International Company Status Requirements: 2-Year History, Local Staff, and Permitted Activities
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Table of contents
TL;DR
Understanding International Company Status (ICS)
What is International Company Status (ICS)?
ICS Eligibility Requirements: The 2-Year Operational History Rule
Local Staff Requirement for ICS Qualification
Permitted Activities: Defining Your Business Operations in Georgia
What Happens if Your Business Activity Changes?
Applying for ICS Status: Step-by-Step Process
How Gegidze Can Help You Navigate ICS Requirements
A Powerful Tax Advantage for IT and Maritime Companies
Frequently Asked Questions (FAQs)
TL;DR
Georgia’s International Company Status (ICS) offers substantial tax benefits, including a 5% corporate tax, 0% dividend tax, and 5% payroll tax, making it a highly attractive option for IT and maritime businesses.
To qualify, your business must have at least a 2-year operational history, employ local staff, and operate within the permitted industries (IT or maritime).
Navigating ICS can be complex, but with the right guidance, your company can enjoy tax reductions while maintaining compliance with Georgian laws.
Understanding International Company Status (ICS)
Georgia’s International Company Status (ICS) offers substantial tax benefits, such as a 5% corporate tax, 0% dividend tax, and 5% payroll tax. These tax breaks are an incredible incentive for IT and Maritime companies, but in order to qualify, your business must meet certain requirements.
If you’re running a foreign business and considering how to move to Georgia or expand your operations there, understanding these ICS requirements is critical for setting up tax-efficient operations.
In this article, we will break down the key conditions for qualifying for ICS. We’ll focus on the 2-year operational history, the need for local staff, and the permitted activities within Georgia’s tax framework that can help your company benefit from these substantial tax reductions.
What is International Company Status (ICS)?
Overview of ICS
International Company Status (ICS) is a special tax regime in Georgia that applies to companies in the IT and Maritime sectors. The Georgian government introduced this tax status to attract international businesses by offering significant tax reductions.
With ICS, eligible companies can benefit from:
5% corporate income tax, applied only on distributed profits (not reinvested profits)
5% payroll tax for employee salaries, significantly lower than Georgia’s standard 20% payroll tax
0% dividend tax, meaning profits can be distributed to shareholders without incurring additional tax at the source
This makes ICS an ideal option for businesses looking to optimize tax efficiency while operating in Georgia.
Key Benefits of ICS
Here’s a breakdown of the key benefits that ICS offers for IT and Maritime companies:
5% Corporate Income Tax: Unlike the standard 15% corporate tax in Georgia, ICS applies 5% tax only on distributed profits, so if the profits are reinvested in the business, no tax is levied. This is perfect for growing companies that want to reinvest their earnings into expansion without triggering tax liabilities.
5% Payroll Tax: This is a significant reduction from the standard 20% payroll tax applied to Georgian employers. By using ICS, companies can dramatically reduce labor costs while still being compliant with Georgian tax regulations.
0% Dividend Tax: With ICS, you can distribute dividends to shareholders without any tax being levied at the source. This is a huge benefit compared to many other jurisdictions, where dividend tax can be quite substantial.
ICS Eligibility Requirements: The 2-Year Operational History Rule
What Does the 2-Year Operational History Mean?
To qualify for ICS, your business must meet the 2-year operational history requirement. This means:
Georgian companies applying for ICS must have been in business for at least two years in the IT or Maritimesectors.
Foreign companies wishing to establish a Georgian subsidiary must demonstrate that the parent company has been operating in the relevant IT or Maritime sector for at least two years.
This 2-year rule ensures that only businesses with proven experience in their sectors are eligible for ICS tax breaks.
How the 2-Year Rule Applies to New Georgian Enterprises
While foreign companies do not need to have two years of experience in Georgia itself, they must meet the 2-year operational history requirement through their parent company. In simple terms:
A foreign IT company can establish a Georgian subsidiary and apply for ICS, as long as the parent company has been operating in the IT sector for at least two years.
For example, a foreign SaaS company can open a subsidiary in Georgia to benefit from ICS tax incentives, as long as the parent company has been in operation for two years in the IT sector.
This rule ensures that both Georgian and foreign companies must have the necessary experience in the relevant sectors to qualify for ICS status.
The 2-Year Rule and Compliance
Maintaining the 2-year operational history is crucial for retaining ICS status. If a company fails to meet this requirement, it will lose its eligibility for the ICS tax benefits, meaning it will revert to the regular Georgia tax rate(which is 15% corporate tax, 20% payroll tax, etc.).
As such, companies must ensure they are consistently meeting this 2-year operational threshold, and any changes to business activities should be carefully considered to ensure ongoing eligibility.
Local Staff Requirement for ICS Qualification
Why Local Staff Is Necessary for ICS
One of the key eligibility criteria for ICS is the requirement for businesses to employ local staff in Georgia. This is part of the physical substance rule, ensuring that businesses with ICS status have a legitimate operational presence in the country.
In order to qualify for ICS, your business must:
Employ Georgian citizens or permanent residents in roles directly related to your core business activities (specifically IT or Maritime services).
