IT Virtual Zone Company In Georgia
pays an incredible 0% tax on income.

IT Virtual Zone Company In Georgia pays an incredible 0% tax on income.
IT Virtual Zone Company In Georgia pays an incredible 0% tax on income.

The Virtual Zone is designed for IT sector. To benefit from 0% CIT, 0% VAT, and 5% dividends tax, an IT company must sell its services to foreign clients outside Georgia. 

What Is The Georgian Virtual Zone?

To improve Georgia’s IT technologies sector and the attractiveness of its economy, the country’s leadership decided to create The Virtual Zone. Also known as the “Information Technology Zone”, this special status allows a Georgian Limited Liability Company, whose activity is related to the IT sector, to benefit from huge tax exemptions: 0% corporate income tax, 0% VAT, and 5% dividends tax.

To benefit from the Virtual Zone tax exemptions, the only requirement is that the IT company provides and sells its IT services and products to clients outside Georgia’s territory (to foreign non-Georgian and non-resident clients and companies). If you are eligible, the Virtual Zone is a license allowing you to create and sell your IT products and software-based services worldwide in a tax-free regime.

According to Georgian legislation, the VZ company’s activities shall result in the use, creation, and development of IT software and products: « development, support, design, research development, production, implementation and deployment of computer information systems and related technologies, the result of which is the emergence of software products » and when development work is performed, partially or totally, in Georgia. The tax benefits apply to services and products provided to foreign clients outside Georgia.

There are very interesting tax advantages if you qualify for the VZ Company. The application process can be tricky and must be prepared correctly to avoid rejection. We recommend getting a consultation about the VZ Company Status with one of our advisers to check that your business project meets the Virtual Zone requirements.

Main Tax Benefits Of Virtual Zone Company Georgia

  • 0% Corporate Profit Tax (instead of 15% and 0% if the profits are re-invested or retained within the VZ Company). 
  • 0% VAT. You can also claim VAT (18%) when purchasing from other VAT Taxpayers registered in Georgia. Therefore, you will have to register as a VAT Taxpayer at the Revenue Service of Georgia.
  • 0% Export tax. The export of IT products is not subject to customs duties.
  • 5% withholding tax on distributed dividends. No matter if they are distributed to an individual or a legal entity, resident or non-resident. VZ Company Dividends not distributed are not taxed.
  • The VZ Company director can be either a Georgian or a Foreign person who can be physically located either in Georgia or abroad.

Do You Qualify For VZ Company Georgia?

  • Be an IT company (Typically connected to software development)
  • Have already registered your business (a Limited Liability Company – LLC) in Georgia
  • Remember that the Virtual Zone Tax benefits only apply to providing and selling IT products and services to clients based outside of Georgia. Income locally sourced, i.e., from Clients working inside the territory of Georgia, will be taxed at regular LLC rates 15% CIT + VAT 18%)
  • A VZ Company must have economic substance in Georgia (please read our FAQ below on this matter): an office with at least 1 Georgian employee is strongly required. 
  • Open a Georgian Bank account for Revenue Service purposes and tax declaration (indeed, RS request a Georgian bank account for the taxes payments of taxes.

Depending on the exact nature of your business, you may or may not qualify for VZ Company status. That’s why we strongly recommend getting a consultation with one of our advisers to check if you are eligible for the Virtual Zone. 

How To Apply For Virtual Zone Georgia?

  • Register your business through an LLC Legal Entity – it takes up to 2 working days.
  • Register your LLC with the Revenue Service – it takes one working day.
  • Submit your VZ Company Application at the Ministry of Finance – it takes a minimum of ten working days up to 30 days for application processing.

Please note that during this Virtual Zone application process, you and the Georgian administration shall set up a follow-up. If MOE asks, you shall provide additional proof and clarification of your business model, services/products, local employee contracts, and more. 

Registering your LLC is relatively easy in Georgia. If you want more help with registering a legal entity in Georgia, read our guidelines to open your LLC in Georgia. However, if you are not familiar with the intricacies of the Georgian administration and how to properly present an application to obtain Virtual Zone status, errors during the application process are common. Therefore rejections are common too, especially if you don’t speak Georgian. 

To make the process as simple as possible and to avoid the frequent errors that can lead to the rejection of your Virtual Zone Company application, Happy Georgia will help you save time and make the process pain-free.

Remote Virtual Zone Registration & Remote Business Bank Account Opening

If you would like to open your Virtual Zone company in Georgia remotely, thanks to Power of Attorney, it’s possible. Your physical presence is then not required. We offer a simple procedure to open your VZ Company Remotely with Power of Attorney without visiting Georgia. We will be able to carry out all the necessary steps for the Virtual Zone company registration on your behalf. 

