IT Freelancer or IT Company in Georgia: 1% Individual Entrepreneur or Virtual Zone LLC?
Georgia offers IT people two excellent positions, and they are built for different sizes of business. The individual entrepreneur on Small Business Status pays 1% of turnover with almost no administration; the Virtual Zone LLC pays no profit tax on exported IT services and 5% on dividends, with a company to run. The right choice follows from turnover, clients, team and liability, not from the headline rate. The numbers at two sizes, the decision points, and how to move from one to the other.
Developers who look at Georgia find two regimes that both sound too good: 1% of turnover for an individual entrepreneur with Small Business Status, and 0% profit tax for a company with Virtual Zone status. Both are real, both are granted on conditions, and they suit different shapes of business. The question is not which rate is lower but which structure matches how you earn, who you sell to and where you are going. This guide puts the two side by side for IT people and works the numbers at two sizes.
| Individual entrepreneur, 1% status | LLC with Virtual Zone status | |
|---|---|---|
| Who it is for | One person billing in their own name | A company that develops software in Georgia and sells it abroad |
| Tax on income | 1% of turnover, up to the annual ceiling | 0% profit tax on exported IT income; 5% on dividends when distributed |
| Ceiling | GEL 500,000 a year; 3% from the month it is passed | None on the exemption |
| Administration | Monthly turnover declaration | Monthly bookkeeping, annual accounts, payroll if you hire |
| Liability | Personal; you are the business | Limited to the company |
| Clients | Agencies, platforms, direct clients comfortable with a sole trader | Enterprises and investors that want to contract with a company |
| Team | You alone; subcontracting is possible but strains the regime | Employees and contractors in Georgia, which the status expects |
| Set-up | Registration from EUR 180 with the status assessment; the 2026 right-to-work step for foreign nationals | Formation from EUR 400, or the Starter package; the status EUR 150 assessment plus EUR 450 after a positive answer |
| Granted on | Activity not excluded (consulting is), turnover under the ceiling | Real development in Georgia, exported, evidenced |
The numbers at two sizes
The comparison that matters is after tax and after administration, at the size you expect to be in two years. Two illustrative cases, with everything distributed to the owner and exported services outside VAT in both.
EUR 600
Tax on EUR 60,000 as a 1% freelancer
Against about EUR 3,000 as a Virtual Zone LLC distributing it all
EUR 12,500
Tax on EUR 250,000 as a Virtual Zone LLC
5% on the dividend; the 1% route is over its ceiling here
GEL 500,000
The line that moves the answer
About EUR 175,000 of turnover at 2026 rates
The same developer at EUR 60,000 and at EUR 250,000
A backend developer starts alone with two foreign clients at about EUR 5,000 a month. Three years later she runs a product with two employees in Tbilisi and EUR 250,000 of exported revenue.
- 1Year one, EUR 60,000: as a 1% individual entrepreneur she pays about EUR 600 and files a monthly declaration. As a Virtual Zone LLC she would pay nothing on profit but 5% on the EUR 60,000 she distributes, about EUR 3,000, plus bookkeeping. The 1% wins by a wide margin.
- 2Year three, EUR 250,000: the 1% route passes the GEL 500,000 ceiling during the year, so 3% applies from the month in which it is passed, and exceeding the ceiling in each of two calendar years ends the status; confirm how the two years are counted. As a Virtual Zone LLC the exported income is exempt; she distributes EUR 200,000 after salaries and costs and pays 5%, EUR 10,000, with the employees on Georgian payroll.
- 3The switch happens in year two, when the first employee is hired and an enterprise client asks for a company contract: the LLC is formed, the eligibility assessment confirms the development is Georgian, and the individual entrepreneur registration is closed after the last invoice.
Neither regime was wrong; each was right at its size. Starting as a company would have cost about EUR 2,400 more in year one and the administration of a company with no need for one; staying a freelancer would have left the 1% behind in year three.
Illustrative. Rates, the ceiling, dividend withholding and the authority's practice should be confirmed when you decide.
The decision points
- Turnover: under about EUR 100,000 and growing slowly, the 1% route; approaching the GEL 500,000 ceiling, the company.
- Clients: platforms and agencies pay sole traders without difficulty; enterprise procurement and investors want a company with limited liability and a cap table.
- Team: the moment you pay a second developer regularly, the company is the structure that makes the payments, the contracts and the Virtual Zone evidence coherent.
- Activity: consulting is excluded from the 1% status and does not qualify as development for the Virtual Zone; an IT consultant is usually best served by a standard LLC.
- Residence: the 1% route needs the 2026 right-to-work step for a foreign national unless an exemption applies, and so does a foreign founder who lives in Georgia and manages a small, fourth-category company; a company with Virtual Zone status can also support a residence permit application for its founder on conditions.
- Exit: a product that may be sold one day is sold more easily as a company than as a person's activity.
Both regimes are granted on conditions and both can be lost on the facts. Trustlex gives the eligibility answer in writing before either registration is filed: for the 1% status at registration, for the Virtual Zone as a EUR 150 assessment before any application.
Moving from one to the other
- 1
Form the LLC on the Starter package while the individual entrepreneur registration is still active, so invoicing never stops.
- 2
Order the Virtual Zone eligibility assessment; if positive, the application is filed with the evidence of Georgian development.
- 3
Move the client contracts to the company from an agreed date, with the software or the development service named in each.
- 4
Close the individual entrepreneur registration after the last invoice and the last monthly declaration, so the two never run on the same income.
Next step
Which one, in writing
Tell us your turnover, your clients and your plans. Trustlex confirms the route in writing, registers the individual entrepreneur with the status assessment or forms the company with the Virtual Zone assessment, and plans the switch when the time comes.
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