Tax Benefits
- Exemption from the 15% corporate income tax on profits from IT services sold outside Georgia.
- 5% tax on dividends when distributing profits.
Requirements
- The company is registered in Georgia (only Georgian legal entities may apply, through the Ministry of Finance).
- A physical or legal presence in Georgia.
- Operations in IT or software development.
- Products and services sold exclusively outside Georgian jurisdiction.
How to Obtain Virtual Zone Status
The first step is registering a company with the National Agency of the Public Registry of Georgia (NAPR) — a two-business-day process.
What exactly is exempt
The Tax Code of Georgia defines a virtual zone person as a legal person engaged in IT activities and holding the appropriate status (Article 8). So the status is available to a company, not to an IE.
Profit tax exemption covers profit earned from supplying outside Georgia information technologies developed by the virtual zone company (Article 99). The Code defines IT as studying, supporting, developing, designing, producing and introducing computer information systems that result in software products.
Other income is taxed on general rules:
| What is taxed | Rate |
|---|---|
| Profit from selling IT outside Georgia | exempt |
| Profit from other activity, including clients in Georgia | 15% on distribution |
| Dividends paid to a natural person | 5% |
| Employee salaries | 20%, no special rate for the virtual zone |
Virtual Zone or International Company status
The main practical difference is salaries. At a virtual zone company, employee salaries are taxed at the general 20% rate, while at an international company they are taxed at 5% (Article 23 of the Tax Code). If the company has many employees in Georgia, this can outweigh the profit exemption. A detailed comparison of the regimes is on the international company status page, and a walkthrough of the virtual zone for IT companies is in our article on Virtual Zone IT status.
Who Virtual Zone Is For
- Companies developing software for foreign clients.
- IT outsourcing businesses with a client base outside Georgia.
- SaaS products targeting international markets.
If your company operates both inside and outside Georgia, or belongs to the maritime sector, consider International Company status instead.
FAQ
How does Virtual Zone differ from Small Business Status (1%)?
Small Business Status applies to sole traders (IE) and taxes 1% of gross turnover regardless of where services are delivered. Virtual Zone applies to LLCs and JSCs and exempts corporate income from tax, provided services are sold outside Georgia.
Can I work with Georgian clients under Virtual Zone status?
No. Virtual Zone status requires products and services to be sold exclusively outside Georgia. Income from Georgian clients is taxed at standard rates.
Can an IE get Virtual Zone status?
No. Under the Tax Code definition, a virtual zone person is a legal person. An individual entrepreneur in IT is usually better served by Small Business Status with 1% tax on turnover. For Virtual Zone status, an LLC is registered first.
What tax do virtual zone company employees pay?
The standard 20% income tax. There is no special salary rate for the virtual zone. This is where it differs from International Company status, under which employee salaries are taxed at 5%.
Are virtual zone company dividends taxed?
Yes. Dividends paid to a natural person are taxed at source at 5%, as at other Georgian companies. The exemption covers profit from selling IT outside Georgia, not dividends.