Do You Qualify for Georgia’s Virtual Zone or International Company Tax Benefits?
- Tinatin Tolordava
- May 29
- 10 min read
Table of contents
Why Smart Businesses Are Looking to Georgia for Tax Relief
More and more founders, freelancers, and remote companies are making Georgia their base, not just for the lifestyle, but for the tax strategy.
Read our guide here to learn more about general tax optimization strategies and 2025 requirements in Georgia.
Georgia’s business incentives are real. They’re not loopholes. They’re part of a deliberate national strategy to attract tech-first companies. The two most powerful tax setups are the Virtual Zone status and International Company status, which offer major reductions in corporate tax and simple compliance. However, each has different rules, and if you choose the wrong one or apply too early, you might lose the benefits altogether.
This guide clearly explains everything. Whether you qualify for Georgia's virtual zone tax benefits or if your company is better suited for International Company status, you’ll find your answer here.
Let’s start with the option most small and mid-sized IT businesses lean toward first.
What Is the Virtual Zone in Georgia?
The Virtual Zone is Georgia’s flagship tax incentive for IT companies. It’s designed for companies that develop and deliver software or digital services to clients outside the country.
Digital nomads leverage various tax benefits in Georgia by integrating specific tax strategies, which we have already explained in detail in another article. The separate guide lets you learn more about digital nomad and remote worker tax strategies.
If your business model is export-based, and you run a productized service or digital agency, the Virtual Zone is built for you. You don’t need a massive team or 10 years of trading history. You just need the right legal structure and the right clients.
Virtual Zone status doesn’t change your company type. You still operate as a Georgian LLC. But once granted, it shields you from standard corporate tax on foreign-source revenue.
The best part? You keep ownership, retain your IP, and control how profits are handled. There are no investor minimums or complex entry barriers, just a clean registration process with clear rules.
Virtual Zone Tax Benefits Georgia Businesses Can Access
The benefits of the Virtual Zone are clear-cut. No fine print. No backloaded clauses. If your business qualifies, here’s what you get:
0% corporate income tax on profits from foreign-sourced IT services. That means you can legally retain your earnings at the company level without paying anything in income tax, as long as you don’t distribute them.
0% VAT on exports. If your clients are abroad, your services aren’t taxed. You don’t have to collect or remit VAT on invoices.
5% dividend tax, but only when profits are distributed. If you keep your profits inside the company, they’re untaxed. Georgia applies a flat 5% tax if you take them out as dividends. No further personal income tax is required.
No required minimum payroll. While some countries demand you hire locally to qualify for tax perks, Georgia’s Virtual Zone doesn’t. Local hires are encouraged, but not mandatory.
There is no local ownership requirement. Foreigners can own 100% of a Virtual Zone company. There are no partnership quotas or nationality requirements.
A fast, digital application process. Virtual Zone status is applied online via the Revenue Service, usually taking 10 to 15 business days.
These benefits are structured to support lean, fast-moving digital teams. You can register your company, apply for Virtual Zone status, start invoicing global clients, and file your taxes, all remotely.
A Simple Example: Comparing Virtual Zone vs EU Tax
Let’s say you run a web development studio earning $100,000 annually from US clients.
Here’s how your tax outcome looks in different jurisdictions:
Germany: Up to 30% corporate tax, plus 25% dividend tax. Total taxes: ~$45,000.
UK: 19% corporate tax, 8.75% dividend tax. Total taxes: ~$28,000.
Georgia (Virtual Zone): 0% corporate tax, 5% dividend tax (if distributed). Total taxes: $0 to $5,000.
That kind of difference lets you grow faster, reinvest earlier, and stop worrying about tax season.
Eligibility Criteria for Virtual Zone Status
Not every company qualifies automatically. Georgia’s Virtual Zone is generous, but only if you follow the rules. To apply successfully, your company must:
Be registered as a legal entity in Georgia.
Most applicants use the LLC structure, which offers legal protection and investor readiness.
Engage in approved IT-related services.
This includes software development, database management, SaaS infrastructure, game development, cloud engineering, and similar export-oriented activities.
Serve only foreign clients.
Your revenue must come from outside Georgia. If you have local clients, that income is taxable under standard rules.
Maintain a physical business presence.
You don’t need a full office, but having a Georgian address helps. Some companies rent a registered address via service providers.
Classify your business correctly.
You must select the correct business activity codes (NACE) when registering. Misclassifying as “marketing” or “consulting” instead of “IT services” will result in denial.
