reached 4 657 525 mln during the first 10 months of 2014. (2% increase compared to the same period of the last year). • • • Majority of tourists come from: Turkey (30%), Armenia (23%), Azerbaijan (19%), Russia (14%), Ukraine (2%). Tourist number of international visitors from Europe increased by 3 % in 2014 Average duration of stay - 5 nights, average spend - USD 650

Potential

• European Youth Olympic Festival 2015; UEFA Super Cup 2015.

• • • UNESCO heritage sites; 8 national parks Curative climate; mineral waters; According the IUCN criteria there are 84 different categories of Protected Areas(Total area – 520 811 ha; 7,47% of the country’s territory)

Source-Georgian National Tourism Administration

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More international luxury hotel chains are coming to the market…

Existing Hotel Chains (8 pipeline hotel projects in Tbilisi)

With the growth of tourists the demand for hotel rooms has been growing in the last years in Georgia, which has stimulated investments in the hotel sector. Average occupancy rate of international brand hotels in Tbilisi

Reached to 80% in 2013 , Tbilisi hotel market is expected growth this year of an estimated 83%;

Source: TBSC Consulting

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Supply of the rooms increased, but still there is a huge capacity for development of Hotel Industry.

Upcoming international hotel brands in Georgia

Batumi Tbilisi Batumi Tbilisi Batumi Tbilisi Tbilisi/Li kani

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Investment opportunities in Hospitality & Real Estate

1 “Sun-beach” resorts 2 Winter ski resorts Summer mountains resorts 3 4 Spa Resorts 5 Gambling Description Potential location

Expansion of summer ”sun and beach” franchise focusing on high end segment All inclusive summer resorts New master resort development  Batumi  Anaklia  Kobuleti  Other Black Sea locations www.investingeorgia.org

 Master development of winter resorts with unique profile equivalent to the Alps Government is fully committed to provision of basic infrastructure Four season resort value preposition Majestic landscapes allow for a wide range of tourism activities such as camping, climbing, rafting, fishing, hunting etc.

Mestia  Gudauri  Bakuriani  Goderdzi  Mestia  Gudauri  Bakuriani  Goderdzi  Kazbegi  Other locations Development of Spa Resorts Include hotels, different types of clinics, fitness, outdoor activities    Tskhaltubo Akhtala Other locations Development of large-scale integrated casino complex to Serve regional markets.

Include hotels, casino entertainment, family Services and shopping Fiscal incentives available  Batumi  Tbilisi  Other locations 13

• • • •

Map of Regional Countries Fully of Partially Banning Gambling Activities

Legislation in surrounding countries prevents people from enjoying gambling facilities, but Georgia will provide them with high quality gambling experience similar to world class gambling destination as Las Vegas or Monte Carlo Countries where gambling is completely or partially prohibited: Russia, Turkey, Azerbaijan, Iran, Israel, Kazakhstan, Saudi Arabia etc.

Easy access by Land, Sea and Air makes Georgia attractive gambling destination for all above countries and beyond. Gambling business is fully decriminalized. www.investingeorgia.org

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Gambling Business in Georgia

• • There are couple of choices for starting Gambling Business in Georgia:  Casino  Slot Machines  Table Games   Bookmaker Bingo   Lotto Promotional Drawing Game Georgia Revenue Service (Tax and Customs Administration of Georgia) is responsible for issuing permits, regulation and supervision of gambling business 15

Casino Fees

Annual fees:

• 5 000 000 GEL (with exceptions) • These exceptions vary according to the location of the company:  Batumi, Kobuleti, Borjomi, Bazaleti Lake, Gurjaani district, vill. Katchreti – 250 000 GEL  Akhaltsikhe – 100 000 GEL Some of the regions are totally exempt from annual state fees:  Gudauri, Khazbegi, Bakuriani, Sighnagi and Tskaltubo – are totally exempt from annual fees with no conditions  Batumi, Kobuleti, Khelvachauri, Anaklia and Ganmukhuri are exempt from an annual fee on a condition that the casino will operate in newly opened 100 or 80 room hotel

Quarterly fees:

• For each Casino Table - 15 000 - 30 000 GEL (Tournaments tables are not subject to quarterly fees ) www.investingeorgia.org