Demonstrate that your business operations are actively carried out in Georgia by utilizing local professionals with the necessary expertise.
This requirement ensures that the company is not merely using Georgia for tax benefits but is actively contributing to the local labor market and economy.
Who Counts as Local Staff?
Local staff refers to Georgian citizens or permanent residents who are:
Directly employed by the company (not contractors)
Involved in the day-to-day operations of the business
Working in positions related to the IT or Maritime sectors (for example, software developers, project managers, and IT consultants for IT businesses, or ship operators, port managers, and maritime consultants for Maritimebusinesses)
Having local staff is essential for ICS compliance. It shows that the company is fulfilling the physical substancerequirement, which is crucial for the ICS tax regime. The staff should be qualified professionals who directly contribute to generating revenue in the IT or Maritime sectors.
Hiring Locally and Compliance Considerations
To meet ICS requirements, simply hiring local employees is not enough. The employees must play an active role in the company’s core revenue-generating activities. This ensures that the company is truly operating in Georgia with a legitimate business presence.
For example:
If you are an IT business, your local staff should be involved in software development, SaaS management, or other core IT services that make up the business’s 98% of revenue.
If you are in the Maritime sector, your local staff should be involved in activities like ship management, logistics, or port operations that align with your business's permitted activities.
Employing local staff not only helps you qualify for ICS but also ensures compliance with Georgian labor and tax laws, which is essential to retain the ICS benefits.
Permitted Activities: Defining Your Business Operations in Georgia
What Activities Are Permitted Under ICS?
The ICS program only applies to businesses engaged in specific IT or Maritime activities. These activities must represent at least 98% of your revenue to qualify for ICS status.
IT Sector:
Some of the permitted IT activities under ICS include:
Software development: Includes custom software solutions, SaaS products, and mobile apps.
Web development and hosting: Building websites and providing hosting services for international clients.
IT consulting: Offering professional services such as system architecture, cybersecurity, and IT project management.
Cloud services: Providing infrastructure and software services via the cloud.
If your company engages in these types of services and generates the majority of its revenue from foreign clients, you’re likely eligible for ICS.
Maritime Sector:
For businesses in the Maritime sector, the permitted activities include:
Ship management: Including operational management of vessels, maintenance, and technical services.
Shipping logistics: Services related to the transportation of goods by sea.
Port operations: Managing ports or shipping hubs for cargo or passenger services.
Maritime consulting: Offering advisory services on shipping, regulations, and logistics.
If your company’s operations fall within these permitted activities, it qualifies for ICS tax benefits, as long as you meet the required revenue thresholds and have sufficient physical presence in Georgia.
What Happens if Your Business Activity Changes?
If your company shifts its focus away from IT or Maritime services, it may lose its ICS status. For example, if your business begins generating more than 2% of its revenue from activities outside of the prescribed sectors, you risk having your ICS status revoked.
To maintain eligibility, it’s crucial to carefully define and document the activities your business engages in. This is especially important when your company undergoes any changes in its operations. Whether you're expanding into new markets, pivoting your services, or introducing new business models, any shift away from the IT or Maritime sectors could trigger a reassessment of your ICS status.
Keeping track of the activities that contribute to your revenue is essential to ensure your company maintains compliance and continues benefiting from ICS tax advantages. Regularly reviewing your business operations and ensuring they align with Georgia's ICS criteria will safeguard your company from potential issues and help you avoid the loss of valuable tax breaks.
Activities Allowed Under the IT Sector
Georgia’s ICS regime provides specific tax benefits for companies in the IT sector. To qualify, your business must primarily engage in one or more of the following activities:
Software Development: This includes developing custom software, SaaS applications, mobile apps, and other digital products. If your company develops software for international clients, you will likely meet the ICSeligibility for IT-based operations.
Web Development and Hosting Services: This covers building websites, offering web hosting, and maintaining digital services for clients around the world.
IT Consulting and Management: If your business provides consulting services in areas such as system integration, software solutions, or digital transformation, you are part of the eligible IT sector.
Cloud Computing Services: Offering cloud infrastructure or cloud-based solutions qualifies under ICS. If your business provides scalable, remote computing services, Georgia’s tax system offers great incentives.
Cybersecurity Services: Providing cybersecurity solutions such as network protection, data security, or vulnerability assessments makes your company eligible for ICS.
Software Support and Updates: Businesses that provide ongoing software updates, support services, or product maintenance are also eligible for ICS.
If your company provides digital services or technology solutions to international clients, you are likely in the IT sector and could qualify for ICS. It's essential to ensure that at least 98% of your revenue comes from these qualifying activities to remain eligible for the tax breaks.
Activities Allowed Under the Maritime Sector
For companies operating in the Maritime sector, Georgia’s ICS regime offers tax benefits for activities such as:
Ship Management: This includes managing the operation of ships, overseeing ship maintenance, and ensuring vessels comply with international maritime laws and standards.
Shipping Logistics: Companies involved in organizing, managing, or coordinating the movement of goods by sea, such as cargo management and supply chain solutions, are eligible for ICS.
