Tax Exemptions & Preferential Tax Regimes in Georgia
A practical overview of Georgia's preferential tax statuses - Virtual Zone Person, International Company Status, Free Industrial Zones, Small Business and Micro Business - who qualifies, the headline rates, the legal framework, and how to apply.
Georgia pairs a simple baseline tax system with an unusually rich set of preferential regimes. Under the "Estonian" corporate model, a standard Georgian company pays no profit tax while earnings stay in the business: the 15% corporate income tax arises only when profit is distributed, and dividends paid to individuals carry a further 5% withholding. On top of that baseline, seven special statuses can reduce the burden dramatically - in some cases to zero. Each one is examined in detail below.
One rule applies to all of them: no status is automatic. Every regime requires a formal application, has precise eligibility conditions, and can be lost if the conditions stop being met. A certificate alone is never enough - the Revenue Service looks at what the business actually does.
The legal framework and the baseline
The regimes below sit within the Tax Code of Georgia, which sets the standard rates and the conditions for each special status. Free Industrial Zones operate under the Law of Georgia on Free Industrial Zones, and International Company Status is anchored in Article 23 of the Tax Code and in Government Ordinance No 619 of 8 October 2020, and is granted to a particular company by a decree of the Government of Georgia. Understanding the baseline is essential, because every preferential status is measured against it.
Applies the distributed-profit ("Estonian") model: corporate income tax of 15% is triggered on distribution rather than on accrual, and dividends to individuals carry a 5% withholding. Standard personal income tax on salary is 20%.
| Status | Who it is for | Headline rate |
|---|---|---|
| Micro Business | Individuals, smallest solo activity | 0% income tax |
| Small Business | Individual Entrepreneurs | 1% of turnover (3% from the month the ceiling is passed) |
| Virtual Zone Person | IT companies exporting services | 0% profit tax on foreign IT income |
| International Company | Established IT and maritime businesses | 5% corporate income tax on distribution |
| Free Industrial Zone | Exporters located inside a zone | 0% (4% on domestic trade) |
| Special Trading Company | Re-export traders | Exempt on permitted trading |
1. Micro Business Status - 0% for the smallest solo activity
Micro Business Status is the entry-level exemption for individuals testing an idea. A registered individual with micro status pays 0% income tax on business revenue, and while turnover stays under the threshold there are no regular declarations to file - the lightest possible compliance load in the Georgian system.
Conditions
- Available to individuals (registered at the Revenue Service), not to companies.
- Annual turnover must stay below 30,000 GEL.
- No hired employees are allowed.
- Inventory balance must stay below 45,000 GEL.
- The activity must not be on the excluded list (activities requiring licences, currency operations, and similar).
When your turnover approaches the ceiling, the natural next step is Small Business Status - crossing 30,000 GEL does not create a crisis, but it should be planned rather than discovered.
2. Small Business Status - 1% of turnover for Individual Entrepreneurs
The best-known Georgian incentive: an Individual Entrepreneur with Small Business Status pays 1% of gross turnover (not profit) up to 500,000 GEL per year - for agritourism activities the ceiling is 700,000 GEL. Once the ceiling is passed, turnover is taxed at 3% from the start of that month until the end of the year, not only on the excess, and the status is lost if the ceiling is exceeded in each of two calendar years; the Code does not say in terms that they must be consecutive, so confirm how the years are counted. The regime is open to foreigners: you do not need to be a Georgian citizen or resident to register as an IE and apply.
1%
Tax on turnover
Up to the annual ceiling.
500,000 GEL
Standard ceiling
700,000 GEL for agritourism.
3%
Rate once the ceiling is passed
From the start of that month to the year end.
Conditions and mechanics
- Register as an Individual Entrepreneur, then separately apply for Small Business Status at the Revenue Service - registration alone does not grant the 1% rate.
- File a short income declaration every month, even for months with zero income.
- Keep the activity genuinely independent: a single "client" directing your daily work like an employer risks requalification of the income as salary (20%).
- Banks and the Revenue Service expect turnover to flow through accounts consistent with the declared activity.
Excluded activities
- Advisory professions are outside the regime: legal, medical, architectural, audit and consulting services are excluded by regulation.
