Virtual Zone Person (VZP) in Georgia: IT Tax Benefits Guide
How tech companies can achieve 0% corporate tax on export income
Georgia's Virtual Zone Person (VZP) status is one of Europe's most attractive tax incentives for IT companies. With 0% corporate tax on export income and a straightforward application process, it's no wonder Georgia has become a hub for tech entrepreneurs and remote teams.
VZP Benefits at a Glance
β’ 0% corporate tax on IT export income
β’ 5% withholding tax on dividends (only when distributed)
β’ 0% VAT on export services
β’ No revenue limits or sunset clauses
β’ Available to both Georgian and foreign-owned companies
What is Virtual Zone Person Status?
Virtual Zone Person is a special tax status introduced by the Georgian government to attract IT businesses. Unlike physical free zones, the "virtual zone" is purely a tax designation β your company operates like any normal Georgian LLC but enjoys significant tax benefits on qualifying income.
The key advantage: profits from IT services delivered to clients outside Georgia are taxed at 0%. You only pay 5% withholding tax when you actually distribute dividends to shareholders.
Who Qualifies for VZP Status?
Eligible Activities
VZP status is available for companies engaged in creating information technologies, including:
β’ Software development (web, mobile, desktop, embedded)
β’ Web and mobile application development
β’ Website design and development
β’ IT consulting and system architecture
β’ Data processing and hosting services
β’ Digital marketing services (SEO, PPC, SMM)
β’ Graphic design and UI/UX design
β’ Video game development
β’ AI and machine learning services
β’ Cybersecurity services
Requirements
1. Company Structure: Must be a Georgian LLC (α¨αα‘). Individual Entrepreneurs cannot obtain VZP status.
2. Export Focus: Services must be delivered to clients located outside Georgia. Domestic Georgian clients don't qualify for the 0% rate.
3. IT Activity: Your primary business must involve creating or processing information technologies.
4. No Physical Goods: VZP is for services only. If you sell physical products, those sales are taxed normally.
VZP Tax Structure Explained
Corporate Profit Tax: 0%
Under Georgia's Estonian tax model, companies don't pay corporate tax on retained earnings anyway. VZP extends this to distributed profits from IT exports β meaning even when you pay dividends, that portion of profit remains untaxed at the corporate level.
Dividend Withholding Tax: 5%
When you withdraw profits as dividends, a 5% withholding tax applies. This is significantly lower than the standard 20% rate for non-VZP companies.
Example:
Your VZP company earns $100,000 profit from foreign clients.
Corporate tax: $0
You distribute $50,000 as dividends.
Dividend tax: $2,500 (5%)
Total tax: $2,500 (2.5% effective rate)
VAT: 0% on Exports
Services provided to clients outside Georgia are zero-rated for VAT. You can still register for VAT voluntarily to reclaim input VAT on business expenses.
Salary Taxes: Standard Rates
VZP status doesn't affect employment taxes. If you hire employees in Georgia:
β’ 20% income tax (withheld from salary)
β’ 2% pension contribution (employee portion)
β’ 2% pension contribution (employer portion)
How to Apply for VZP Status
Step 1: Register Your LLC
If you don't already have a Georgian company, register an LLC at the Public Service Hall. This takes 1 day and costs around 100 GEL.
Step 2: Prepare Documentation
Gather the following documents:
β’ Company registration extract
β’ Charter/Articles of Association
β’ Description of IT activities
β’ Business plan or service description
β’ Director's ID document
Step 3: Submit Application
Apply through LEPL Georgia's Innovation and Technology Agency (GITA). The application includes:
β’ Completed application form
β’ Supporting documents
β’ Description of how your services qualify as IT
Step 4: Receive Certificate
Processing typically takes 5-10 business days. Once approved, you receive a VZP certificate. The status is effective from the date of application.
VZP vs Other Tax Options
| Aspect | VZP LLC | Standard LLC | Small Business IE |
|---|---|---|---|
| Corporate Tax | 0% | 15% (Estonian model) | N/A |
| Dividend Tax | 5% | 5% | N/A |
| Total Effective Rate | 5% | 19.25% | 1% |
| Revenue Limit | None | None | 500,000 GEL |
| Can Hire Employees | Yes | Yes | Limited |
Common Questions About VZP
Can I have Georgian clients too?
Yes, but income from Georgian clients is taxed at standard rates (15% corporate tax under the Estonian model). Keep separate accounting for domestic and export income.
What if my client is a Georgian company owned by foreigners?
The client's location matters, not ownership. If the client company is registered in Georgia, it counts as domestic income.
Do I need a physical office in Georgia?
No, you can operate entirely remotely. However, you need a registered legal address (can be a virtual office) and a local director or representative.
Can a foreigner own a VZP company?
Absolutely. There are no restrictions on foreign ownership. You can own 100% of a Georgian VZP company as a non-resident.
Is VZP status permanent?
VZP status has no expiration date and no sunset clause. As long as your activities remain IT-focused and export-oriented, you keep the benefits.
Compliance Requirements
VZP companies have the same compliance obligations as standard LLCs:
β’ Annual financial statements
β’ Monthly tax declarations (if applicable)
β’ Proper invoicing and documentation for all transactions
β’ Separate tracking of VZP-eligible and non-eligible income
Is VZP Right for You?
VZP status is ideal if:
β You provide IT or digital services
β Most of your clients are outside Georgia
β You earn (or expect to earn) more than $50,000/year
β You want to hire employees or scale your team
β You prefer an LLC structure for liability protection
Consider Small Business Status (1% tax) instead if:
Γ Your revenue is under 500,000 GEL
Γ You work solo without employees
Γ You want minimal administrative overhead
Get VZP Status for Your Company
We handle the entire VZP application process: company registration, documentation, and submission to GITA. Most applications are approved within 2 weeks.
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