Virtual Zone or International Company: the choice is not 0% against 5%
Georgia offers two preferential statuses to software businesses, and they are routinely compared on the wrong number. Virtual Zone status can exempt qualifying profit distributions from exported IT work, while International Company status taxes distributed profit at 5%. But International Company status also taxes qualifying employment income at 5% where ordinary rules commonly mean 20%, so for a company with staff the payroll line can matter more than the profit line.
Two statuses that are not variants of each other
Virtual Zone status attaches to IT produced in Georgia and sold abroad, and can exempt qualifying profit distributions from that activity. International Company status is a wider regime: distributed profit is taxed at 5%, qualifying employment income at 5%, and the special rule means no Georgian tax at source on dividends. They are not two settings of the same dial, and a business that fits one may not fit the other at all.
Where the money actually differs: payroll
Under Virtual Zone status ordinary employment rules generally apply, which commonly means 20% income tax on salaries. Under International Company status qualifying employment income is taxed at 5%. For a founder working alone and distributing profit rarely, the profit-side difference is the one that shows. For a company paying a team of developers every month, the fifteen-point gap on salary can outweigh the gap on distributions entirely. The arithmetic turns on headcount, not on the slogan.
Getting in: speed against scrutiny
Virtual Zone status has a statutory decision time of ten working days after application and no fixed headcount requirement, though the IT itself must be produced in Georgia. International Company status is a heavier process: a Revenue Service review followed by a government decision, with the status applying from the start of the month in which it is granted. It also generally expects at least two years of relevant experience, held by the applicant or by a qualifying related or represented enterprise whose partner owns more than half, plus real substance in Georgia in the form of income-generating activity, qualified staff and appropriate operating costs.
What neither status does for you
Neither removes the VAT question: registration is triggered by GEL 100,000 of VAT-taxable transactions in any continuous twelve-month period, under both regimes. Neither covers income outside the permitted activity. A Virtual Zone company with non-qualifying revenue has to tax it separately and allocate costs accordingly, and an International Company is capped at non-permitted revenue of 2% of its permitted-activity revenue excluding VAT. A status is a frame around one kind of income, not a blanket over the whole company.
Written by us from the source linked above, not investment, legal or tax advice. Figures and rules change — confirm anything that matters before acting on it.
