Tax Benefits with Georgia IT Status + Virtual Zone
- Tinatin Tolordava
- Mar 31
- 12 min read
Quick Look: Why Georgia for Tech Companies?
Georgia has quietly become one of the most business-friendly countries for tech entrepreneurs. Whether you're launching a SaaS startup, running a remote development team, or providing digital consulting services, Georgia offers a rare combination of low taxes, simple regulations, and fast company formation.
Let’s start with the basics. The corporate tax rate in Georgia is 15% — already lower than in most Western countries. But if you qualify for Virtual Zone status or IT company status, you could legally reduce that rate to 0% or 5%, depending on how your business is structured. For digital service providers targeting international clients, that’s a major win.
The Georgian tax code is built around a territorial tax system, meaning your foreign-sourced income is generally not taxed locally. Combine that with Georgia’s vast network of double tax treaties, and you can see why foreign founders are paying attention. A Georgian LLC with Virtual Zone status will often pay no corporate income tax on international earnings.
But tax isn’t the only reason companies are setting up shop here.
You can register a business online in just a few days
The company formation process in Georgia is straightforward and inexpensive
There are no minimum capital requirements
English-speaking service providers are widely available
On top of that, Georgia has carved out several tax free zones and incentive programs designed to attract digital businesses. For example, the Georgia Virtual Zone program is tailored specifically for IT and software firms. And if you decide to scale locally, IT status offers reduced payroll tax obligations and other long-term benefits.
Startups aren’t just forming companies in Georgia, they’re building full operations here.
With a growing digital economy, minimal red tape, and a tax environment that favors exporters, Georgia is more than a workaround. It’s a smart base for serious business.
Virtual Zone vs. IT Company Status — What’s the Difference?
If you’re thinking about forming a tech company in Georgia, you’ve probably heard of Virtual Zone status and IT Company (International Company) status. These two programs are often mentioned together, but serve different purposes and follow different rules under the Georgian tax code.
Let’s break it down.
What is Virtual Zone Status?
Virtual Zone status is a targeted tax incentive created specifically for IT companies that export digital services, such as software development, SaaS products, mobile apps, or web-based tools. If your business generates income from clients outside Georgia, you could qualify.
The significant benefit? 0% corporate income tax on foreign-sourced revenue. That’s right — under Georgia’s territorial tax system, you won’t pay corporate tax in Georgia on international income. This makes the Virtual Zone one of digital entrepreneurs' most attractive business structures.
A few things to know:
You only need a Georgian legal entity and a registered address — no physical office required
The status is granted by Georgia’s Ministry of Finance
It’s especially popular with remote-first companies and freelancers
You’ll still need to comply with basic local regulations like Georgia tax return filings
What is IT Company Status?
IT Company status, or International Company status, is a broader incentive. While it includes IT firms, it also covers BPO providers, call centers, and some consulting businesses.
This program is designed for companies that plan to operate physically in Georgia, hire local employees, and pay salaries that meet minimum thresholds. In return, you get:
A reduced corporate tax rate in Georgia of just 5%
0% dividend tax on profit distributions
Lower payroll tax obligations for local staff
Compared to the Virtual Zone, this status comes with more conditions and long-term advantages for businesses planning to scale in Georgia.
Which One Should You Choose?
If you’re a small team working remotely or want to minimize business taxes in Georgia on export income, the Virtual Zone is the easier and faster route. It’s cost-effective, requires no physical office, and helps you operate fully online while benefiting from Georgia’s corporate tax exemptions.
But if you plan to grow a team on the ground and invest in local operations, IT Company status can reduce your tax burden while supporting expansion.
Some companies start small — forming a company in Georgia, applying for Virtual Zone status — and later upgrade to IT Company status when they expand.
Both programs work with Georgia’s double tax treaties and share the same goal: keeping corporate tax in Georgia low while encouraging digital growth.
Virtual Zone Status
Virtual Zone status in Georgia could offer one of the most aggressive legal tax breaks available in Europe or Asia if your business delivers digital services to clients abroad. Introduced under the Georgian tax code, this incentive attracts IT companies by exempting them from corporate income tax on foreign-sourced revenue.
So, what exactly does it mean to become a Virtual Zone entity?
At its core, Virtual Zone status is a tax classification, not a corporate structure. You’ll still need to register a legal entity — typically a Georgian LLC — but your company is officially recognized as a Virtual Zone person once approved. That designation allows you to benefit from Georgia’s territorial tax system, which means foreign income isn't taxed under local corporate tax in Georgia.
Only certain business activities qualify, and the government is strict about this. To apply, your company must be engaged in IT-related services like software development, SaaS products, gaming, or platform-based services. Selling physical products, running a marketplace, or offering non-digital consulting won't meet the criteria.
How do you apply?
The process is fast and fully digital. Once your company is formed, you apply to the Ministry of Finance via their online portal. Approval usually takes less than 10 working days. There’s no application fee, and no need to maintain a physical office — a Georgian business address is enough.
