Three regimes at a glance

Georgia is known for a low, simple tax system, and on top of the standard rules it runs three special regimes that can take your effective corporate tax to a fraction of the norm — or to zero. They are not interchangeable. Each was designed for a specific kind of business:

• Virtual Zone Person (VZP) — for IT and digital services delivered abroad.
• International Company Status (ICS) — for established IT or maritime companies exporting their services.
• Free Industrial Zone (FIZ) — for physical goods: manufacturing, trade and processing inside a designated zone.

For context, a regular Georgian company with no special status pays the standard how the Estonian-model 15% tax works for your LLC — corporate income tax of 15% on the Estonian model, meaning tax is due only when profit is distributed, not while it stays in the business. Every regime below is measured against that baseline.

Virtual Zone: 0% on IT exports — and the substance trap

The Virtual Zone is the most popular route for software developers, SaaS founders and IT freelancers who incorporate in Georgia. A Virtual Zone Person pays 0% corporate income tax on IT and digital services that are exported abroad. When the profit is finally paid out, a 5% dividend tax applies on distribution. Services billed to foreign clients are treated as export, so no VAT is charged on them.

There is no statutory minimum staff count and no mandatory office. That sounds frictionless — and it is the trap. To keep the 0% rate, you must be able to show that the services are genuinely performed from Georgia. This is the substance requirement. A shell with a Georgian registration number but no real activity in the country invites the tax authority to deny the exemption. In practice that means having a real link to Georgia — work actually carried out here, not just a mailbox.

The Virtual Zone sits on top of an ordinary Georgian LLC, so the first step is always to register the Georgian LLC that holds your tax status, then apply for Virtual Zone recognition for that entity.

International Company Status: 5% / 5% / 0% — and a high bar

International Company Status, introduced in October 2020, is the heavyweight regime for serious operators. The numbers are excellent:

• 5% corporate income tax (Estonian model, on distribution)
• 5% personal income tax on employee salaries
• 0% property tax (excluding land) on property used for the permitted activity
• 0% dividend withholding on distributions

The catch is eligibility. ICS is open only to IT or maritime companies. At least 98% of revenue must come from the qualifying activity and from export. The applicant must be a Georgian enterprise (or the representative of a non-resident) with at least two years of operating history in the sector. It must keep genuine physical substance — a real office and staff — and the status is not automatic: it is granted by the government.

In short, ICS rewards an established, exporting business with employees on the ground. It is not a vehicle for a brand-new one-person company. For the full picture of both IT regimes, see Georgia’s IT company tax privileges (Virtual Zone & ICS).

Free Industrial Zone: full exemption for goods

The Free Industrial Zone regime is built for physical business — manufacturing, processing and trade carried out inside a designated zone. The exemptions are the broadest of the three: full exemption from corporate profit tax, dividend tax, property tax and VAT, plus 0% customs on the import and export of goods, raw materials and equipment. The only routine tax is 20% personal income tax on the salaries of local staff.

Several Free Industrial Zones operate in Georgia, located in Tbilisi, Kutaisi and Poti. If your business is goods rather than IT services, this is the regime to study — start with setting up in a Georgian Free Industrial Zone.

The 4% domestic-sales catch

The full exemption assumes you are exporting. The moment you sell into the Georgian domestic market, the picture changes: those national sales attract VAT plus 4% of the revenue from them, on top of the usual payroll PIT. The FIZ is a powerful base for an export operation; it is far less attractive if your real market is inside Georgia.

Side-by-side comparison

Regime	Activity	CIT	PIT	Dividend	VAT / Customs	Eligibility / substance	Application needed
Virtual Zone	IT / digital services, exported	0%	Standard	5% on distribution	No VAT (export); customs n/a (services)	No minimum staff/office, but must show services performed from Georgia	Yes — Virtual Zone recognition
International Company Status	IT or maritime, exported	5% (Estonian model)	5% on salaries	0%	—; 0% property tax (excl. land)	≥98% revenue from qualifying activity & export; ≥2 yrs history; office + staff	Yes — government grant
Free Industrial Zone	Goods: manufacturing / trade in-zone	0% (full exemption)	20% on local staff	0%	0% VAT & 0% customs on import/export of goods	Operate inside a designated zone; domestic sales add VAT + 4% of revenue	Yes — register in the zone
No special status	Any	15% (Estonian model)	Standard	Standard	Standard	—	No

VZ vs ICS — the mutual-exclusivity decision

For an IT company, Virtual Zone and International Company Status are the two doors — and you cannot stand in both. They are mutually exclusive: being granted ICS revokes your Virtual Zone status. So the choice is real and one-directional.

Virtual Zone gives you 0% corporate tax with almost no entry barrier, but the profit you eventually distribute is taxed at 5%, and you carry the substance risk alone. ICS charges 5% corporate tax but pays 0% on dividends and cuts payroll tax to 5% — yet it demands two years of history, the 98% revenue test and real staff on the ground. A young, lean software company almost always starts in the Virtual Zone. A mature exporter with a payroll and a track record may save more under ICS, especially once dividends and salaries are in the mix.

Which regime for which business

• Solo developer or small SaaS, all clients abroad → Virtual Zone. Lowest barrier, 0% on exports, just keep genuine Georgian substance.
• Established IT firm with employees and 2+ years of trading → run the numbers on ICS; the 0% dividend and 5% payroll can outweigh the 5% corporate rate.
• Maritime services business, exporting → ICS is the only one of the three built for you.
• Manufacturer, processor or goods trader selling abroad → Free Industrial Zone, for the full exemption and 0% customs.
• Goods business selling mainly inside Georgia → the FIZ 4% domestic charge erodes the benefit; a standard 15% Estonian-model LLC may be simpler.

How to apply, and common reasons for rejection

All three regimes sit on a registered Georgian entity, so step one is incorporation. From there:

• Virtual Zone — apply for Virtual Zone Person recognition for your IT company after registration.
• ICS — apply for the government grant of International Company Status, evidencing your sector, two-year history and the 98% export/activity split.
• FIZ — register your company inside one of the designated zones in Tbilisi, Kutaisi or Poti.

Rejections and later challenges usually come from the same handful of issues: no real substance (the Virtual Zone services are not demonstrably performed from Georgia), failing the 98% test for ICS, missing the two-year history requirement, claiming an activity outside the permitted scope (non-IT/non-maritime for ICS), or treating domestic FIZ sales as if they were exempt exports.

FAQ

Can a Virtual Zone company also get International Company Status?

Not at the same time. The two are mutually exclusive — being granted ICS revokes Virtual Zone status. You choose one path for the company.

Does the Virtual Zone really require zero staff or office?

There is no statutory minimum staff count or mandatory office. However, you must be able to show the services are genuinely performed from Georgia. Without that substance, the 0% exemption can be denied.

What tax does a Free Industrial Zone company pay on sales inside Georgia?

Domestic sales are not covered by the exemption. They attract VAT plus 4% of the revenue from national sales, on top of the usual personal income tax on local salaries.

What does a company pay if it has no special status?

The standard regime is 15% corporate income tax on the Estonian model, meaning tax is due only when profit is distributed, not while it remains in the company.

This article is general information, not tax or legal advice. Tax rules and eligibility can change, and your situation may differ. Confirm the current requirements with a qualified Georgian adviser before choosing a regime.