Georgia offers two preferential regimes to technology companies: Virtual Zone Person (VZP) status and International Company (IC) status. Both can substantially lower tax exposure. Neither is a formality, and choosing the wrong one, or holding the right one without real substance behind it, is where the risk sits.
Two Regimes, One Underlying System
Georgia taxes corporate profit only on distribution, not annual accrual. VZP, dating to 2011 under the Tax Code of Georgia and the Law on Information Technology Zones, exempts distributed profit from qualifying IT export income from this tax entirely. IC status, introduced in 2020 under Tax Code Article 23¹ and Government Ordinance N619, instead applies a reduced 5% distributed-profit rate (against the standard 15%) to a broader list of permitted activities.
Virtual Zone Person
VZP suits a Georgian entity that develops software and exports it. The qualifying activity is defined narrowly: study, support, development, design, production and introduction of computer information systems resulting in software products. Consulting or hosting services that do not produce software generally fall outside this definition. The exemption covers only profit from IT supplied outside Georgia; domestic sales stay taxed at the standard rate, and dividends carry the standard 5% withholding tax, reducible under an applicable Double Taxation Agreement subject to its own conditions.
Substance is the live issue. The Information Technology Zones law ties the regime to IT produced on Georgian territory, and the Revenue Service of Georgia has, in post-2021 audits, denied the exemption where in-country development could not be evidenced, a position some VZP holders continue to dispute. Treat genuine local development, by employees or contracted developers, as a condition, not a technicality.
International Company
IC status demands more upfront. An applicant needs at least two years’ experience in a permitted activity, directly, through a represented non-resident parent, or through a majority-owning partner enterprise, with at least 98% of income from that activity. Ordinance N619 also requires the company to carry out its core activities in Georgia with adequately qualified staff, an explicit substance test.
Benefits:
- 5% CIT on distributed profit;
- dividends excluded from the recipient’s gross income;
- 5% personal income tax on salaries against the standard 20%
- property tax relief on qualifying assets.
Georgian-citizen salary costs and qualifying R&D spending further reduce the distribution tax base, pushing the effective rate below 5% in some structures. The Government of Georgia grants and revokes the status on application to the Revenue Service.
Choosing Between Them
An export-focused Georgian software developer with modest headcount often fits VZP cleanly. A company with substantial Georgian employment, a broader service offering, or a multinational parent building a regional hub typically extracts more value from IC’s salary deduction and lower payroll tax. Neither status is self-executing: genuine operations, accurate income attribution, and real people doing real technical work in Georgia are what the benefit actually depends on.
What the Incentives Do Not Cover
Neither status is a blanket VAT exemption. Services genuinely supplied to foreign customers are generally outside the scope of Georgian VAT under ordinary place-of-supply rules, a conclusion independent of holding VZP or IC status. Domestic input VAT remains deductible for VAT-registered companies either way, and a treaty reduction on dividends is never automatic; it depends on satisfying that treaty’s residence and beneficial-ownership conditions.
Conclusion
Both regimes are genuine and, applied correctly, materially reduce the cost of building a technology business in Georgia. Their value depends on matching the regime to the company’s actual activities, customers, and Georgian footprint, and defending that match if the Revenue Service later asks.
Nomos Georgia advises technology companies on selecting, applying for, and maintaining VZP and IC status.
