What is Virtual Zone Person Status and Why is It So Beneficial?
Georgia offers one of the most attractive tax regimes in the region for IT companies through its Virtual Zone Person (VZP) status. This designation grants qualifying tech companies a 0% corporate income tax rate on profits derived from the export of digital services and software products to clients abroad.
The status was introduced to encourage the growth of Georgia’s digital economy and attract international tech businesses to establish their base of operations within the country. It has since become a popular option for software development companies, remote IT service providers, and startups building export-oriented products. For businesses structured appropriately, the regime can result in a dramatic reduction in overall tax liability.
It is important to note that the tax exemption applies only to income earned from non-resident clients for services that are delivered from Georgia. In any other case, standard corporate income tax rules will apply, with a base rate of 15%.
Who Can Qualify for Virtual Zone Person Status?
The status is available exclusively to legal entities, such as LLCs, registered in Georgia. Unlike other preferential tax regimes (such as the Small Business Status), it is not open to individual entrepreneurs. Eligible companies must be engaged in information technology activities, which, under the Georgian Tax Code, include the research, development, support, implementation, and production of IT systems and software products.
In practice, you cannot rely solely on your business description to prove eligibility. Authorities often require you to show that you genuinely operate within Georgia. This means you must provide evidence that you deliver IT services from Georgian territory, maintain a local presence with technical staff, and earn revenue from services provided to foreign clients.
One‑Person Virtual Zone Company Regime
If your business is a one‑person Virtual Zone company, where the sole shareholder is also the software developer, Georgia provides a clear pathway to qualify, albeit with some conditions.
According to the official methodical guideline on Virtual Zone Person taxation, a single founder/developer company can still access the 0% corporate tax benefit. The key requirement is that the developer must create the IT product within Georgia and deliver it abroad.
How to Apply for Virtual Zone Person Status
The application process is fully electronic and managed by the Financial-Analytical Service of Georgia. After you register your legal entity, submit your application through this portal using the online form. In your application, describe any past or current IT projects, provide an overview of your technical team and structure, and include documentation that supports the nature and scope of your IT services.
The Financial-Analytical Service may request additional information, including contracts with foreign clients or evidence of employee presence in Georgia. All submissions are treated as confidential. If successful, your company will receive a digital certificate within two business days of approval. This certificate is also made publicly available on the agency’s website and shared with the Georgian Revenue Service for tax administration purposes. The application processing period is 10 working days.
What Are the Tax Benefits?
Virtual Zone Person status allows your company to keep 100% of its pre-distribution profits by fully exempting corporate income tax on earnings from exporting software or digital services. This applies as long as you provide these services from Georgia to clients who are non-residents.
Another key efficiency comes from Georgia’s Estonian-style corporate tax system, which taxes profits only when distributed. Virtual Zone Person companies avoid corporate income tax but pay a 5% dividend tax when profits go to shareholders. Until distribution, retained earnings remain untaxed, letting businesses reinvest profits for growth without immediate tax consequences. Additionally, Georgia’s network of double taxation treaties across 58 jurisdictions in Europe and Asia can often reduce the 5% dividend tax rate to 0%.
While Virtual Zone Person companies benefit from 0% corporate profit tax, this perk does not extend to employee salaries. Any salary paid to Georgian-resident employees is subject to a 20% withholding tax, plus mandatory pension contributions: employees contribute 2% of gross salary, and employers pay an additional 2% on their behalf.
Activities that commonly benefit from the regime include custom software development, cloud-based platforms, managed IT services, technical support, and other B2B digital offerings. As long as the end client is located outside Georgia and the work is carried out locally, the income qualifies for exemption.
It’s important to distinguish this from VAT (Value Added Tax) obligations. If your company’s turnover exceeds 100,000 GEL in any 12 months, VAT registration becomes mandatory. Under Georgia’s B2B VAT rules, companies treat services supplied to non-resident clients as outside the scope of Georgian VAT, effectively applying a zero rate.
Compliance Requirements and Risk of Revocation
Although the Virtual Zone regime is generous, it comes with clear expectations. Companies must ensure that services are genuinely provided from Georgia, and they must maintain a physical or operational presence in the country. This often includes having employees, mostly programmers, working locally, as well as evidence of ongoing service delivery to non-resident clients.
Failure to comply with these practical standards may lead to revocation of the status, even if the company remains legally active in the IT sector. Authorities can revoke the status if the company engages in tax avoidance schemes, requests it voluntarily, or switches to a different preferential regime (such as International Company status).
Compliance also requires regular tax reporting. Even though the profit may be exempt, companies must still file monthly corporate declarations with the Revenue Service and keep detailed records in case of audits or reviews.
Is Virtual Zone Person Status Right for Your Business?
This status suits tech companies that export services, particularly those in software development, IT outsourcing, SaaS, and other remote-first service models. Startups and established firms alike can benefit from the cost savings and international competitiveness that come with the 0% tax regime.
That said, not every business will qualify. Companies focused on local markets, or those lacking operational presence in Georgia, are unlikely to meet the eligibility threshold. Likewise, businesses outside the IT sector or those structured solely for tax optimization without local substance may struggle to obtain or retain the status.
About Andersen Georgia
At Andersen Georgia, we work with startups, established IT companies, and global entrepreneurs to help them navigate Georgia’s most competitive tax regimes – including Virtual Zone Person status. From registering your legal entity and preparing a strong application to ensuring long-term compliance and international tax efficiency, we provide comprehensive support tailored to your business model.