VZS vs. Int. company: The Definitive Tax Comparison for Georgian IT Companies

TL;DR

• Georgian IT companies have two main preferential regime options: Virtual Zone status (VZS) and the International Company regime. Both offer significant tax advantages — but they are not interchangeable.

• VZS gives 0% corporate income tax and 0% VAT on qualifying IT export income. It has no employment requirements and works for lean, foreign-facing IT companies.

• The International Company regime gives 5% corporate income tax on qualifying income. It imposes minimum employment and payroll requirements in Georgia.

• VZS is almost always the better structure for solo founders and small teams billing exclusively or primarily to foreign clients.

• The International Company regime may be advantageous for larger companies with significant Georgian payroll and mixed domestic/foreign revenue.

• VZS does not allow Georgian-client revenue at the 0% rate. Georgian-client revenue is taxed at 15%. The International Company regime allows mixed revenue with conditions.

• The two regimes cannot be held simultaneously by the same Georgian LLC.

Two regimes. Both designed to attract international IT companies to georgia country. Both offering materially lower tax rates than the Georgian standard. But the decision between Virtual Zone status and the International Company regime is not a preference question. It is a structural question that depends on your client base, your headcount, and your revenue mix.

Most Georgian IT founders who encounter the International Company regime for the first time assume it must be compared against VZS on a rate basis: 0% vs 5%. That comparison misses the point. The regimes differ not just in rate but in qualifying conditions, compliance obligations, and operational constraints. For some companies, 5% under the International Company regime is actually cheaper than 0% under VZS — because of the way each treats local revenue and distributions.

This guide runs the comparison in full. By the end, you will know which regime fits your company and why.

Virtual Zone status: how it works

Virtual Zone status is available to Georgian LLCs providing information technology services to foreign clients. The qualifying criteria are activity-based: the company must be providing IT services, and those services must be delivered to clients outside Georgia.

Under VZS, qualifying IT export income is taxed at 0% corporate income tax and 0% VAT. There is no withholding tax on dividends distributed from VZS-qualifying profits. There are no employment requirements — no minimum staff count, no minimum Georgian payroll.

The trade-off is the export rule: revenue from Georgian clients is not VZS-qualifying and is taxed at 15% under the standard corporate income tax. For a full treatment of how the export rule works and how "foreign client" is defined, see the separate guide on the Virtual Zone export rule.

VZS also requires annual compliance: filing the correct declarations, maintaining a Virtual Zone certificate, and demonstrating through documentation that qualifying income meets the conditions. The certificate must be renewed annually.

International Company regime: how it works

The International Company regime is a more recently introduced special status available to companies in specific sectors, including information technology. Under this regime, qualifying income is subject to 5% corporate income tax. VAT treatment follows standard Georgian rules for the activity type.

Employment requirements

The critical distinction between the International Company regime and VZS is that the International Company regime imposes minimum employment and payroll requirements. To qualify and maintain status, the Georgian entity must employ a defined number of qualifying employees in Georgia and meet a minimum annual payroll spend. The thresholds are set by regulation and are subject to periodic revision.

This requirement makes the International Company regime structurally different from VZS. It is not a structure for a solo founder. It is a structure for a company that has — or plans to build — a genuine Georgian team.

Income eligibility

The International Company regime has a broader definition of qualifying income than VZS in some respects — it does not apply the same strict "foreign client only" export rule. Companies under the International Company regime can receive income from both Georgian and foreign clients and apply the preferential tax rate to qualifying income, subject to the sector and activity conditions.

Rate comparison: 0% vs. 5%

On the surface, 0% is better than 5%. But the effective rate comparison requires considering the full picture: how each regime treats different income streams, and what the company's actual revenue mix looks like.

For a company with 100% foreign-client IT revenue:

• VZS: 0% CIT. Total effective rate on corporate income: 0%.

• International Company: 5% CIT. Total effective rate on corporate income: 5%.

VZS wins for a pure foreign-client IT company. The 5% advantage is unambiguous.

For a company with 70% foreign-client revenue and 30% Georgian-client revenue:

• VZS: 0% on 70% of income, 15% on 30% of income. Blended effective rate: approximately 4.5%.

• International Company: 5% on all qualifying income (foreign and local, subject to conditions). Effective rate: approximately 5%.

At this revenue mix, the two regimes are comparable. At a higher Georgian-client proportion, the International Company regime may become advantageous — provided the employment requirements are satisfied.

