Georgia attracts businessmen from all over the world, systematically creating favorable conditions for entrepreneurial activity. Experts note the country's unconditional advantages: transparent legislation, lack of bureaucracy, the possibility of free inflow and outflow of capital, low cost of services, a stable banking system.
In 2019, according to the global ranking "Doing Business" from the World Bank, Georgia ranked 7th in the world for ease of doing business, which is the 1st place among the countries of the European region and Central Asia. Georgia ranked 2nd in the world in terms of ease of registration of enterprises and 16th in terms of simplicity in the tax system.
To register a company in Georgia is beneficial for several reasons. The state has special tax regulations for certain types of businesses, including its enterprises. The Georgian authorities are comprehensively improving the investment climate in the country and actively stimulate the development of this area.
Registration of a company in the virtual zone of Georgia is a great business project for those who are looking for an opportunity to start their business from scratch or are in search of a profitable investment direction.
The principle of operation of the virtual IT zone
According to Georgian legislation, a company registered in a virtual IT zone is exempt from VAT, excise and customs duties. And for the registration of a company, a minimum package of documents and very little time are needed.
These rules apply to firms exporting goods outside Georgia. Thus, it has become easier and more profitable for non-residents to do business in the field of IT than in their home country.
The consequence of this decision was a sharp increase in the number of foreign companies in Georgia, which led to the dynamic growth of the national economy and the development of the IT sector in particular.
In the interests of non-residents of the country, Georgia has signed an agreement on the elimination of double taxation with more than 50 countries.
What is a Virtual Zone Entity in Georgia?
The subject of the virtual zone in Georgia is VZE, Virtual Zone Entity. It is a legal entity that provides IT services. Such a company has a special preferential tax status: profits that it receives outside Georgia are exempted from tax.
What firms can enjoy the benefits of virtual IT zone:
Conducting research in the IT field.
Developing and supporting IT products.
Producing or implementing IT products and services.
The certificate from the Ministry of Finance of Georgia verifying that the company belongs to the virtual IT zone in Georgia.
The law «On information technology zones» states that the subject of the virtual zone in Georgia must carry out activities in the IT field. But at the same time, it does not have a clear concept of what kinds of actions are included in this term.
The official website of the Ministry of Finance of Georgia states only that activities in the IT field include «the study, support, development, design, production, and introduction of computer information systems, as a result of which software products are obtained».
This means that any web product or service that is produced or supplied by the subject of the virtual zone of Georgia can be referred to «IT activities».
You can read the text of the law in English here https://matsne.gov.ge/en/document/view/1152405?publication=1
How to get the status of a virtual IT zone entity?
To create a company in the virtual IT zone, at least one employee must be registered – a director. The main advantage is that the employee does not necessarily need to be a resident of Georgia and even physically stay in the country.
To include a company in the preferential zone, you must first obtain a confirming status, and then a confirming certificate (an example of a certificate is in the article above). The first stage takes no more than 10 days, the second - no more than 2 days. No more additional permissions, regulatory documents or licenses are required, the certificate is the main document.
You can register a company remotely. You can choose a contractor or a specialist who provides consulting services and provides business registration services remotely in the web directory GEO-ASK.COM in the Services section. Selected organizations in the web directory provide qualified assistance in starting a business in Georgia. The specialists will give you detailed advice and answer all your questions, and then register your company in the virtual IT zone of Georgia (remotely).
The companies represented in the web directory undertake full support of the process, including the remote opening of a Bank account in the leading banks of Georgia within 1-2 working days.
Another important peculiarity – at the moment Georgia has not signed international obligations to implement a single standard of financial reporting and automatic exchange of financial information (CRS). This means that Georgian banking institutions do not transfer financial data of their clients to any other countries and organizations.
Taxation of IT zone entities in Georgia
If the company provides its services to foreign clients outside Georgia, it is exempted from income tax (15%) and VAT (18%). These taxes are levied only if the IT company does business with a foreign enterprise on the territory of Georgia. Since such a company is a legal entity and is already considered a resident of the country.
A company registered in the IT zone, of course, can enter into transactions with residents, sell them their services or products. But all profits received from such transactions will already be taxed.
At the same time, enterprises of the virtual zone in Georgia are not exempted from tax on dividend payments. Its amount is 5%.