Port Operations: Managing or operating ports and terminals, handling cargo, and coordinating logistics services are activities that qualify under ICS for Maritime businesses.
Maritime Consulting: If your business provides consulting services in areas like shipping, logistics, or maritime compliance, it qualifies for the ICS benefits.
Shipbuilding and Ship Repairs: Engaging in ship construction, design, maintenance, or repair services is included within the ICS framework for Maritime businesses.
Maritime Legal Services: Providing legal services for the maritime industry, including advising on maritime law, regulations, or dispute resolutions, also qualifies under ICS.
Companies engaged in these activities that generate 98% of their revenue from Maritime services are eligible for ICSstatus. The sector is designed to support Georgia's maritime industry, fostering innovation, infrastructure development, and global trade.
Applying for ICS Status: Step-by-Step Process
Initial Company Setup in Georgia
Before applying for ICS, your business must be registered as a Georgian LLC. This process involves several steps:
Registering your company with the Georgian Revenue Service: You will need to provide your business's legal name, identification number, and a physical address in Georgia.
Obtaining a legal address in Georgia: As part of the registration process, your company will need to have a valid Georgian address, whether it’s a physical office or a legal business address.
Appointing a director: Your Georgian LLC must have at least one director who is responsible for company management and compliance.
Registering for taxes: This includes applying for a tax identification number (TIN) and preparing for any necessary tax filings.
Once these steps are completed, your company will be legally registered and ready to apply for ICS.
Prepare Documents for ICS Application
After registering your company, you will need to gather several documents to apply for ICS:
Company registration details: This includes your business ID, name, legal form, and articles of incorporation.
Proof of revenue: You need to show that at least 98% of your revenue is derived from IT or Maritime activities. This includes financial statements, contracts with clients, and other documentation of your business activities.
Description of your business activities: This should clearly outline your company’s operations and explain how they fall under the IT or Maritime sectors.
Documentation showing physical presence in Georgia: This includes proof of office space, local employees, or other operational assets in Georgia to meet the substance requirement.
These documents ensure that your application for ICS meets all legal requirements, and they will be submitted through Georgia’s official online portal for the Revenue Service.
Submit Application to Revenue Service
Once you have all the required documents, you can submit your ICS application through the Georgian Revenue Service’s online portal. The process is fairly straightforward, but make sure all documentation is complete and accurate.
Typically, the Revenue Service takes 10 business days to process the application. If additional information is needed, you’ll have 10 business days to submit the requested documents. If your application is approved, you’ll be granted ICSstatus, which comes into effect from the first day of the month in which the approval was granted.
Ongoing Compliance for ICS Companies
Once you have obtained ICS status, it’s essential to maintain compliance to continue benefiting from the tax advantages. This includes regular tax filings, maintaining local staff, and ensuring that the majority of your revenue comes from the IT or Maritime sectors.
How Gegidze Can Help You Navigate ICS Requirements
Navigating the application process and maintaining compliance can be complex. At Gegidze, we specialize in helping companies with every aspect of the ICS process, from company registration to ongoing tax compliance. Our experts can guide you through:
Ensuring your business qualifies for ICS
Managing the ICS application process
Preparing the necessary documents for submission
Assisting with ongoing tax filings, compliance, and local staffing
By working with Gegidze, you can ensure your company remains fully compliant with Georgian regulations and optimally structured to take advantage of the ICS tax benefits.
A Powerful Tax Advantage for IT and Maritime Companies
International Company Status offers a tax-efficient structure for businesses in the IT and Maritime sectors. With 5% corporate tax, 5% payroll tax, and 0% dividend tax, Georgia presents a highly attractive option for companies seeking to scale their operations while benefiting from significant tax breaks.
By meeting the 2-year operational history, local staff, and permitted activities requirements, your company can easily qualify for ICS and take full advantage of the tax incentives Georgia offers.
If you’re interested in how to move to Georgia or need help with the ICS application process, Gegidze is here to assist you. Our team of experts will ensure your business is set up for maximum tax efficiency and compliance with Georgian regulations.
Contact us today to learn more about ICS and how we can help with your company registration, tax planning, and compliance needs in Georgia.
Frequently Asked Questions (FAQs)
What is International Company Status (ICS)?ICS is a special tax regime in Georgia that offers significant tax breaks to IT and maritime businesses, such as a 5% corporate tax, 5% payroll tax, and 0% dividend tax on distributed profits.
What are the eligibility requirements for ICS?To qualify for ICS, your business must have at least a 2-year operational history in the IT or maritime sector, employ local staff, and generate at least 98% of your revenue from permitted activities.
What industries benefit from ICS in Georgia?ICS is available for businesses in the IT and maritime sectors, including software development, IT consulting, ship management, and maritime logistics.
Can foreign companies apply for ICS in Georgia?Yes, foreign companies can establish a Georgian subsidiary and qualify for ICS, provided their parent company meets the 2-year operational history requirement in the IT or maritime sector.
What happens if a business doesn’t maintain ICS compliance?If a business fails to meet ICS requirements, it will lose its ICS status and revert to the standard Georgian tax rate, which is higher than the ICS tax rate.
