Published by Bookkeeping.ge — Assio Lex and Associates LLC
Updated
International tax and business in Georgia
Georgia offers several tax structures for IT businesses, but they serve different operating models. Compare a standard Georgian LLC, Individual Entrepreneur with Small Business Status, Virtual Zone and International Company status before deciding how to organise your software business.
Discuss your IT business
Compare the main IT business tax structures
| Structure | Main tax treatment | Who should examine it? | Main eligibility question |
|---|---|---|---|
| Standard Georgian LLC | Generally 15% profit tax under the distributed-profit system; dividends generally 5% | Companies with broad activities, investors or a growing team | Which distributions and other taxable payments arise? |
| IE with Small Business Status | 1% on qualifying turnover; ordinarily 3% from the month the GEL 500,000 threshold is exceeded through year end | Eligible individual entrepreneurs | Does the actual activity and income qualify? |
| Virtual Zone person | Profit-tax exemption for qualifying IT supplied outside Georgia; dividends generally 5% | Georgian companies creating qualifying information technology | What is created, where, and to whom is it supplied? |
| International Company | 5% profit tax and 5% employment income tax; qualifying dividends exempt from withholding | Eligible companies carrying out permitted activities in Georgia | Are the activity, experience and operational conditions met? |
These figures apply to different tax bases. A 1% turnover tax is not directly comparable with a tax on distributed profit. Compare expected revenue, operating costs, payroll and owner withdrawals before choosing a structure. VAT and work-authorisation questions remain separate parts of the review.
Standard LLC: flexibility and retained profits
A standard LLC can suit a business with several revenue streams, investors or activities that do not fit a preferential status. Under the ordinary distributed-profit model, retaining profits for the business generally defers profit tax, while distributions and certain other payments can trigger tax.
Plan owner remuneration and company spending clearly. Salary, dividend, loan and reimbursement entries need their own accounting treatment. The statutory profit-tax base and gross-up rules should be reflected in the model rather than applying 15% mechanically to every bank withdrawal.
For a software company, maintain separate revenue categories for development, licensing, support, resale and any consulting work. This makes the business easier to assess if a special status becomes relevant later.
Small Business Status: an individual entrepreneur route
Small Business Status belongs to an eligible entrepreneur natural person; it is not an LLC tax election. The actual activity matters. Software development and a contract described as consulting should not be treated as interchangeable without reviewing the services delivered and the excluded-activity rules.
The ordinary GEL 500,000 threshold is a calendar-year turnover question. The separate GEL 100,000 VAT-registration test uses a rolling 12-month period for relevant taxable transactions. Monitor both rather than using the Small Business Status threshold as a VAT exemption.
Keep contracts, invoices and turnover records consistent with the approved activity and effective status date. The seven Small Business Status checks explain the broader residence, income and growth issues.
Virtual Zone: qualifying technology and foreign supply
Virtual Zone status focuses on qualifying information technology created in Georgia by the status holder and supplied outside Georgia. A foreign customer alone does not make every company receipt exempt. Understand what the Georgian business creates and how its work is evidenced.
A useful evidence file connects development contracts, staff or contractor responsibilities, project records and deliverables to the relevant income. Separate qualifying IT supplies from local sales, resale and other activities. Maintain a reasoned allocation of costs where the business has mixed income.
The company’s profit-tax exemption does not automatically exempt salaries, dividends or every VAT transaction. Standard employment income is generally taxed at 20%, and dividends generally at 5%, unless a separate applicable rule changes the treatment. Review purchases and foreign services in the normal accounting process.
International Company: eligible activities and real operations
International Company status offers a different set of benefits for eligible businesses. The framework includes 5% profit tax and 5% tax on qualifying employment income, a qualifying dividend exemption and a property-tax exemption for relevant property other than land used for permitted activities.
Eligibility depends on the approved activity and qualifying experience, together with the business’s operations in Georgia. Organise evidence of the operating history, qualified people, actual services and operating costs before an application. The status should follow the commercial activity rather than a company name containing “IT”.
Read the dedicated International Company Status guide for the fuller discussion. Mixed activities and any subsequent change in business model should also be reviewed against the status conditions.
Compare total business cost, not only the headline rate
Revenue and margin
Model sales, contractor costs, payroll and overheads. A low turnover rate and a tax on distributions can produce different outcomes at different margins. Include the owner’s actual withdrawal plans.
Customers and contracts
Identify who buys the service, what rights are transferred and where the work is performed. Keep licensing, development, support and consulting descriptions precise.
People and substance
Record who develops the product, manages delivery and makes decisions. Connect the staffing plan to payroll, residence and the 2026 work-authorisation rules.
Group transactions
Where a parent or affiliate supplies funding, customers, IP or management services, examine the intercompany terms. A special tax status does not replace a transfer pricing and controlled transaction reporting review.
VAT and international payments for IT businesses
International service sales need a place-of-supply review. Some B2B services supplied abroad are outside the scope of Georgian VAT; that is different from calling every foreign invoice “zero-rated”. Local customers, consumer sales and other categories can have a different treatment.
Purchases of hosting, advertising, software and other services from non-residents can raise reverse-charge VAT questions. The business should also distinguish a software service from a royalty when reviewing withholding tax. See payments abroad and withholding tax for the payment checklist.
Plan your IT accounting in Georgia
Bookkeeping.ge helps IT founders organise the comparison, establish revenue categories and build the recurring accounting process. Our tax advisors can review status eligibility and international transactions with the legal team of Assio Lex and Associates LLC.
Prepare a short activity description, sample contracts, expected annual revenue, payroll plan and details of related companies. Then compare ongoing support through our accounting fee calculator. Company packages and dedicated individual entrepreneur services have separate starting prices.
IT tax regime questions
Can an LLC use the 1% Small Business Status rate?
No. This route is for eligible entrepreneur natural persons. A company needs to examine the corporate structures available to it.
Does every software business qualify for Virtual Zone or International Company status?
No. Review the actual activity, operating arrangements and applicable eligibility requirements before planning the tax treatment.
Can you compare the options using our own figures?
Yes. A model using revenue, costs, employees and owner withdrawals gives a more useful comparison than headline rates alone.