Operate with a valid Georgian bank account.
While not a legal requirement, it improves your reporting credibility and helps with tax filing.
Virtual Zone status doesn’t require a minimum turnover or payroll, but your application must be clear, focused, and aligned with Georgia’s strategic IT goals.
How to Apply for Virtual Zone Status
The process is straightforward if you follow each step:
Register your company in Georgia. You can do this in person or remotely through a Power of Attorney. Most entrepreneurs form an LLC.
Prepare your business overview. The Revenue Service wants to know what you do, who your clients are, and where your income comes from.
Submit your application through the tax portal. Since all filings are digital and in Georgian, it helps to have a local partner or service provider assist.
Wait for review. Typical review time is 10–15 business days. You may be asked for clarification if your description is vague or doesn’t match your business activity codes.
Receive your Virtual Zone certificate. Once approved, this certificate exempts your eligible income from corporate tax.
Maintain monthly filings. Even if your corporate tax is 0%, you must file monthly turnover reports and submit an annual Georgia tax return.
This isn’t a one-time hack. It’s a compliant, government-backed tax structure. But it only works if you follow it consistently.
What Is the International Company Status?
The International Company tax regime was introduced in 2020 as a second path, ideal for established businesses with a track record and deeper ties to Georgia.
While the Virtual Zone suits small-to-medium companies, the International Company status is meant for firms that want to scale, hire locally, and benefit from deeper tax reductions.
Here’s how it works.
To qualify, your company must:
Have at least 2 years of international operations in IT or maritime services.
Earn at least 98% of your income from permitted activities under the law.
Maintain a legal presence and operational substance in Georgia.
Employ local staff and provide formal contracts and salary records.
It’s more demanding than the Virtual Zone, no question, but the benefits are stronger in some areas.
The International Company tax regime was created to attract larger, globally active IT and maritime businesses. It’s Georgia’s saying: if you're serious about growing here, we’ll reward you. But the rules are stricter.
This status is better suited for businesses with a longer track record, established teams, and predictable revenue models than the Virtual Zone.
Where Virtual Zone status requires a clean company setup and foreign income, International Company status demands economic substance and history.
The application process is more detailed. To demonstrate substance, you’ll need to provide financial statements, payroll records, and possibly office lease agreements.
This isn’t a checkbox regime. It’s designed for companies with structure, teams, and the intention to stay.
However, once approved, the benefits are some of the best in Europe.
International Company Tax Benefits in Georgia
The International Company regime unlocks a broader range of incentives than the Virtual Zone, particularly around employee taxes and dividends.
5% corporate income tax: Unlike the Virtual Zone, where foreign income is fully exempt, International Companies pay a flat 5% corporate tax. This applies to all income, not just exports.
0% dividend tax: When profits are distributed to shareholders, there is no dividend tax. This applies regardless of shareholder residency, unless a tax treaty applies a higher rate.
5% personal income tax for employees: Normally, Georgian employees pay a 20% flat personal income tax. Under this regime, employees of International Companies only pay 5%. This creates an enormous advantage when hiring or relocating skilled professionals to Georgia.
No property tax on company assets (excluding land): If your company owns office furniture, computers, or other fixed assets in Georgia, they are exempt from annual property taxes under this regime.
No mandatory social security: Georgia has no social security or pension contributions by default, meaning employment costs remain globally competitive.
The benefit mix here appeals to firms looking to grow beyond a lean startup phase. If you're scaling, raising capital, or relocating teams, International Company status may be the smarter long-term setup.
Virtual Zone vs International Company: Which Is Right for You?
Here's where we break it down side by side:
Criteria | Virtual Zone | International Company |
Corporate Tax | 0% (foreign-source only) | 5% flat |
Dividend Tax | 5% | 0% |
Employee Tax | 20% (flat) | 5% |
Required History | None | 2+ years |
Revenue Source | Foreign clients | 98% from permitted activity |
Local Team Required | No | Yes |
Best For | Freelancers, startups, and small remote teams | Growth-stage firms, subsidiaries, and relocation strategies |
Virtual Zone status is ideal if you're running a solo SaaS project or agency with no Georgian staff. You get Georgia's core virtual zone tax benefits, no corporate tax, no VAT, and a low 5% dividend tax.
Suppose you’re building a company with a real team, planning to scale, or need stronger credibility for global operations. In that case, the status of an international company gives you deeper incentives and more long-term value.