- Construction and specialised construction services supplied to Georgian companies, organisations or IEs no longer qualify following recent changes.
- Licensed activities, gambling, currency exchange, and certain trading patterns are also excluded.
For a solo consultant or developer billing foreign clients, 1% of turnover is usually the most efficient structure in Georgia - provided the activity is genuinely eligible and the monthly filings are kept up.
Next step
If Small Business Status is your route
The 1% is real, and so is the excluded-activity list that decides whether you may use it. Trustlex confirms eligibility in writing before registering the Individual Entrepreneur, and sets the monthly filing up.
See the 1% route3. Virtual Zone Person - 0% profit tax for exported IT services
Virtual Zone Person (VZP) status applies to Georgian companies (typically LLCs) engaged in information technology - the research, development, support, implementation and production of software and IT systems. A VZP company pays 0% corporate income tax on profit from IT services delivered to clients outside Georgia, and those exports fall outside Georgian VAT. Dividends still carry the 5% withholding when profits are distributed to individuals, and any Georgian-source income is taxed under the normal rules.
What the exemption really requires
- A valid VZP certificate - necessary, but on its own not sufficient.
- Genuinely eligible IT activity: software and IT systems, not marketing, design-only or resale businesses wearing an IT label.
- Software actually developed in Georgia. In practice this means paying market-level salaries or service fees to the people doing the development, taxed at source in Georgia.
- Clients located outside Georgia for the exempt income stream.
Since the Revenue Service tightened its practice, the substance question decides everything. Keep employment or contractor agreements, payroll records, repository and delivery evidence - a VZP company that cannot show who wrote the code, from where, and for which foreign client should expect its exemption to be challenged.
As a rule, treat the VZP certificate as the beginning of the analysis, not the end. Build and keep the substance file from day one.
Next step
If you are exporting software
Virtual Zone status turns on evidence: who writes the code, where they sit, and what the contracts say. Trustlex tests the substance before applying, then files the application and keeps the file ready for review.
See the Virtual Zone route4. International Company Status - 5% for established IT and maritime businesses
International Company (IC) status is the heavyweight regime for mature businesses, granted by government decree for qualifying IT and maritime/shipping activities. It replaces the standard rates with a package: 5% corporate income tax on distributed profit, 5% personal income tax on employee salaries (instead of 20%), 0% withholding on dividends, and a property tax exemption (except land) for assets used in the permitted activity. The taxable base can be reduced further by salaries paid to Georgian-citizen tax residents and by qualifying R&D expenses.
Together they provide for the grant of International Company Status by decree of the Government of Georgia to companies carrying on permitted IT or maritime activities, replacing the standard rates with a reduced package for the permitted activity.
Conditions
- The company's activities must be on the permitted IT or maritime list, and as a rule at least 98% of income must come from those activities.
- Experience requirement: the company (or its parent/group holding more than half of it) needs a track record - broadly two years or more in the qualifying field.
- Real presence in Georgia: the status targets substantial operations, not letterbox structures.
- Application goes through the Revenue Service, which has 10 days to check it, and then to the Ministry of Finance and the Government of Georgia, for whose decision the ordinance sets no deadline; do not plan on a date.
For an IT business with a real team, IC status often beats Virtual Zone economics once payroll matters: the 5% payroll rate applies to every employee, which VZP does not offer.
5. Free Industrial Zone - 0% inside the licensed zones
Georgia operates Free Industrial Zones in Poti, Kutaisi (including Hualing FIZ) and Tbilisi. An enterprise licensed inside a zone pays 0% corporate income tax, 0% on dividend distributions and 0% property tax, and goods brought into the zone enter free of VAT and customs duty. The main counterweight: revenue from trading with Georgian-registered persons outside the zone is taxed at 4%, so the regime rewards genuinely export-oriented operations.
Governs the creation and operation of Free Industrial Zones and the licensing of enterprises inside them, under which qualifying zone enterprises benefit from exemptions on income, dividends, property and import VAT/customs for permitted operations.
Who it fits
- Manufacturing, processing, warehousing and re-export businesses serving foreign markets.
- Operations able to physically locate in a zone - a FIZ licence comes from the zone operator with annual fees, and the premises must be inside the zone.
- Groups structuring regional trade flows through the Caucasus corridor.