Once granted, the status doesn’t expire. But to stay compliant, you’ll still need to:
File an annual Georgia tax return
Maintain proper bookkeeping
Keep income sources documented
For many founders, especially those building export-focused digital businesses, this structure offers a simple and transparent way to legally lower their corporate tax rate in Georgia. If your company fits this profile, applying for Virtual Zone status is often the first and most effective move to maximize tax benefits in Georgia.
Tax Benefits of Virtual Zone Status
The main reason entrepreneurs and digital businesses are drawn to Virtual Zone status in Georgia is taxes — or the lack of them.
When approved, your company is officially exempt from corporate income tax in Georgia on revenue earned from foreign clients. That’s not a discount — a full 0% rate on qualifying income. This can mean significant savings for export-oriented IT companies compared to typical corporate tax rates in Georgia, which otherwise sit at 15%.
But that’s not all.
If your services are delivered outside Georgia, you're also not required to charge VAT (Value Added Tax) — currently 18%. Since your business operates under Georgia’s territorial tax system, income generated abroad isn’t taxed nationally. That gives you a clean, legal separation between domestic obligations and international earnings.
This is especially useful for startups and remote-first businesses that invoice clients across borders. If you work with customers or partners in countries that have a double tax treaty with Georgia, your exposure to withholding taxes and tax duplication is reduced even further.
Georgia has active tax treaties with over 50 countries, including most of the EU, the UK, China, and the UAE. These agreements help protect your income from being taxed twice — once where it’s earned, and again in Georgia.
For properly structured companies, the Virtual Zone offers a legal, transparent, and long-term way to minimize business taxes in Georgia and international tax friction, making it one of the region's most aggressive incentives for digital entrepreneurs.
Corporate Tax in Georgia: What You Avoid
Georgia's standard corporate tax rate is 15%, applied only when profits are distributed, not earned. That alone makes Georgia attractive compared to jurisdictions that retain tax earnings. But with Virtual Zone status, you can reduce your corporate income tax in Georgia to 0% on qualifying export revenue.
This isn’t a loophole — it’s part of Georgia’s transparent and investor-friendly tax regime. If your business earns income from foreign clients through software development or other digital services, that income is considered foreign-sourced and exempt under the Georgian tax code and the territorial tax system.
You also avoid paying VAT on your services. There’s often no withholding tax on cross-border payments for dividends, royalties, or service fees, thanks to Georgia’s network of over 50 double tax treaties.
Without Virtual Zone status, you’d be subject to the full Georgia business tax rate, including:
15% corporate income tax
5% tax on distributed dividends
18% VAT (unless exempted)
Possible withholding taxes on international payments
For digital service businesses, these exemptions dramatically lower your overall tax exposure and simplify operations.
Tax Residency & Compliance
Your company must be registered and compliant to fully benefit from Georgia’s tax incentives, including Virtual Zone status.
First, establish your entity in Georgia — most use an LLC structure. While physical presence isn’t required for Virtual Zone companies, you will need a registered legal address and a Georgian bank account. This is the foundation for gaining tax residency in Georgia as a business.
The 183-day rule applies to personal tax residency: You must reside in Georgia for at least 183 days within 12 months. This can benefit founders who want to simplify their global tax position.
Ongoing compliance is relatively light:
File an annual Georgia tax return (Form 100 or Form 200 for LLCs)
Maintain basic bookkeeping and invoices
Keep export revenue documented to prove eligibility for VZ tax exemptions
The system is straightforward, but errors can trigger scrutiny. That’s why it’s wise to work with a local accountant or Georgia tax advisor familiar with the Georgia tax code and Virtual Zone reporting. We do this at Gegidze - we make the process hassle-free for you, and the results will scale your business in the long term.
IT Company
While Virtual Zone status is ideal for small, export-focused digital businesses, it’s not the only option. If you’re planning to hire local staff, lease office space, or build a long-term presence in Georgia, there’s another powerful tax incentive worth considering: IT Company status, also known as International Company status.
This status opens the door to reduced corporate tax rates in Georgia, dividend tax exemptions, and lighter payroll taxes — but it comes with different requirements. Unlike the Virtual Zone, it’s designed for companies with actual operations inside the country. So if you’re thinking beyond freelancing or remote work, properly setting up an IT company in Georgia is the next step.
Step-by-Step: How to Set Up an IT Company in Georgia
Setting up an IT company in Georgia isn’t just simple — it’s a strategic tax move. While many digital entrepreneurs are familiar with Virtual Zone status, fewer understand the long-term advantages of forming a local company with a physical presence. Establishing a proper Georgian entity is key if you're planning to grow a team, invest in infrastructure, or benefit from broader tax incentives like the International Company (IT Company) status.
Unlike Virtual Zone entities, which can operate entirely remotely, the IT Company status requires actual substance: a Georgian office, local employees, and minimum salary thresholds. The reward? A reduced corporate income tax rate in Georgia—just 5% instead of the standard 15% and a 0% dividend tax. It’s ideal for companies planning to scale.
