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Tax-Free IT Company in Georgia: All You Need to Know

25. 10. 2022
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A tax-free IT company in Georgia must obtain a Virtual Zone Person (VZP) certificate or the status of an international company in order to enjoy the benefits. Experts assure that the second option is more advantageous for running a business in Georgia, because the VZP status only exempts from income tax, while international business has more benefits.

What is VZP

A Georgian IT company with a VZP status does not have to pay income tax on certain types of digital services for foreigners. It can be a good option for the companies creating software products, e.g. application development, software, etc. If an IT company maintains websites or works with Georgian clients, the exemption does not apply.

The line between when you have to pay tax and when you don't is sometimes hard to distinguish. The law's definition is not clear, so not all accountants and company owners understand it. Therefore, before applying for VZP status, you should consult our lawyers. You can also apply in advance to the tax service, which will issue a statement and clarify your particularthe situation.  

It is also important to understand that the tax office will not immediately react if you are breaking the law. The inspection is usually initiated by the audit department. If the tax office finds out that you are not only creating software products, they can make a preliminary decision that can affect the future of your business.

International company

Registering a tax-exempt IT company in Georgia in 2022 that is registered as international offers more tax advantages compared to VZP. The list of IT services that your company may provide under tax-exempt status is broader than for VZP. At the same time, the law is more clear, and it  explains who pays taxes at the reduced rate.

International status gives discounts on such taxes:

  • on income - 5% instead of 15%;
  • on dividends - 0% instead of 5%;
  • on wages - 5% instead of 20%;
  • on property that is used for work - 0% instead of 1%.

There is also an opportunity to reduce corporate tax at the cost of the following:

  • on salaries that are paid to local employees;
  • for research and development work.

Differences in obtaining status

It is easier to get VZP status than register an international company. In the second case, the company must meet the following requirements:

  • It is required to a run business in the IT field for at least 2 years. It does not have to function as a separate entity, and it can be affiliated with the parent company.
  • The business must prove that it is physically present in Georgia by renting an office, hiring personnel, and showing receipts confirming actual expenses.

Peculiarities of taxation

It is important to understand that registering as a VZP or an international company does not completely exempt the business from paying all fees. To accurately avoid disputes with the tax office, you must also qualify for an exemption. Therefore, it's very beneficial to consult our lawyers, who are well versed in the intricacies of local laws.

How to legally pay no taxes in Georgia

To open a tax-free IT company in Georgia, contact IT-OFFSHORE experts.

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