Get Tax Exemptions with IT Status in Georgia
- Tinatin Tolordava
- Mar 14
- 8 min read
Table of contents
Introduction
Georgia is quickly emerging as a global hub for IT professionals, entrepreneurs, and forward-thinking companies looking to optimize their tax strategies. With its business-friendly policies, strategic location, and simplified regulations, the country has positioned itself as a top-tier destination for startups and established businesses.
Georgia's main attraction stems from its territorial tax system, which applies taxes only to domestic earnings. The combination of startup-friendly tax incentives and specialized corporate programs, such as the Georgia Virtual Zone and Georgia International Company status, draws IT professionals to this thriving market.
In this blog, we’ll explore the key tax exemptions and incentives available for IT businesses and freelancers in Georgia. We’ll explore essential aspects such as Georgia’s income tax policies, corporate tax rates, and obtaining an IT tax exemption, equipping you with the knowledge to make informed decisions about your business’s financial future.
For those looking to establish an IT business in Georgia, Gegidze helps navigate the process, offering expertise in company registration and IT status applications—key steps to unlocking Georgia’s tax benefits.
What is a Georgian Virtual Zone?
The Georgian Virtual Zone represents a specific tax structure that enables IT companies to offer international computer software assistance without Georgian tax obligations. Businesses under the Virtual Zone designation receive substantial tax advantages that apply exclusively to software product development organizations.
Businesses specializing in software creation, SaaS (Software as a Service), and subscription-based software applications can request Virtual Zone status due to their exclusive service provision to non-Georgian entities and non-resident individuals.
Which IT Businesses Can Apply?
Virtual Zone tax benefits had previously extended to IT consulting, eCommerce, Internet marketing, and cryptocurrency service industries. Modern regulations demand that companies make substantial software development investments through eCommerce platforms, automation tools, marketing software sales, or licensing.
Why Register for Georgian Virtual Zone Status?
With a territorial tax system and Georgia tax exemptions tailored for the IT sector, the Virtual Zone status is an attractive option for businesses seeking to optimize their Georgia business tax obligations. Qualifying companies enjoy minimal taxation, boosting profitability while maintaining compliance with local regulations.
The Georgian Virtual Zone offers an efficient, cost-effective way to operate in a low-tax environment for tech startups, software firms, and digital service providers targeting international markets.
Understanding Georgia’s Tax System for IT Professionals and Businesses
In late 2022, Georgia’s Revenue Service introduced a revised Methodical Instruction outlining new requirements for acquiring and maintaining Virtual Zone status. These updates brought notable changes to corporate taxation rules, refining definitions, procedures, and eligibility criteria. Among the key revisions, applicants must now provide a list of past IT projects (if any), adding a layer of verification.
The guidelines also clarify the definition of software, aligning it with copyright law, and confirm that Virtual Zone entities can now rely on independent contractors to meet eligibility requirements. These refinements reflect Georgia’s evolving tax framework for the IT sector.
Type of Company
Businesses seeking tax exemptions in Georgia, particularly in the IT sector, must have at least two years of experience to qualify for International Company Status. This requirement ensures that only established companies with a proven track record can access Georgia’s tax advantages. The government’s focus on attracting mature IT enterprises strengthens the sector’s credibility while ensuring compliance with local economic policies.
Territorial Taxation: A Key Advantage
Georgia operates under a territorial tax system, meaning that only income earned within the country is subject to taxation. This makes Georgia particularly attractive for IT freelancers, remote workers, and international tech companies who generate income from foreign clients.
Tax Benefits for IT Companies in Georgia
Taxation for Companies with Georgia International Company Status
Companies registered under Georgia International Company Status enjoy one of the most favorable tax environments in the region. This special status provides a range of Georgia tax exemptions that significantly reduce the tax burden on businesses operating in IT and maritime industries.
Corporate Income Tax in Georgia
One of the main benefits of the Georgia corporate tax rate for International Companies is the reduced Corporate Income Tax of just 5% on distributed profits. Unlike many jurisdictions with high business tax burdens, Georgia operates on a territorial tax system, meaning only income earned within the country is subject to taxation. This makes it a prime destination for businesses looking to optimize their tax strategies under Georgia business tax incentives.
Dividends Tax Exemption
For business owners, the Georgia tax-free zone benefits extend to dividends tax, which is set at 0%. This exemption makes Georgia income tax policies especially attractive for foreign investors and entrepreneurs who want to maximize their earnings without excessive tax deductions.
Tax Withholding on Employee Income
Companies registered under this status must comply with Georgia’s payroll tax regulations. Employee salaries are subject to a 5% withholding tax and mandatory pension contributions. Despite this, labor costs remain competitive, making Georgia payroll tax structures appealing for businesses hiring local talent.
Property Tax Benefits
Another major advantage is the 0% property tax on assets used exclusively for permitted business activities. However, this does not extend to land, which remains taxable. These Georgia tax incentives further reduce operating costs for companies that establish a physical presence in Georgia.