Choose a Business Structure. Most foreign founders register an LLC. It’s flexible, low-cost, and works for Virtual Zone and IT statuses.
Register the Company. Submit your application to the National Agency of Public Registry. It can be done in one day with a local partner or power of attorney.
Open a Georgian Bank Account, which is required for all local entities and is necessary for tax residency and business operations.
Apply for IT Company Status (if eligible). If you meet the staffing and salary criteria, submit your application to the Revenue Service for approval.
Register for Taxes. You’ll need a Georgia tax ID number and must register for VAT if your revenue exceeds the local threshold.
Common Mistakes to Avoid When Setting Up in Georgia
Forming a company in Georgia can lead to significant tax advantages, but only if you get the setup and structure right. Many founders make avoidable mistakes that reduce or cancel out the benefits of Virtual Zone or IT Company status.
One of the most common issues is assuming that Virtual Zone and IT Company status are the same. While both offer tax incentives, they operate under different rules. Choosing the wrong one or not meeting either criteria can lead to compliance problems and missed savings.
Another critical mistake is failing to separate domestic and foreign revenue. Under the territorial tax system in Georgia, only foreign-sourced income is exempt from corporate income tax. If your company earns money inside Georgia and you don’t account for it correctly, you could incur an unexpected tax bill.
Founders also overlook ongoing obligations, especially if they hire locally. IT Company status includes payroll responsibilities, minimum salary thresholds, and reporting requirements. Failing to comply with Georgia’s business tax regulations can put your status at risk.
Lastly, many entrepreneurs ignore how the corporate tax rate in Georgia applies when reinvesting profits. While retained earnings aren’t taxed immediately, they can be taxed later when distributed. Knowing when and how to handle distributions is essential for long-term tax efficiency.
Avoiding these mistakes starts with understanding how Georgia’s tax system actually works — and building a company structure that fits your business model from day one.
Is It Worth It? Real Tax Scenarios That Show the Value
Many businesses talk about reducing taxes, but what does it look like when a company takes advantage of Georgia’s tax incentives? These real-world examples show how Virtual Zone and IT Company status can significantly cut your corporate tax in Georgia while keeping operations lean and compliant.
Example 1: EU-Based Freelancer Becomes a Georgian LLC.
A freelance software developer based in Spain was taxed at over 30% on business income. After setting up a Georgian LLC and applying for Virtual Zone status, she reduced her corporate income tax in Georgia to 0%. With no VAT on services provided to foreign clients and no withholding tax on payments received, she now operates entirely online, with simple bookkeeping and a once-a-year Georgia tax return, saving over €15,000 annually.
Example 2: Dev Agency Serving US Clients from Tbilisi.
A five-person development agency relocated to Tbilisi to grow its team and qualify for IT Company status. After meeting the local employment and salary criteria, they secured a reduced % corporate tax rate of 5% in Georgia, along with a 0% dividend tax. Combined with Virtual Zone status, their U.S. clients benefited from Georgia’s double tax treaties, eliminating withholding taxes. The agency saved more than $25,000 yearly in taxes while reinvesting in local hiring.
Example 3: Remote SaaS Startup Scaling with IT Company Status.
A bootstrapped SaaS company targeting European markets chose Georgia to base its legal entity and development team. With 10 full-time employees in Tbilisi and average salaries above the minimum threshold, they qualified for IT Company status. This brought their Georgia corporate tax down to 5%, and allowed them to distribute profits tax-free. Compared to their original EU setup, the total tax savings in year one were close to €40,000 — all while maintaining full legal compliance.
Whether you're a solo founder or scaling a team, Georgia offers multiple paths to reducing your business taxes. The best structure depends on your growth model, but the potential tax savings are real and substantial.
Final Tips: Make the Most of It
Georgia’s tax system is business-friendly, but it’s not DIY. Whether applying for Virtual Zone status, registering for IT Company status, or setting up your first LLC, the process is smoother and more effective when guided by someone who knows the system inside out.
That’s where we come in.
At Gegidze, we help founders and digital teams navigate the complexities of the Georgian tax code, choose the proper structure, and stay compliant from day one. Our local team handles everything from company formation and tax residency registration to accounting, payroll, and annual Georgia tax return filings. We also ensure you’re positioned correctly for double tax treaty benefits and advise you on how to minimize your corporate tax in Georgia year after year, legally.
More importantly, we help you future-proof your setup. Georgia’s tax policies are stable, but things change. Whether new reporting rules are introduced or salary thresholds shift for IT status, we stay ahead, so you don’t fall behind.
Are you thinking about setting up in Georgia? Let’s make sure you do it right, from structure to savings.
Talk to Gegidze. We’ll build the setup that works for your business now and will still work a year from now.
Frequently Asked Questions (FAQ)
What makes Georgia attractive for tech companies?
Georgia offers a rare mix of low taxes, fast company formation, and minimal red tape. With corporate tax rates as low as 0% for Virtual Zone entities and 5% for IT Company status, it’s one of the most cost-effective countries in Europe for digital businesses targeting international clients.