Factor	Virtual Zone Status (VZS)	International Company Regime
CIT rate (qualifying income)	0%	5%
VAT on IT exports	0%	Standard rules apply
Dividend withholding tax	0% (from VZS income)	Standard rates apply
Georgian-client revenue rate	15%	5% (if qualifying under regime)
Employment requirement	None	Minimum Georgian employees + payroll
Available to solo founders?	Yes	Generally no — headcount required
Foreign clients required?	Yes — exclusively or predominantly	Mixed client base allowed with conditions
Certificate renewal	Annual	Annual (subject to ongoing compliance)
Best for	Lean IT teams, 100% foreign revenue	Larger teams, mixed Georgian/foreign revenue

Employment requirements: the key operational difference

The employment requirement is not a technicality. It is the structural feature that determines whether the International Company regime is viable for a given company.

If your Georgian LLC has no employees — or one or two employees — the International Company regime is likely not accessible. The minimum qualifying employee count and payroll spend are designed to ensure that the regime benefits companies making a genuine economic contribution to Georgia through employment.

VZS has no equivalent requirement. A Georgian LLC with one shareholder-director, no employees, and USD 2 million in foreign-client revenue can hold VZS status and pay 0% corporate income tax. The same company could not access the International Company regime.

If you are considering the International Company regime because of the broader income eligibility rules, confirm that you can meet the employment requirements before applying. Receiving the status and then failing to maintain the headcount threshold triggers a retroactive loss of the preferential rate and potential penalties.

How each regime handles Georgian-client revenue

The handling of Georgian-client revenue is where the two regimes diverge most practically.

VZS and Georgian clients

Revenue from Georgian clients — any client tax-resident in Georgia — does not qualify for the VZS 0% rate. It is subject to 15% corporate income tax under the Georgian distribution trigger model. If the VZS company also serves Georgian clients at meaningful scale, the blended effective rate rises and the VZS advantage diminishes.

Some VZS companies solve this by maintaining a separate Georgian LLC for their local client work, while the VZS entity exclusively serves foreign clients. This structure is legally permissible but adds complexity and requires careful management of inter-company transactions.

International Company and Georgian clients

The International Company regime applies the preferential 5% rate to qualifying income regardless of whether the client is Georgian or foreign, subject to the activity and sector conditions. This makes it more flexible for companies with a mixed client base. The Georgia corporate income tax guide covers how qualifying income is determined under each regime.

Dividend and distribution tax under each regime

Both regimes operate within Georgia's Estonian-model corporate tax system: profit is taxed when distributed, not when earned. The regime affects the corporate-level rate; the distribution itself triggers an additional layer of tax.

VZS distributions

Dividends distributed from VZS-qualifying income are not subject to Georgian withholding tax. The shareholder receives the distribution without a further Georgian deduction. Whether the shareholder pays tax on the dividend in their country of residence depends on their personal tax residency and applicable treaties.

International Company distributions

The International Company regime does not carry the same dividend withholding tax exemption. Standard Georgian withholding tax rules apply to distributions. The effective take-home for the shareholder is therefore lower than under VZS, even before the 5% vs. 0% corporate-level difference is considered.

Compliance obligations compared

Both regimes require ongoing compliance: monthly declarations, income documentation, and annual certificate renewal. The specific requirements differ.

VZS compliance

VZS compliance centres on demonstrating that qualifying income meets the foreign-client export rule, filing monthly declarations via rs.ge, and renewing the VZS certificate annually. The Virtual Zone compliance guide covers the full annual compliance cycle.

International Company compliance

The International Company regime requires demonstrating ongoing compliance with the employment requirements — employee count, payroll spend — in addition to the standard income tax compliance. Companies must be prepared to evidence their Georgian payroll on an ongoing basis as a condition of maintaining the preferential rate.

Decision framework: which regime fits which company

The following framework covers the most common company profiles.

Use VZS if

• Your company provides IT services and sells exclusively or predominantly to foreign clients.

• Your Georgian LLC has few or no Georgian employees — you work with contractors, remote teams, or solo.

• You want the maximum tax efficiency on corporate income and on shareholder distributions.

• You have clean revenue separation and can demonstrate that qualifying income meets the export rule.

Consider the International Company regime if

• Your company has — or plans to build — a genuine Georgian team that meets the employment threshold.

• Your revenue mix includes a significant proportion of Georgian-client income that would be taxed at 15% under VZS.

• You operate in a sector or with an income model that qualifies under the International Company rules but not cleanly under VZS.

• You have taken professional tax advice and confirmed that the blended effective rate under the International Company regime is lower than under VZS given your specific revenue mix.

How Gegidze helps

Gegidze advises Georgian IT companies on regime selection, registration, and ongoing compliance for both VZS and the International Company regime.