Payroll, licensing fees and the 4% domestic-trade charge should be modelled before committing: for a services company selling into Georgia, a FIZ is usually the wrong tool; for an exporter of goods it can be close to a zero-tax environment.
6. Special Trading Company - exemption for re-export trading
A Special Trading Company (STC) is a status granted by the tax authority to companies that buy foreign goods and re-export them, or sell them from a customs warehouse without the goods entering free circulation in Georgia. Profit from these permitted trading activities is exempt from corporate income tax on distribution. The status carries strict boundaries - other income is narrowly limited, and the company must not perform activities outside the permitted trading scope. STC is a niche tool, but for pure re-export traders it remains a clean exemption.
7. Other exemptions worth knowing
- High-mountain settlement enterprises: businesses registered and genuinely operating in listed high-mountain settlements enjoy multi-year income and property tax benefits designed to develop those regions.
- Agriculture: income from primary agricultural production is exempt within statutory thresholds, and specialised regimes support agricultural cooperatives.
- Startup status: innovative startups certified under the national programme can access targeted incentives for their early years.
A worked comparison
Solo developer vs. a small IT team
A single developer billing foreign clients about 200,000 GEL a year, compared with a five-person software company exporting its work.
- 1The solo developer registers as an Individual Entrepreneur and applies for Small Business Status, paying 1% of turnover while filing monthly.
- 2The five-person company weighs Virtual Zone (0% on foreign IT profit, but 20% payroll) against International Company Status (5% on distribution and 5% payroll).
- 3Both map their clients, income streams and the exclusion lists before applying.
For the solo developer the 1% turnover regime is usually most efficient; for the team, once payroll is significant, the 5% payroll rate under IC status can outweigh the 0% profit rate under VZP.
Illustrative only; the right answer depends on the full picture, not the headline rate.
Choosing between the regimes
- Map your income streams: who pays you, from which country, for what activity - the answer often selects the regime by itself.
- Check the exclusion lists before anything else; an excluded activity ends the analysis.
- Model the full picture, not just the headline rate: dividends, payroll, VAT registration and the cost of compliance all move the result.
- Apply formally through the Revenue Service (for Virtual Zone status, to the Financial-Analytical Service of the Ministry of Finance; for IC status the application then goes on to the Ministry of Finance and the Government) and wait for confirmation before relying on the rate.
- Keep evidence from day one - contracts, payroll, delivery records - because every Georgian preferential regime is substance-tested.
Common mistakes we see
The status that was granted, and then quietly lost
An IT company obtains Virtual Zone status with two developers working from Tbilisi. Eighteen months later both developers have relocated abroad and the work is performed entirely outside Georgia.
- 1The status was granted on the basis of IT activity carried out in Georgia. That fact has now changed, and nobody filed anything to say so.
- 2The company keeps applying the 0% treatment to its foreign-sourced income because the certificate is still in the drawer.
- 3On review, the Revenue Service examines where the activity is actually performed: payroll location, contracts, equipment, who does the work.
- 4The exposure is not only the tax that should have been paid; it is the interest and penalty accruing across every period since the substance disappeared.
A preferential status is a continuing condition, not a permanent award. The dangerous version of this failure is that nothing visible happens at the moment the entitlement ends, so the company keeps behaving as though it holds a status it no longer qualifies for.
Illustrative. Substance requirements and review practice change; confirm the current position before relying on any status.
- Treating a Virtual Zone certificate as the exemption itself, with no development substance in Georgia behind it.
- Running employment through a 1% Individual Entrepreneur - one controlling client, fixed hours, requalification risk.
- Missing monthly nil declarations on Small Business Status: the return stays due in a month with no income, and the gap surfaces when a bank or the Revenue Service looks.
- Mixing Georgian-source revenue into an exempt stream and assuming the status covers it.
- Discovering the 500,000 GEL ceiling in December instead of planning for it in June.
Trustlex prepares and files status applications, builds the substance file the Revenue Service expects, and keeps the monthly compliance running after the status is granted. Every recommendation on this platform is preliminary until confirmed by the authority - but with the right preparation, confirmation is the expected outcome, not a gamble.
General information, not legal or tax advice. Rates, thresholds and eligibility change; confirm the current position with the Revenue Service before relying on any regime.