What is the Virtual zone?
The Status of the Virtual Zone is a license to carry out IT business activities in a Virtual Zone. The best news is that profit generated by a Virtual Zone Entity (company or business person) from the supply of information technology (IT) services outside of the territory of Georgia is exempted from taxation in Georgia.
Virtual Zone attracts freelancers with their Tax advantages.
Once becoming a Virtual Zone person, you will earn lots of TAX benefits. What’s very important, If the company provides its services to customers outside of Georgia, then the income of Virtual Zone is exempt from the taxation by VAT (18%) as well as from the corporate tax (15%)
The director of the Virtual Zone Person or Virtual Zone Company can be either a Georgian or foreign person who can be physically located either in Georgia or abroad and can manage the company´s activities and corporate bank account by the internet and mobile banking.
There is no law requirement to keep employed staff in Georgia, except for the company`s director.
Georgian Virtual Zone Entities give new opportunities for IT companies and it is becoming interesting especially for international clients.
IT Zone gives you plenty of benefits, especially if you are a freelancer. A study conducted by Intuit predicts that by 2020, “independent workers” will comprise 40% of the total workforce, including freelancers, contractors, and temps.
Tax Advantages
No taxes on earnings from software products exported outside Georgian borders;
No export duties on the same products as well;
Minimal taxes and duties on earnings made within Georgia as well;
No value-added tax or VAT on exports outside as well;
The income of a virtual zone entity is exempt from VAT (18%) and corporate income tax (15%) if the company provides its services to foreign customers located outside Georgia;
In case of dividends payment (to a physical person or non-resident legal entity shareholder), the only Georgian tax on dividends payable is rated at 5% and is paid by the company to the state budget at the moment of dividends paid. Dividends distributed in Georgia to a Georgian shareholder will not be included in the taxable base of such a person If dividends are paid to a foreign shareholder, the taxation of such a shareholder in the country of its tax residency shall be analyzed with the consideration of provisions of double tax treaty of the relevant country with Georgia (if any). If the income of Virtual Zone Entity is distributed not in the form of standard dividends but in another way described by-law regulations, then the 5% withholding tax in Georgia will not be paid and there will be no taxation in Georgia at all;
Sal the expenses with respect to the income earned by supplying information technology products outside or within the borders of the Georgian territory shall be deducted from the gross income according to the share of the earnings by supplying within its territory.
For more details you may contact our agents‘ Business register Georgia lawyers in Georgia.