Common Mistakes and Pitfalls to Avoid
These two regimes are powerful, but not forgiving. Many foreign founders make errors that cost them months of tax savings or risk compliance issues early on.
Misclassifying your business activity: Your NACE code (business activity classification) must match an eligible sector when registering your company. Mislabeling as “consulting” instead of “software development” is a common reason for Virtual Zone rejection.
Applying too early: You will be rejected if you apply for International Company status without two full years of revenue in a permitted field, Build the track record first.
Mixing income types: Your foreign-sourced income must be separated from local revenue. If you mix invoices or clients, you risk losing your Virtual Zone status and falling under the standard corporate tax in Georgia.
Neglecting filings: Even if you owe 0% tax, you must still submit monthly turnover declarations and an annual Georgia tax return. Missing a filing doesn’t just trigger a fine; it may flag you for review.
Assuming residency comes with company registration: Setting up a company does not grant you tax residency Georgia status. You must still spend 183+ days per year in Georgia or meet other criteria to qualify for a Tax Residency Certificate.
Not using a local tax advisor: The Revenue Service system is in Georgian. The terminology around foreign income, dividends, and activity codes can be tricky. Working with a local expert helps you stay compliant and take advantage of available exemptions.
Learn more about common tax optimization mistakes to make sure that you do not fall into the pit of legal uncertainties.
Smart Ways to Make the Most of the Virtual Zone Tax Benefits Georgia Offers
If you do qualify for Virtual Zone status, use it strategically. Here’s how:
Keep profits in the company
You don’t have to distribute profits right away. Retained earnings remain tax-free, helping you reinvest into hiring, product development, or marketing.
Plan your dividend payouts.
Only pay dividends when it makes sense. You’ll owe 5%, but no additional income tax if you’re not a Georgian tax resident.
Use double taxation treaties.
If you're a country resident with a treaty with Georgia, your dividends might be exempt or taxed at a reduced rate at home. File the right forms to avoid dual reporting.
Track all invoices
Ensure each invoice clearly states the foreign client, service provided, and delivery method. This helps prove foreign-sourced income if ever audited.
Apply for Georgia tax residency if strategic.
Tax residency in Georgia allows you to use Georgia as your fiscal home. Combined with Virtual Zone status, it becomes a globally powerful setup, especially if your home country taxes worldwide income.
Use a clean structure.
Don’t mix services or operate informally. Keep your Georgian entity focused on its core eligible services and keep all invoicing and banking clean.
Conclusion: Virtual Zone or International Company?
Here is a quick breakdown of what we have covered so far:
Category | Virtual Zone | International Company |
Best For | Freelancers, small IT firms, remote agencies | Scaling tech companies, relocations, subsidiaries |
Company Age | New or existing | Minimum 2 years of global operations |
Revenue Source | 100% foreign clients | 98% from permitted sectors (IT or maritime) |
Corporate Tax | 0% (on foreign-sourced income only) | 5% flat |
VAT on Exports | 0% | 0% |
Dividend Tax | 5% | 0% |
Employee Income Tax | 20% | 5% |
Local Hiring Requirement | Not required | Strongly preferred |
Physical Office | Recommended | Required |
Registration Authority | Revenue Service | Ministry of Finance |
Ease of Setup | Fast, fully digital | Slower, detailed approval process |
Compliance Burden | Light |
If you're running a small IT business, agency, or SaaS platform serving clients abroad, Georgia's virtual zone tax benefits can be a game-changer. It’s lean, effective, and globally competitive.
If you're beyond the solo phase, hiring, growing, opening offices, and building long-term value, the International Company regime gives you deeper benefits. From employee tax breaks to dividend exemptions, it’s built for scale.
Both paths are fully legal, internationally recognized, and government-backed. But neither works automatically. Choose based on where your company is today, not where you hope it might be someday.
Do you want to register a company, apply for Virtual Zone or International Company status, or properly set up Georgia residency?
Gegidze can help. Our team supports foreign founders and remote-first businesses at every step, from company formation and compliance to monthly filings and status applications.
Let’s ensure you get the tax benefits you qualify for and avoid the ones that could cost you later.
Frequently asked questions (FAQ)
What are the tax benefits of Georgia’s Virtual Zone status?
Virtual Zone companies in Georgia pay 0% corporate tax on foreign-sourced IT income, 0% VAT on exported services, and only 5% dividend tax when profits are distributed.