Similarly, you can open a Remote Business Bank Account for your VZ Company Georgia. Your physical presence in Georgia is not required. If you wish to open a remote bank account for your Virtual Zone, we can carry out this service on your behalf, thanks to your Power of Attorney.

Why Not Consider Opening A International Company Status For Your IT Business?

Suppose your company has at least two years of proven experience in the IT sector. In that case, the newer International Company Status may offer even better tax breaks than the Virtual Zone, in some cases. With International Company Status, you get 0% dividends, 5% corporate tax, only 5% tax on employee salary (instead of 20%), and 0% VAT on B2B services provided to foreign clients.

Individual Enterprise Vs. Virtual Zone Company

Depending on your turnover, IT entrepreneurs such as solo digital entrepreneurs who can trade as individual entrepreneurs and do not require a legal entity could also consider the Small Business Status (1% tax rate) if they qualify and will be tax residents of Georgia.

What Kind Of Substance Do You Need In Georgia To Get The Virtual Zone Company Status?

You need to demonstrate actual physical office and local staff. Each case is specific according to the exact nature of your business. One of our advisers can get in touch with you to analyze your current situation and advise what you would need to do to get this substance and make your Virtual Zone Company application successful.

How Can I Get Substance For My Virtual Zone Company?

If you do not have substance in Georgia already, we advise getting it to get a positive result. If you want to get it before applying for VZ Company status, we can assist in putting this substance in place to ensure you a successful VZ application.

Do You, As Company Director, Need To Live In Georgia To Benefit From The VZ Company Status?

No. You can manage your VZ company remotely without residing in Georgia. But, according to your specific situation, it is worth analyzing if it would be good for you to be a tax resident in Georgia, therefore living here for more than 183 days per year. If you are a tax resident in Georgia and work with your VZ Company, 5% tax is levied on dividend distributions.

But if you are a tax resident elsewhere, you may owe additional taxes in that country on any income earned from your Georgian VZ Company. According to our information, Georgia will sign the CRS (Common Reporting Standard) in 2025. At this date, your country of tax residency may access your bank account details in Georgia.

To Get The VZ Status, Are There Any Any Capital Requirements?

No. after showing sufficient substance (office, employment agreement) you can proceed with the Virtual Zone application. Your company does not have to generate minimum turnover before applying; the Virtual Zone license is free. You don’t need to renew it annually like in a Free Industrial Zone.

Summary Of Virtual Zone Benefits And Limitations

The VZ status allows a Georgian Limited Liability Company, whose activity is related to the IT sector, to benefit from huge tax exemptions: 0% corporate income tax, 0% VAT, and 5% dividends tax. To benefit from the tax exemptions of the VZ Status, the only requirement is that the IT company provides and sells its IT services and products to foreign, non-Georgian, non-residents clients outside Georgia’s territory. 

Virtual Zone Company Corporate Income Tax

  • Corporate Income Tax 0% 
  • If you work with Georgian clients and earn incomes within Georgia, the income generated by these Georgian sources will be taxed: Corporate Income Tax 15% + VAT 18%.

Virtual Zone Company VAT

  • Value Added Tax 0%. You can also voluntarily register as a VAT taxpayer, pay 0% VAT on business income, but be able to reclaim VAT when making purchases from other VAT taxpayers registered in Georgia.
  • If you hire a Georgian employee or tax resident in Georgia, you will have to pay a 20% tax on gross salary + 4% social security contributions.

Virtual Zone Dividends Tax

  • 5% tax on distributed dividends
  • When Distributing dividends to non-resident shareholders, the country of your tax residency should be considered carefully. To avoid double taxation, Georgia signed double taxation avoidance treaties. You can check all the participating countries.  

Virtual Zone Export Tax

0% Export tax on exports leaving the Georgian customs territory.

Virtual Zone Management

  • A foreigner living abroad can perfectly obtain the VZ Company status. But even if the LLC must be registered in Georgia, you can manage it from anywhere.
  • But, if the company director is a resident or tax resident in Georgia, it will greatly increase your chances of obtaining the Virtual Zone Status.

Virtual Zone Staff

  • Your staff can be based anywhere, not just in Georgia.

Limitations. But, although Georgian law does not oblige you to hire local staff, the VZ Company status was created to develop employment in the IT sector in Georgia. So your Virtual Zone application will be much more likely to be accepted if you hire local staff and show a real presence in Georgia.

Contact us about company formation in Georgia.