Accounting for Virtual Zone and IT Companies in Georgia

Virtual Zone status takes a Georgian LLC’s corporate tax to 0% on software it built and sold abroad. Income from Georgian clients, salaries, dividends, VAT outside the exemption and the monthly declaration stay as they were. International Company Status is a separate regime with its own rates and conditions.

Virtual Zone Status in Georgia: Tax Rates and What It Covers

Virtual Zone status is granted to a Georgian legal entity, in practice an LLC, under the Law of Georgia on Information Technology Zones. The law defines information technology as the study, support, development, design, production and introduction of computer information systems that result in a software product. It sets no minimum trading history, headcount or revenue, and the status is not time-limited.

Holding it exempts three things:

• corporate tax on profit from IT products the company created and supplied to clients outside Georgia
• VAT on those same exports
• export duty on IT goods leaving Georgia’s customs territory

The standard corporate rate is 15%, charged only when profit is distributed. On qualifying export profit the status takes that to 0%, distributed or not.

Everything else stays under the standard rules:

• income from Georgian clients, taxed like any other domestic revenue
• income from pure support or helpdesk work, resold licences and consulting about technology, none of which produces a software product
• dividends, which carry the ordinary 5% withholding
• salaries, taxed at the standard 20%, which Virtual Zone status does not change

A company selling half its output in Georgia and half abroad pays 0% on the exported half and, on the domestic half, what an ordinary LLC pays: 15% once the profit is distributed.

Subscription income from clients abroad qualifies when the Georgian company built and maintains the product. A recurring fee for reselling or supporting a platform built elsewhere does not, however the invoice describes it.

International Company Status: Tax Rates and Requirements

International Company Status is defined in a separate government ordinance, with its tax treatment in Article 23 of the Tax Code. It sets 5% profit tax on distribution, 5% tax on employees’ salaries, 0% on dividends and 0% property tax on property used for the permitted activities, land excluded. A company holds one status or the other, not both.

The conditions are stricter than Virtual Zone’s:

• at least two years of documented experience in a permitted activity, held by the company, by a non-resident enterprise it represents, or by partner enterprises owning more than 50% of its shares
• the basic income-generating activity carried out in Georgia, with qualified staff and operating costs to match
• a fixed list of permitted activities, including software publishing, computer programming and related consulting, website development and hosting, and remote software maintenance
• no more than 2% of annual revenue from outside that list

The status is often described as export-only, but the ordinance does not say so in those terms. Its 2% cap tests the type of activity, not the client’s location, so confirm your client mix with the Revenue Service before assuming either reading.

Virtual Zone vs International Company Status vs Free Industrial Zone

Regime	Corporate tax	Salary tax	Qualifying activity	Minimum history
Ordinary LLC	15% on distribution	20%	Any legal activity	None
Virtual Zone	0% on qualifying export income	20%	Software the company created, sold outside Georgia	None
International Company Status	5% on distribution	5%	Listed IT and maritime services	2 years
Free Industrial Zone	0% on activity in the zone	20%	Production, processing and goods handling inside a zone	None stated

A new company with no group history qualifies only for Virtual Zone, because International Company Status needs the two years. An established company with a real payroll that distributes its profit often does better on International Company Status. A Free Industrial Zone exempts only activity carried out physically inside the zone, so it does not suit a software company.

Neither status is open to an individual entrepreneur, whose preferential regime is Small Business Status, at 1% of turnover up to ₾500,000 a year.

Monthly Declarations for Virtual Zone and IT Companies

Every Georgian LLC files with the Revenue Service every month, Virtual Zone, International Company and Free Industrial Zone companies included. The monthly declaration is due by the 15th of the following month, so January is declared by 15 February, and a month with no income still needs one.

What goes in depends on the month:

• Corporate tax declaration, every month. With no distribution it shows nothing owed, and a Virtual Zone company separates exempt export income from other revenue in it.
• Dividend withholding of 5%, remitted on the same monthly cycle when a dividend is paid. Under International Company Status dividends are not taxed at source.
• Payroll and pension declarations, once the company has employees.
• VAT declaration, once the company is registered for VAT.
• Reverse VAT on services bought from abroad, registered or not.

Annual financial reporting continues alongside the monthly cycle, and companies in one of the four reporting categories file with SARAS by 1 October.

