What is a Virtual Zone Entity in Georgia?

pict_What is a Virtual Zone Entity in Georgia?

Georgia is becoming an increasingly popular jurisdiction for doing business. Georgia offers great ease of business creation and management. The absence of exchange control rules, the free entry and exit of foreign capital, the relatively low cost of services, the stability of the banking system, its geographical location as a gateway between Europe and Asia make Georgia an attractive destination for international companies outside the EU. It should also be noted that Georgia has not made any commitments to Automatic Exchange of Bank Information or to the OECD's TIEA agreement.

Some key features of a Virtual Zone Entity in Georgia

  • A VZE is exempt from VAT (18%) and Corporate Income Tax (15%), if the company provides its services to foreign customers outside Georgia.
  • In the event of a dividend distribution (to a non-resident physical or legal person), only the dividend tax is to be paid by the company VZE (5%).
  • If dividends are distributed to a foreign shareholder, the taxation of that shareholder must be analysed taking into account the double taxation treaty between Georgia and his country of residence (if any).
  • Dividends distributed in Georgia to a Georgian shareholder will not be included in its tax base.

If the income of the Virtual Zone Entity is not distributed as dividends, there will therefore be no taxation in Georgia.

  • For the Georgian State, it is essential that a foreign investor can enjoy all the advantages of doing business in or through Georgia without having to stay or come to Georgia. For this reason, the director of the VZE may be a Georgian national or a foreigner residing in Georgia or residing abroad. The Director shall manage the company's account through an internet banking service.
  • It is not necessary to have any employees in Georgia, with the exception of the accounting (very simple and very cheap) of the company VZE. This account manager is appointed at the time of the company's registration at the House of Justice in Tbilisi.

Georgian legislation defines the activities of a Virtual Zone Entity widely as "any legal entity related to Information Technology". However, according to the law, a VZE must involve into its activity "any process of research, development, support, design, production and implementation of computer information systems and software design".

It could therefore be said, on the basis of this legal definition, that any online product/service produced and provided by a VZE entity can be considered as an 'information technology activity', on the condition that the entity carries out research, development, support and design activities and holds the intellectual property rights for the product concerned.

The Georgian VZE is becoming a very interesting new solution for international IT companies developing an offshore customer base from Georgia.

Guriansoft and Gurian-Consulting's services offer for the incorporation of your Virtual Zone Entity includes all the necessary support for the creation and management of your company in Georgia, accounting and tax advisory services, as well as your representation before public authorities and banks in Georgia.