Virtual Zone or International Company? The IT Founder’s Guide to Georgia’s Tax Regimes

RIGHTSIDE INSIGHTS · TAX & TECHNOLOGY · 2026 GUIDE

A Georgian IT company can look excellent on paper: a low headline tax rate, international clients and a lean team. The difficult question comes next. Does the work the company actually does fit the status it plans to use? Virtual Zone Person and International Company answer that question in different ways.

Think of the choice as a business design decision, not a race to the smallest percentage. One regime focuses narrowly on eligible technology created by a Georgian company and supplied abroad. The other offers a wider range of IT activities and favourable treatment of salaries and dividends, while demanding an established, working operation in Georgia. This guide takes you from the product and people to the taxes, application and records that make a status defensible.

The comparison at a glance

The following rates are a map, not a promise. They describe qualifying treatment. A certificate does not convert every payment or every project into tax-free income.

Profit tax in Georgia generally concerns distributions and certain deemed distributions, rather than simply every year’s accounting profit. The precise tax base and other triggers should be modelled before comparing net outcomes.

What Virtual Zone Person status actually covers

A Virtual Zone Person, or VZP, is a Georgian legal entity with a separate status for information-technology activity. There is no industrial park to move into. An LLC can be registered in the ordinary way and then apply electronically to the Ministry of Finance’s Financial-Analytical Service for VZP status. The certificate confirms the status; it does not by itself confirm that a particular invoice or dividend qualifies for relief.

The tax benefit is narrow but powerful: profit from supplying qualifying information technologies, created by the VZP, outside Georgia can be exempt from Georgian profit tax when distributed. The law’s concept of IT centres on studying, supporting, developing, designing, producing and introducing computer information systems that result in software products. That makes the output important. Writing a product or custom software can fit. Merely using software to deliver an unrelated service may not.

Software development, support and licensing

Development is the clearest case. Maintenance, updates and support need a closer look at their connection to a qualifying software product. A licence is not automatically outside the regime: the Revenue Service’s published methodical guidance discusses licensing of software developed by the company, with meaningful ongoing support. But a contract that is really a passive royalty or the resale of somebody else’s product presents a different tax question. Describe the deliverables, the intellectual property, the development process and the support obligations in the contract and accounting records.

Where was the product created?

The law connects the regime to creation of technology in Georgia and its supply outside the country. In its guidance, the Revenue Service gives examples in which employees and contractors contribute to development and explains how it assesses whether software was substantially created by the VZP. TPsolution’s 2026 analysis notes a more flexible administrative approach in some remote-team situations when genuine developer remuneration and Georgian withholding obligations can be documented. That is an interpretation and practice point, not a universal exemption for a company with no real development activity. If developers work abroad or the structure is mostly subcontracted, obtain a case-specific assessment or advance ruling before relying on the relief.

There is no general two-year operating-history requirement for VZP status comparable to the International Company entry condition. Nor does the VZP regime prohibit a company from receiving other revenue. The difficulty is keeping the taxable and exempt streams separate: Georgian sales, non-qualifying services and other income cannot simply be folded into the exempt pool. The Revenue Service guidance discusses allocating mixed costs and identifying the exempt part of a distribution.

Taxes that do not disappear

For VZP, the relief concerns qualifying profit tax. Employment income is generally subject to the ordinary 20% income tax. Dividends paid to individuals or non-residents commonly face 5% withholding, subject to the exact recipient and any applicable treaty. Pension contributions may arise for covered employees. VAT and reverse-charge VAT must be tested under the ordinary place-of-supply rules. Payments to non-residents may trigger Georgian withholding on royalties or other Georgian-source income, subject to treaties and statutory exceptions. Property tax may also apply. These payments and reporting duties can change the result of a seemingly “zero-tax” model.

What International Company status changes

International Company, or IC, is also a status for a Georgian enterprise, not a new legal form. The permitted fields are set out in Government Ordinance No. 619. Its IT list is broader than the VZP product-focused test. It includes software publishing, programming and computer consultancy, digital products, websites, hosting, remote software or hardware maintenance and other specified digital services. A company must check its exact service against the ordinance rather than assume that anything described as “tech” qualifies.

