Founders setting up an IT company in Georgia choose, as of July 2026, between two special regimes: the Virtual Zone (VZP) offers 0% corporate income tax on foreign IT revenue, while the International Company Status (ICS) combines 5% corporate tax with 0% dividend withholding and 5% payroll tax. Add the standard LLC under the Estonian model and — for solo developers — the 1% Individual Entrepreneur regime, and you have four options.
The four options at a glance
| Virtual Zone (VZP) | Int. Company Status (ICS) | Standard LLC | I/E with 1% status | |
|---|---|---|---|---|
| Corporate income tax | 0% on foreign IT revenue | 5% | 15% only upon distribution | — (1% PIT on turnover up to GEL 500,000) |
| Dividend withholding tax | 5% | 0% | 5% | — |
| Payroll tax (employees) | 20% | 5% | 20% | — |
| Property tax | standard | 0% | standard | standard |
| Activity focus | software development/maintenance for foreign clients | IT & maritime (Decree 619) | any | IT/software, design, marketing, etc. (Decree #415) |
| Substance requirement | rising — local development increasingly expected | genuine substance and employees mandatory | none specific | self-employment must be genuine (GAAR) |
| Entry requirement | certificate | 2 years of experience; max. 2% non-qualifying income | incorporation is enough | I/E registration + status application |
Virtual Zone: 0% — with an honest risk assessment
A Virtual Zone Person pays 0% corporate income tax on IT revenue from foreign clients (primarily software development and maintenance). Distributions carry 5% dividend withholding; employee salaries are taxed at 20% payroll tax.
International Company Status: predictable 5% with real substance
The ICS (Decree 619, in force since 2020) is the more robust regime for companies with a team:
- 5% corporate income tax, 0% dividend withholding tax, 5% payroll tax, 0% property tax.
- Available only for IT and maritime activities.
- 2 years of relevant experience required — provable also via a foreign parent company.
- Genuine substance and employees in Georgia are mandatory; non-qualifying income is capped at 2%.
The required substance — real office space, on request local management and equipment — is available through BGGE’s Registered Address & Substance service.
The math on full distribution: 5% CIT plus 0% withholding yields roughly 5% total burden — similar to the VZP’s 0% plus 5% withholding, but with much stronger legal certainty and a decisive payroll advantage for teams (5% instead of 20%).
Standard LLC: the Estonian model as a flexible base
Without any special status, a Georgian LLC is taxed under the Estonian model: 15% corporate income tax is due only upon profit distribution; retained earnings stay untaxed. Distributions add 5% dividend withholding — roughly 18.25% effective on full distribution. For growth companies reinvesting profits this is a strong model with no status conditions attached; the claim “1% for LLCs” that circulates online is simply wrong.
Solo developers: 1% as an Individual Entrepreneur
Solo developers often need no company at all: as a registered Individual Entrepreneur with Small Business Status you pay 1% personal income tax on turnover up to GEL 500,000 per year. The details, the changes effective March 2026, and the reclassification risk when one client dominates your revenue are covered in Georgia’s 1% Tax.
Decision guide by team size and revenue
- Solo developer, foreign clients, turnover up to GEL 500,000: I/E with 1% status — lowest complexity, lowest burden.
- Small team (1–5 developers), purely foreign revenue: consider the Virtual Zone — but only with genuine local development; otherwise a standard LLC with retained earnings.
- Established IT company with a Georgian team and a 2-year track record: ICS — the 5/0/5 structure with 0% property tax is hard to beat once payroll and distributions matter.
- Mixed business model or local clients: standard LLC — the special regimes fail here on activity scope or income caps.
For shareholders with Georgian tax residency there is a further layer: foreign dividends are tax free at the personal level — see Tax-Free Foreign Income in Georgia for how the territorial principle works, and Georgia Tax Residency for the residency basics. For US market access, the US LLC combination can complement the setup.
FAQ
FAQ
Is the Virtual Zone really 0% — with no risk?
The 0% applies to foreign IT revenue, but the certificate does not automatically bind the tax authority. Without demonstrable substance in Georgia (local development, local costs) there is a risk of retroactive taxation. Substance planning belongs in the setup from day one.
What are the requirements for International Company Status?
IT or maritime activity, 2 years of relevant experience (also via a foreign parent company), genuine substance and employees in Georgia, and no more than 2% non-qualifying income (Decree 619).
Which is cheaper on taxes: VZP or ICS?
On full distribution both land around 5% effective. The difference comes from payroll (5% instead of 20%), property tax (0% under ICS), and legal certainty — the ICS wins on all three but demands more substance.
Does a regular Georgian LLC really pay tax only on distribution?
Yes. Under the Estonian model, the 15% corporate tax is due only when profits are distributed; retained earnings remain untaxed. Distributions add 5% withholding tax.
Do I even need a company as a freelancer?
Often not. Up to GEL 500,000 in annual turnover, the 1% Individual Entrepreneur status is usually the simplest and cheapest solution — a company pays off once you have a team, investors, or liability concerns.
This article is for general information only and does not constitute legal or tax advice. Choosing the right regime requires a case-by-case review. If you are tax liable in your home country, observe its declaration obligations for foreign shareholdings, accounts, and income.