• Regime selection analysis: We model the effective tax rate under each regime for your specific revenue mix, client profile, and team structure — before you commit to a structure.

• VZS registration: We register Virtual Zone status and manage the full compliance cycle: monthly declarations, income categorisation, and annual certificate renewal.

• International Company regime applications: We advise on employment threshold requirements and manage the application for eligible companies.

• Dual-entity structuring: For companies with both foreign and Georgian clients, we advise on whether a dual-entity structure — a VZS LLC for foreign clients and a standard LLC for Georgian clients — is more efficient than a single entity under the International Company regime.

• LLC registration: We register a company in Georgia and apply for the appropriate regime simultaneously.

• Distribution tax planning: We advise on the distribution tax implications of each regime for non-Georgian shareholders and on applicable treaty benefits.

Final thoughts

Virtual Zone status is the right structure for the overwhelming majority of Georgian IT companies. It offers 0% corporate income tax, 0% VAT, and no dividend withholding tax on qualifying foreign-client income — with no employment requirements. For lean teams serving international markets, the regime is nearly unmatched.

The International Company regime is not a fallback. It is a different tool, designed for a different profile: companies with genuine Georgian headcount, mixed client bases, and revenue structures that make the 5% rate more advantageous than the blended effective rate under VZS. For those companies, the analysis is worth running. For most early-stage and mid-size IT companies in georgia country, it is not.

Run the numbers for your specific revenue mix. Consider the employment requirements. Think about the distribution tax implications. Then choose the structure that produces the lowest effective rate across both the corporate and shareholder levels — not just the headline corporate rate.

If you want a structured analysis of which regime is right for your company, book a free consultation with Gegidze and we will model both scenarios against your numbers.

Frequently asked questions (FAQs)

Can I switch from VZS to the International Company regime later?

Yes, but it requires formally de-registering from VZS and applying for the International Company regime. You cannot hold both simultaneously. The transition involves a compliance gap analysis — ensuring that the period under VZS is fully reconciled and that the International Company regime application is supported by evidence of employment compliance. Plan the switch at least one quarter in advance with professional support.

Does the International Company regime require Georgian employees — or can they be based anywhere?

The employment requirement under the International Company regime refers to employees employed by the Georgian entity and on Georgian payroll — not simply individuals working for the company from any location. Remote employees based in other countries, contracted through foreign entities, do not satisfy the Georgian employment threshold. The qualifying employees must be formally employed in Georgia, with Georgian payroll taxes and social contributions paid accordingly.

Is there a revenue threshold for the International Company regime?

The International Company regime does not have a minimum revenue threshold in the same way that the SBS regime has a 500,000 GEL cap. However, the combination of the employment requirement and the 5% rate means the regime is only economically meaningful at a revenue level where the employment cost is justified by the tax saving relative to VZS. For very small companies, VZS at 0% with no employment requirement is always more efficient.

Does VZS work for companies incorporated outside Georgia?

No. Virtual Zone status is available only to Georgian LLCs. A foreign company providing IT services to Georgian or international clients cannot apply for VZS. Only a Georgian-registered LLC can hold Virtual Zone status. Foreign founders who want to access VZS must first incorporate a Georgian LLC. Gegidze handles this for foreign nationals, including remote incorporation via power of attorney.

Can a Georgian LLC hold VZS and also employ Georgian developers?

Yes. There is no restriction on VZS companies employing Georgian staff. The employment does not affect VZS eligibility. Salaries paid to Georgian employees are subject to standard payroll taxes — 20% personal income tax withheld at source and 2% pension contribution. These payroll costs reduce the company's net retained profit but do not affect VZS status. The VZS 0% rate applies to qualifying corporate income regardless of whether the company has Georgian employees.

What is the VAT treatment under the International Company regime?

The International Company regime does not provide a blanket VAT exemption equivalent to VZS. VAT obligations under the International Company regime follow standard Georgian VAT rules: registration is required when 12-month rolling turnover exceeds GEL 100,000, and standard 18% VAT applies to taxable supplies delivered within Georgia. IT services delivered to foreign clients may be zero-rated under Georgian VAT rules, but this must be assessed on a supply-by-supply basis — the International Company status alone does not guarantee zero-rating.

How does Georgia corporate income tax interact with personal income tax under each regime?

Under both regimes, the corporate income tax applies at the entity level. When profits are distributed to shareholders as dividends, a separate layer of personal income tax (dividend tax) may apply. Under VZS, there is no Georgian withholding tax on distributions from qualifying VZS income. Under the International Company regime, standard withholding tax rules apply. For a full treatment of how the corporate and personal layers interact, see Georgia's low corporate tax rate.