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Casino Fee Payment Map

Exempt from annual fee + 100 Room Hotel Exempt from annual fee + 80 Room Hotel Exempt from annual fee with no conditions 250000 GEL annual fee 100000 GEL annual fee www.investingeorgia.org

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Other Gainful Games Fees

Slot Machines Annual State Fees: 50 000 – 1 000 000 GEL (Tbilisi – 1 000 000 GEL)

In case of locating slot machine club within Casino in Tbilisi: 100 000 GEL

Quarterly Fees: For each Slot Machine: 1500 – 3000 GEL Table Games Annual state fees:

Only Casino permit and gaming machine permit holders are allowed to open table gaming club Casino Permit holders are allowed to open 3 Gaming Clubs in any part of Georgia for free Gaming Machine Permit holders are allowed to open 1 Gaming Club in any part of Georgia for free Each following Gaming Club: 10 000 – 50 000 GEL

Quarterly fees:

For each Table in Table Game: 3 000 – 10 000 GEL

Bookmaker Annual state fees:

30 000 - 300 000 GEL

Quarterly fees:

Free

Bingo/Lotto Annual state fees:

15 000 GEL

Quarterly fees:

Free

Promotional Drawing Game Annual fees:

15 000 GEL

Quarterly fees:

10% of Prize Fund 18

Land Based Gambling and Gainful Games Taxing

• • •

Casino

 Personal income tax (salaries) – 20%; Property tax – up to 1%; Corporate Income Tax– 15%; W/H - only during tournament – 20%; • •

Slot Machines

 Personal income tax (salaries)– 20%; Property tax – up to 1%; •

Table Games

 Personal income tax (salaries)– 20%; withholding liability- only during tournament – 20%; Property tax – up to 1%;

Bookmaker

 Personal income tax (salaries) – 20%; Property tax – up to 1%;

Bingo/Lotto

 Personal income tax (salaries)– 20%; Corporate Income Tax– 15%; withholding liability – 20%; Property tax – up to 1%;

Promotional Drawing Game

 Personal income tax (salaries) – 20%; Corporate Income Tax– 15%; withholding liability – 20%; Property tax – up to 1%; www.investingeorgia.org

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iGaming Permits

• iGaming permit is only issued to the land-based permit holders (of Georgia).

• Gambling and gainful games may be arranged by internet for:  Casino    Slot machines Bookmaker Promotional Drawing Game • A company in Georgia is prohibited from providing iGaming services to an offshore company • iGaming permit holders pay quarterly fees. Quarterly fees are determined by Local Administrations, which vary from 30000 to 60000 GEL www.investingeorgia.org

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iGaming Taxation

•

Casino

 Personal income tax (salaries)– 20%, Corporate Income Tax – 15%, property tax – up to 1%, withholding liability– only during tournament -20% •

Slot Machines

 Personal income tax (salaries) – 20%, Corporate Income Tax – 15%, Property tax – up to 1%.

•

Bookmakers

 5% of the turnover (gross revenue). Personal income tax (salaries) –20%; property tax–up to 1%.

•

Promotional Drawing Game

 personal income tax (salaries)– 20%; property tax – up to 1%, Corporate Income Tax– 15%; withholding liability - 20% www.investingeorgia.org

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GEORGIAN NATIONAL INVESTMENT AGENCY

• STATE AGENCY – Promoting Georgia internationally – Supporting foreign investments and investors before, during & after investment process • “One-stop-shop” for investors • Moderator between Investors, Government and Local Companies

Investors Local Companies GNIA Government

Mission

- Attracting Greenfield and M&A Investments

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WHAT YOU CAN GET FROM GNIA

• INFORMATION - General data, statistics, sector researches • COMMUNICATION - Access to Government at all levels/Local partners • Organization of site visits & Accompanying investors • AFTER CARE - Legal advising & Supporting services www.investingeorgia.org

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www.investingeorgia.org

GEORGIAN NATIONAL INVESTMENT AGENCY

7 Bambis Rigi, Business Center Mantashevi, II floor 0105, Tbilisi, Georgia Tel: (+995 32) 2 473 696 E-mail: [email protected]

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