Bookkeeping Requirements for Virtual Zone and IT Companies

A Virtual Zone company’s books have to show, every month, which income is exempt and which is not, because that split is what an audit tests. Exported IT products the company created go in one group. Revenue from Georgian clients and from consulting, support or other non-IT work goes in another.

Article 6 of the Law on Information Technology Zones ties the regime to IT production in the territory of Georgia, and the Revenue Service has moved toward reading that clause literally. A company that cannot show development happened here can be asked to restate past filings at 15%, with penalties and interest. Keep the following evidence on file, much of which passes through the accounting records:

• developers who are in Georgia, as employees or as contractors working here
• client contracts and invoices that trace to the company’s own output
• repositories, documentation and product history showing the company built the software
• operating costs of a real office and team, not only a registered address

Under International Company Status, revenue from outside the permitted list is tracked against the 2% cap every month, because the excess is exposed to ordinary taxation and repeated breaches are grounds for revocation. Revocation is forward-looking, with no automatic restatement of years already filed.

VAT and Reverse VAT for IT Companies

Virtual Zone status exempts only the qualifying export income from VAT. VAT registration becomes mandatory once turnover from non-exempt activity passes ₾100,000 in any continuous 12 months, and the application is due within 2 working days of crossing it. The same threshold applies under International Company Status, and the rate is 18%.

Reverse VAT applies whatever the company’s status. When the company buys a service from a supplier outside Georgia, such as hosting, software tools or a foreign contractor, it declares and pays 18% Georgian VAT on it. A company not registered for VAT pays that amount in full by the monthly deadline, as a real cost. A VAT-registered one can typically claim it back as an input deduction in the same declaration.

VAT paid to Georgian suppliers is reclaimed only with Qualified VAT status, a separate approval that requires active trading with Georgian customers.

Payroll for IT Staff: Income Tax and Pension Contributions

Virtual Zone status does not reduce the tax on salaries. Staff pay the flat 20%, withheld by the company and calculated after the employee’s 2% pension contribution is deducted. On a gross salary of ₾3,000 a month that is ₾60 of pension contribution, ₾588 of income tax and ₾2,352 net, and the employer’s own 2% brings the company’s cost to ₾3,060. Under International Company Status the rate on salary income is 5%.

The pension scheme is mandatory for Georgian citizens and for foreigners with a permanent residence permit. A foreign employee without one is outside it, with nothing withheld and nothing owed by the employer.

Payroll and pension declarations go through rs.ge and are paid by the 15th of the month after the salary is paid. There is no separate employer registration. A non-resident contractor paid for work physically performed in Georgia is generally subject to 10% withholding.

Penalties and Common Mistakes for Virtual Zone Companies

Interest accrues daily on any unpaid balance from the deadline until it is settled, and understating the tax in a declaration carries its own penalty on top of the shortfall. A Virtual Zone company has a second, retrospective exposure: income declared at 0% that cannot be evidenced as Georgian development can be restated at 15% years later.

These are the mistakes to watch for:

1. Applying the 0% rate to all revenue, Georgian clients included.
2. Recording consulting, support or resold licences as exempt IT income.
3. Skipping the monthly declaration because no tax is due.
4. Missing reverse VAT on hosting, software tools and foreign contractors.
5. Assuming Virtual Zone status lowers salary tax or dividend withholding.
6. Registering for VAT late after non-exempt turnover passes ₾100,000.
7. Checking the 2% International Company Status cap only at year end.

Liability for a filing error we make sits with us. It does not extend to penalties caused by documents we never received.

Virtual Zone Accounting Prices

Virtual Zone, International Company Status and Free Industrial Zone companies are on the Business package. Lite is not available to them, because these regimes carry substance and reporting conditions that an ordinary LLC does not.

The price follows your transaction count. One bank statement row, invoice, payment or expense is one transaction.

Transactions a month	Business	Premium
Up to 10	₾315	₾675
11 to 30	₾495	₾855
31 to 60	₾855	₾1,305
More than 60	Quoted	Quoted

Business covers corporate tax and dividend declarations, reverse VAT, VAT registration and monthly VAT returns, pension declarations, financial reporting to SARAS and 1 hour a month of email support. Tax advice is not included and is available separately. Premium adds 30 minutes a month of senior tax consulting by video call.

All prices exclude 18% VAT. One month slightly over your band usually costs nothing extra, and a company with uneven months can have its volume averaged to find the right package.