A full breakdown of Georgian rates for companies and individuals is collected in the guide Taxes in Georgia.
What Virtual Zone status actually is
Virtual Zone is a special tax status for companies that develop software and provide IT services to clients outside Georgia. It does not create a separate jurisdiction and does not require relocating into a physical special economic zone. The company stays an ordinary Georgian legal entity but receives an exemption from corporate tax on qualifying income.
The benefit is tied to export of services, not to the industry alone
The key condition is defined by where the client sits. The exemption covers income from products and services supplied outside Georgia. Revenue from Georgian clients does not qualify and is taxed under the standard rules.
Who can obtain the status
Only Georgian legal entities may apply. An individual entrepreneur cannot claim Virtual Zone status: sole traders have a separate small business regime taxed at 1% of turnover. If you are still choosing a legal form, the difference is covered in How to register as an individual entrepreneur in Georgia.
The core conditions are:
- The company is registered in Georgia as an LLC or a JSC.
- Its activity falls within information technology or software development.
- Products and services are supplied outside Georgia.
- The company maintains a presence and real operations in the country.
Staff who build the product must work from Georgia
This condition is often overlooked. Development has to be carried out on Georgian territory. Hiring non-residents is allowed, but the people directly creating the product are expected to be in Georgia. A fully distributed team with no presence in the country creates exposure during a tax review.
Tax treatment: 0% on profit and 5% on dividends
Georgia applies the Estonian model of profit taxation: tax arises not when income is earned but when profit is distributed. For a Virtual Zone company the picture is:
- Profit tax on exported IT services: 0% instead of 15%.
- Dividend tax on distribution of profit: 5%.
- VAT on services supplied to foreign clients: not charged, because the place of supply is outside Georgia.
The dividend rate can be reduced by a double taxation treaty if the recipient is a tax resident of a treaty country. How personal tax status is established is described on the Tax residency in Georgia page.
Source note
> Exemption from the 15% profit tax: profit from the sale of IT services outside Georgia is not subject to corporate tax. Dividends: 5% on distribution of profit.
Source: Virtual Zone status, Legalese
How to obtain the Virtual Zone certificate
The procedure has four steps:
- Register an LLC with the National Agency of Public Registry. This takes 2 working days.
- Activate the tax profile on the Revenue Service portal rs.ge.
- File the Virtual Zone application with the Ministry of Finance of Georgia.
- Open a corporate bank account.
The statutory review period is 10 days. In practice, because of the growing number of applicants, review takes from 20 working days to about a month. Once approved, the Revenue Service issues the certificate within two working days. The certificate has no expiry date.
It is easier to arrange the bank account early, since without it the company cannot receive client payments. A comparison of Georgian banks for legal entities is set out in the review of TBC, Bank of Georgia and Credo.
Requirements and obligations after approval
The certificate does not remove ordinary reporting duties. The company still keeps accounting records, files monthly returns and pays payroll taxes for its employees.
What has to be monitored continuously:
- Separate accounting for revenue from foreign and Georgian clients. Only the first part qualifies for 0%.
- Documentary proof that services were exported: contracts, invoices, acceptance acts, payments from foreign counterparties.
- Actual presence in Georgia, including an office and the staff involved in development.
- Timely filing of returns through rs.ge.
The status can be withdrawn if conditions are not met
If the Revenue Service establishes that services were in fact supplied to Georgian clients, or that development happened outside the country, the exemption can be removed and tax assessed retroactively. Documentation therefore matters more than the formal existence of a certificate.
When International Company status fits better
Virtual Zone is not universal. If a company serves Georgian and foreign clients at the same time, or operates in the maritime sector, it is worth comparing the regime with International Company status. That status permits domestic work but comes with different rates and stricter substance requirements. Details are on the International Company status page.
Frequently asked questions
Can a Virtual Zone company work with Georgian clients?
It can, but income from Georgian clients does not qualify for the zero rate and is taxed under the standard corporate rules. The company will need separate revenue accounting. If most clients are inside Georgia, Virtual Zone status loses its economic point.
How does Virtual Zone differ from the 1% small business status?
They apply to different legal forms. Small business status is available to an individual entrepreneur and means 1% of turnover regardless of the field of activity. Virtual Zone applies to an LLC or JSC, removes profit tax, and requires that services are supplied outside Georgia.
How long does the certificate take?
The statutory review period is 10 days. In practice the process runs from 20 working days to a month because of the workload at the Ministry of Finance. After a positive decision the certificate is issued within two working days and remains valid indefinitely.
Is VAT charged on work for foreign clients?
No. Services supplied to clients outside Georgia fall outside the scope of Georgian VAT, because the place of supply is abroad. A VAT registration duty may still arise from other transactions if domestic turnover exceeds the statutory threshold.
Can the company hire remote staff from other countries?
Hiring non-residents is allowed. The restriction concerns where the work is performed: employees who directly create the product are expected to work from Georgian territory. This condition is examined when the basis for the status is verified.
How Legalese handles this
We run the whole process, from incorporation to the certificate. The first step is checking whether your activity meets the definition of IT services and whether the export condition holds, so that we do not file an application from a knowingly weak position.
We then register the LLC with the public registry, activate the tax profile on rs.ge, prepare and file the application with the Ministry of Finance, and support the corporate account opening. Once the certificate is issued we help set up separate revenue accounting and reporting so the status is not challenged during a review.
The scope of work is described on the Virtual Zone status in Georgia page. If the company is not incorporated yet, start with LLC incorporation.
Key points
- Virtual Zone status gives 0% profit tax instead of 15% on income from IT services supplied outside Georgia.
- Distribution of profit is taxed at 5%, and a double taxation treaty may reduce that rate.
- Only Georgian LLCs or JSCs may apply, through the Ministry of Finance. The statutory term is 10 days, in practice up to a month.
- The certificate is open ended but requires separate revenue accounting and real development presence in Georgia.
- Income from Georgian clients is outside the exemption and is taxed at standard rates.
To check whether the regime suits your company, book a free consultation.