VAT on Services
Georgia applies a standard 18% VAT on most business-to-consumer (B2C) services. However, certain B2B services may qualify for Georgia tax exemptions, especially if they involve cross-border transactions. Businesses may also be eligible for VAT refunds, reducing the overall tax burden. This is particularly beneficial for tech firms taking advantage of Georgia IT tax exemptions.
Residency or Citizenship Requirement
Unlike many jurisdictions, Georgia tax residency is not required to register a company under the International Company Status. However, maintaining this status requires a physical presence in Georgia, including a registered office and active operations within the country.
Enterprise Must Be Operated in Georgia
To qualify for the International Company Status, businesses must demonstrate physical substance in Georgia. This includes:
A physical office in Georgia
A team of qualified employees actively engaged in income-generating activities.
Failure to meet these requirements can lead to revocation of Georgia tax incentives and International Company Status.
Potential Revocation of Status
Companies risk losing their International Company Status if more than 2% of their revenue is generated from non-permitted activities. Businesses must monitor This critical compliance factor to continue benefiting from Georgia tax exemptions and favorable corporate tax rates.
Why Choose Georgia for Business?
With its low corporate tax rate, territorial taxation system, and double tax treaties, Georgia is an increasingly attractive destination for international businesses. Entrepreneurs looking for Georgia tax-free zones, favorable Georgia small business taxes, and Georgia business tax incentives will find that the International Company Status provides a strategic advantage for growth and profitability.
Taxation for IT Freelancers and Small Businesses
Georgia Small Business Taxes: The 1% Tax Rate
Georgia offers a desirable 1% tax rate under the Small Business Status regime for self-employed IT professionals and small businesses.
Eligibility criteria for the Georgia small business tax rate:
Annual revenue must not exceed 500,000 GEL.
The individual must be registered as a sole entrepreneur.
The business must not engage in prohibited activities such as financial services or large-scale trading.
Georgia Self-Employed Tax Benefits
For self-employed IT professionals, Georgia provides additional tax advantages, including:
No corporate tax obligations.
No VAT for income generated outside Georgia.
Simplified tax reporting and accounting requirements.
These benefits make Georgia an ideal location for freelancers and remote workers seeking low-tax jurisdictions for IT businesses.
Georgia’s Double Tax Treaties and Tax-Free Zones
Georgia Double Tax Treaties
Georgia has signed double tax treaties with over 50 countries, including the U.S., UK, Germany, and most EU nations. These agreements prevent individuals and businesses from being taxed twice on the same income in Georgia and their home country.
Georgia Tax-Free Zones
Georgia also offers special economic zones that provide tax-free incentives for certain businesses. While IT companies primarily benefit from Virtual Zone and International Company statuses, businesses operating in free industrial zones (FIZs) enjoy:
0% corporate tax.
0% VAT on exported goods.
Reduced customs duties.
While this setup benefits manufacturing and trading businesses, IT companies engaged in hardware production or tech equipment exports may also find it useful.
Steps to Register and Benefit from Georgia’s IT Tax Exemptions
To take full advantage of Georgia IT business tax incentives, follow these steps:
Register a business in Georgia - Small-scale freelancers should become sole entrepreneurs, while larger IT companies should establish themselves as limited liability companies in Georgia.
Apply for Virtual Zone or International Company status - Depending on your operational business model, applying for Virtual Zone or International Company status remains vital to access tax-free or reduced-tax benefits.
Ensure compliance with Georgian tax laws - Georgia's beneficial tax rates require organizations to maintain legal and accounting compliance.
Consider obtaining tax residency - Applying for tax residency will deliver extra tax advantages specifically for those staying in Georgia long-term.
Leverage Georgia’s double tax treaties - Georgia manages double tax treaties that allow entrepreneurs to reduce their tax burden when they have a tax agreement with their country of origin.
Conclusion: Why Georgia is a Tax Haven for IT Professionals
Georgia attracts business investors through territory-based tax policies, which provide minimal taxation rates and specialized support for IT ventures. These policies make Georgia an appealing location for business owners and digital nomads. All IT professionals can experience low bureaucracy and significant tax benefits from operating their businesses in Georgia.
IT professionals gain tax advantages by adopting virtual zone status, international company standing, and utilizing the 1% small business tax rate.
Local tax experts should be consulted before a business registration to ensure complete legal compliance and maximum savings potential.
Registering a legal entity is straightforward and cost-effective compared to other European countries. However, applications can be rejected quickly, and mistakes are common without Georgian language skills. Moreover, hundreds of details must be considered while applying for an IT status company in Georgia.
Gegidze is here to make this process simple and stress-free. For more information, contact us and book a free consultation today.
Frequently Asked Questions (FAQ)
What is the Virtual Zone in Georgia?
Georgia's Virtual Zone Status (VZS) is a tax incentive program established in 2011 to foster the growth of the country's information technology sector.