Virtual Zone Status IT Company in Georgia
IT Virtual Zone Status is a special tax status which can be granted to certain types of companies operating in the IT sector. The tax benefits apply only to services/products provided to foreign, non-resident clients. The procedure and terms for granting the status of a virtual zone person are determined by ordinance No4064-RS, 15 December 2010, of the Government of Georgia "LAW OF GEORGIA ON INFORMATION TECHNOLOGY ZONES"
If you generate revenue through Georgian business (legal entity) activities related to software development, including SaaS (Software as a service / subscription based software), and your business provides those products/services to non-Georgian companies or to individuals that are non-residents in Georgia, you are eligible to get Virtual Zone company status and have access to benefits like 0% corporate income tax and 0% VAT.
The applications based on sorts of businesses such as IT consulting, Internet marketing, eCommerce, Crypto, and other IT-related services may have at one time qualified, but mostly to be granted Virtual Zone Status, they are used to show a majority component within the business as being software and development based (ie. you sell/license ecommerce or internet marketing software).
Virtual Zone tax status itself means that you enjoy several benefits, including being exempt from different types of taxes.
TAX BENEFITS OF VIRTUAL ZONE ENTETIES IN GEORGIA
- The income of a VZE is exempt from VAT (18%) and corporate income tax (15%) if the company provides its services to foreign customers located outside Georgia. It means your IT company tax is 0%.
- In case of dividends payment (to a physical person or non-resident legal entity shareholder), the only Georgian tax on dividends payable is rated at 5% and is paid by the company to the state budget at the moment of dividends payment. Dividends distributed in Georgia to a Georgian shareholder will not be included in the taxable base of such a person. If dividends are paid to a foreign shareholder, then the taxation of such a shareholder in the country of its tax residency shall be analysed with the consideration of provisions of double tax treaty of the relevant country with Georgia (if any). If income of Virtual Zone Entity is distributed not in the form of standard dividends but in another way described by law regulations, then the 5% withholding tax in Georgia will not be paid and there will be no taxation in Georgia at all(!)
- The director of the Virtual Zone Person or Virtual Zone Company can be either a Georgian or foreign person who can be physically located either in Georgia or abroad and can manage the company´s activities and corporate bank account by internet and mobile banking
- There is no law requirement to keep employed staff in Georgia, except for the company`s director. Anyhow it is a benefit to work with a local Georgian developers and IT specialist.
- Georgian Virtual Zone Entities give new opportunities for IT companies and it is becoming interesting especially for international clients.
Our specialized and experienced lawyers from Georgia are always ready to consult you about attitudes of Georgian authorities, help you with preparation all the necessary contracts and other required documentations and assist you with the application submission process.