If dividends are paid to a Georgian shareholder, this person will not be in the database of taxable entities. If dividends are paid to a foreign shareholder, the issue of taxes shall be settled within the framework of the double taxation agreement between Georgia and another country, if there is such an agreement.
In order to avoid tax, a foreigner must submit a certificate of tax residence of his / her country to the tax authorities of Georgia.
Russia and Georgia have not signed an agreement on the elimination of double taxation, so Russian citizens are obliged to pay tax both in Georgia and in Russia.
But since Georgia does not exchange financial information with other countries, the dividends can be credited to the personal account of the shareholder in the Georgian Bank. You can then cash out via Visa and MasterCard anywhere in the world. In this case, the revenue data will not be known to the fiscal authorities of the non-resident shareholder.
Another way to optimize financial revenues is if the income of the subject of the virtual zone is not issued in the form of dividends but in other legal ways. Then it will also not be taxed in Georgia.
The registration procedure of an IT company
To start the registration procedure of a company in the virtual zone you will need to fulfill the following conditions:
- Come up with the name of the company.
- Choose the legal form of the enterprise.
- Hire at least one manager (a Director).
The legislation of Georgia is very loyal – there are no special requirements for the Director and staff of the subject of the IT zone. The head can be any person - a Georgian or a citizen of another country. It is also not necessary to hire staff from among residents of Georgia. It is allowed to attract remote specialists on a contractual basis. The Director does not have to be physically present on the territory of Georgia – it is allowed to manage the company and financial issues through Internet banking.
The main organizational and legal forms of virtual IT companies are Limited Liability Company (LLC), Private Limited Company, Joint Stock Company (JSC).
The presence of authorized capital is not required.
Registration of a virtual IT company takes place in the Public Register of the House of Justice. The list of documents does not differ from the list of papers required for registration of an ordinary Georgian company.
- If the founder of the company is an individual, his international passport will be required, as well as the passports of all other Directors or shareholders or authorized representatives of the future firm.
- If the founder is a legal entity, in addition to passports, the Charter of a foreign legal entity, a certificate of registration or an extract from the trade register will be required.
- If the founder is another company, a certificate of incorporation and a Charter of the parent company will be required to establish the entire chain of ownership to the final beneficiary.
The cost of registration of a legal entity in the House of Justice at the moment is 200 Gel, which is equivalent to about $70.
It should be added that it is not required to confirm or renew annually the certificate of the subject of the virtual IT zone in Georgia. If necessary, the liquidation procedure of the company takes only 3-7 working days.
Self-registration of an IT company
Despite the simplified regime of registration of companies in Georgia, it can be quite difficult for foreigners to do it on their own. It is necessary at least to be well-versed in local legislation and to know the Georgian language since all documents to the state bodies are submitted exclusively in the Georgian language.
In addition, the law puts forward a number of mandatory requirements for an IT company. In particular, when registering, it is necessary to have a legal address in Georgia and provide constituent documents in the Georgian language, and subsequently, it is necessary to report on the activities of the firm on a monthly basis.
Entrust these concerns to professionals! In the web directory GEO-ASK.COM you can easily find the right performers who will save time, financial and nervous resources. The specialists know the Georgian language, have knowledge of national tax code and have extensive experience in the registration of any companies in Georgia.
To register a company, a notarized power of attorney will be required – for CIS countries, citizens of other countries will need to apostille it additionally. After receiving the power of attorney, it is translated into Georgian and notarized.
Then your chosen executor or company registers your company in the House of Justice, in the tax authorities, after which they receive a special status of a subject of the virtual zone and open a corporate account in any chosen bank of Georgia. All constituent documents will be placed in electronic form on the website of the Public Register.
Also, in the web directory, you can find companies, lawyers, accountants, etc., which will provide you with all the subsequent support of the company, including representation of the client's interests in public authorities and financial institutions.
For more information, you can contact us in the chat on this page, visit the web directory GEO-ASK.COM to find a contractor or a partner and read other articles that reveal the issues and subtleties of business in Georgia. We recommend you to pay attention to the investment climate in Georgia, which describes in detail the opportunities, benefits, and features of doing business in Georgia.
PS: Please note, as part of the project "The World Citizen" we tell you and show about successful business cases and the lives of entrepreneurs who founded their business in Geor