Preferential Taxation Scheme For IT Business In Georgia

Taxation Scheme For IT Business In Georgia: Georgia offers several favourable taxation statuses for businesses operating in Informational Technologies. The most appealing are:

– The Status of an International Company;
– The Status of a Virtual Zone.

The Status of an International Company

In 2020 the Georgian Government introduced a new tax incentive for companies operating in the IT and Maritime sector. The Ordinance №619 – “On Determining the Status of an International Company and Approving the List of Permitted Activities and Certain Expenses” classifies the criteria and list of permitted activities under the preferential taxation scheme.

A Georgian enterprise can qualify for the status of an international company in any of the following cases:

A) The Georgian company has at least 2 years of experience in the activity for which it claims to qualify for the status of an International Company;

B) The Georgian company that is the representative (daughter company) of a non-resident enterprise in Georgia and this non-resident enterprise has 2 years of experience in carrying out activities permitted for obtainment of the International Company Status.

The preferential status of an international company implies a reduction in personal income tax from 20% to 5%, corporate income tax from 15% to 5% an exemption from tax on dividends.

The Status of a Virtual Zone

Georgia’s Virtual Zone Status was introduced in 2011 and provides tax benefits for Information Technology companies that offer services abroad. This scheme is highly attractive as it offers a 15% income tax exemption and only requires a 5% tax on dividends when distributing profits.

To obtain this status, interested parties must establish a company with the National Agency of the Public Registry of Georgia, which is a quick and easy process completed in just two working days, since only Georgian businesses are eligible to apply for Virtual Zone Status through the Ministry of Finance.

Before submitting an application, it is important to ensure that all mandatory requirements are met. These include having representation in Georgia, operating in IT or software development, and selling products exclusively outside of Georgia’s jurisdiction.