The Tax Code gives an IC a 5% profit-tax rate on the relevant taxable base, a 5% rate for qualifying employment income, and an exemption from withholding on dividends. Qualifying property used or intended for its permitted activity is exempt from property tax, except land. The ordinance also identifies certain Georgian salary and research-and-development expenditure that may reduce the profit-tax base under the prescribed procedure. This is why a payroll-heavy company may favour IC even though VZP has the lower headline profit-tax rate.

Experience and a real operation in Georgia

The IC application has an experience gate. Ordinance No. 619 generally requires at least two years of permitted activity by the applicant or an eligible foreign enterprise/parent structure. The shareholding and branch routes have specific conditions, so a new Georgian subsidiary should not assume that its shareholder’s history automatically transfers. The applicant must perform its principal income-producing permitted activity in Georgia, with appropriately qualified people and operating costs. The Revenue Service receives the application and evidence; the Government makes the status decision.

The source article describes current administrative practice as expecting staff to be physically in Georgia for most of the year. The ordinance itself speaks in terms of activity, human resources and costs in Georgia. Read these together: if most of a team is elsewhere, the company needs careful advice on whether its actual operations satisfy the legal and administrative tests.

IC also has a strict boundary around other business. The ordinance permits limited revenue from non-permitted activities only within a 2% annual ceiling measured against revenue from permitted activities, excluding VAT. A side line that grows beyond this can put the status at risk. The Tax Code and ordinance contain revocation rules, so the cost of a wrong classification can reach beyond a single invoice.

Cross-border VAT and payments need their own review

A foreign customer address does not by itself settle VAT. For many business-to-business services, the place-of-supply rules may place the transaction outside Georgian VAT, but the answer depends on the client, the service and statutory exceptions. “Outside the scope” is not the same legal description as a zero-rated supply. On the purchase side, services bought from non-residents may bring reverse-charge VAT; whether an input credit offsets it depends on registration and deduction conditions. Neither IT status removes this analysis.

Likewise, review foreign contractor fees, software royalties and other outbound payments before deciding that a gross amount reaches the supplier. A Georgian-source payment to a non-resident can carry withholding; a tax treaty may change that only if its requirements and documents are met. The company’s contracts should allocate who bears any withholding and contain the evidence needed for a treaty claim.

What if one developer runs the whole business?

A single developer can compare three quite different structures. First, a Georgian company with VZP status may fit genuine qualifying software work. Second, an individual entrepreneur may be able to use the small-business regime for eligible personal business income, often described by its 1% rate; that requires separate activity, status and income checks. Third, IC should not be dismissed solely because legislation does not explicitly set a minimum headcount, but meeting its two-year experience and substantial Georgian-operation tests may be difficult for a one-person setup. These are different taxpayers and tax bases. The cheapest number in a marketing chart is not automatically the cheapest lawful structure for a founder.

From application to a defensible tax position

1. Map the service. Write down what is actually delivered, who creates it, who owns the software and where customers receive it. Test each revenue stream separately.
2. Choose the entity and route. Register the Georgian company, then apply for the relevant status. For VZP, use the Financial-Analytical Service route. For IC, submit the application and evidence through the Revenue Service for the Government’s decision.
3. Build the evidence file. Keep customer agreements, specifications, code or development records, staff and contractor agreements, timesheets or deliverable logs, invoices, payment records and proof of place of work or supply. For IC, retain the documents supporting two years’ experience and the Georgian team and operating costs.
4. Model the full tax cost. Include salary tax, pensions where applicable, dividend withholding, VAT, overseas supplier payments and property tax. Then compare the cash available to the owners, not just company-level profit tax.
5. Monitor the facts after approval. Separate exempt and taxable profit for VZP. For IC, watch permitted activities, the 2% ancillary-revenue limit and actual operations in Georgia. A status is maintained through the work the company continues to do.

Which route deserves a closer look?

Some businesses may move from one model to another as the team grows, but a switch requires a fresh eligibility review. No tax status should be selected by headline rate alone. The safest decision is the one the company can explain with its contracts, payroll, development records and annual accounts.