Recently, Georgia has become a very popular jurisdiction providing favorable conditions for business that operates both domestically and internationally. Tax preferences, free inflow and outflow of foreign capital, a relatively low cost of services, and a stable banking system make Georgia an attractive country for international business, especially for the companies working in the information technology. In turn, the status of a Virtual Zone Entity in Georgia can help significantly reduce the tax burden and receive other benefits and preferences for international IT business focused on foreign clients. We offer you a service of incorporating a virtual IT company in Georgia remotely with a corporate account with the Bank of Georgia.
What Are the Benefits of Incorporating a Business in Georgia?
In recent years, Georgia has been doing quite a lot to attract foreign investors and promote business development. This is facilitated by the free industrial zones (FIZ) established in the country, as well as the special status of the “Virtual Zone Entity” with certain tax benefits.
Foreign investors can take advantage of all these benefits in or via Georgia without having to visit the country or stay there. It should also be noted that Georgia has not yet committed to the automated international financial information exchange and a unified standard of financial reporting. This means that Georgian banks are not obliged to disclose any financial information about their clients to the third countries.
The Virtual Zone Entity in Georgia
The Virtual Zone Entity in Georgia is a preferential tax status that is granted both to the local and international IT business in Georgia by the local tax authority. The Virtual Zone Entity is a legal entity that carries out certain activities in the field of information technology and has the status of a special trading company assigned by the tax authority of Georgia.
Profits gained by the Virtual Zone Entity outside Georgia by means of providing information technology services are exempt from taxation in Georgia.
But if a virtual IT company plans to do business with a branch of a foreign company in Georgia, then it should be taken into account that such a legal entity is considered a Georgian resident. A company registered in the IT zone can make deals with that resident and sell their products, but all profits gained from such transactions will be subject to the revenue tax of 15%.
Taxation of the Virtual Zone Entities in Georgia
One of the main advantages of having the status of the Virtual Zone Entity in Georgia is the exemption from revenue tax (15%) and VAT (18%) if the company provides its services to foreign customers outside Georgia.
Dividend Tax for the Virtual Zone Entities in Georgia
Dividends are taxed in Georgia at the rate of 5%, which must be paid by the company in favor of the state budget at the time of dividend payment.
If the payout of dividends in Georgia is made in favor of a Georgian shareholder, in this case this person will not be present in the database of taxable entities.
If dividends are distributed to a foreign shareholder, taxation of the shareholder is to be effected in the country of residence, subject to the terms of the double taxation agreement between Georgia and the country concerned (if there is any such agreement).
It will be possible to avoid such taxation if you provide the tax authority of Georgia with a certificate confirming your tax residency in another country. It should be noted that Georgia has not signed such agreements abolishing double taxation with a number of countries, and therefore nationals of different countries must make sure they do not have to pay their taxes both in Georgia and in their country of residence or origin. As an option of optimizing your taxation you could consider the dividends payout to the private accounts of individuals opened with the Georgian banks. Georgia does not exchange financial information with other countries and income data will not be known to the non-resident fiscal service. Also, you can withdraw money from your account later on using your Visa and MasterCard in any ATM across the world.
However, if the income of the Virtual Zone Entity is distributed not in the form of dividends, but in other legal ways, it is not taxed in Georgia.
Governance and Staff of the Virtual Zone Entities in Georgia
Georgian law does not advance any special demands on the executives and personnel of the Virtual Zone.
The director of the Virtual Zone Entity can both be a local or a foreign resident. The director can be physically located both in Georgia and abroad, managing the company’s accounts via online banking.
It is also not mandatory to have any hired staff in Georgia.
The Virtual Zone Entity in Georgia. What is Included in the Information Technology Business Concept?
The company that has received the Virtual Zone Entity status should carry out operations in the field of information technology. However, Georgian law does not specify exactly what types of operations are included in the Information Technology Business term for a company that has received the Virtual Zone Entity status.
According to the official website of the Ministry of Finance of Georgia, information technology business includes “research, support, development, design, production and implementation of computer information systems, resulting in the adoption of software products.”
Thus, it can be concluded that any of the web products/services that are produced and supplied by the Virtual Zone Entity in Georgia can be considered as “information technology business.” It also implies that the Virtual Zone Entity will engage in research, development, support and design of the product concerned and will also hold the intellectual property rights to it.
Free Industrial Zone (FIZ) and the Virtual IT Zone in Georgia. Similarities and Differences
Incorporation of a company both in the free industrial zone and in the virtual zone in Georgia provides certain benefits. However, specific conditions for various companies may differ, including taxation.
| Free Industrial Zone (FIZ) | Virtual IT Zone | |
| Revenue tax | 0% | 0% |
| Dividend tax | 0% | 5% |
| Wage tax (no requirement to hire employees) | 20% | 20% |
| VAT | 0% | 0% |
| Reporting/Revenue Declaration | Not required | Required |
| Permitted operations | Manufacturing, processing, import, export, services of any kind | Information technology only |
Corporate Account with the Bank of Georgia for a Virtual IT Company in Georgia
If a beneficiary of the Georgian company is not a resident of Georgia, but a resident of any other country except Georgia, including the EU countries, they will not be able to open a corporate bank account in Georgia at the moment. Please feel free to enquire about the relevance of this information by sending your request to the info@ofshore-pro.info personally. However, there is an opportunity to become a resident of Georgia and we can assist you with applying for it. It is also possible to open a private account in Georgia and open a corporate account for a Georgian company with many banks and payment systems around the world that still work with non-residents.
After incorporating a virtual IT company, we will open a corporate account for you in one of the largest banks in Georgia, the Bank of Georgia. Thanks to the wide range of options for remote account management, you will be able to manage your company and its account remotely wherever you are.
The Bank of Georgia was founded in 1903 and its shares are listed on the London and Georgian Stock Exchanges. The bank is headquartered in Tbilisi, the capital of Georgia.
The Bank of Georgia provides all the basic products and services required by the corporate and private clients, brokerage, insurance and private wealth management services.
Here are the main advantages of this bank:
- Individual approach and professional advice;
- A group of corporate bankers with experience in specific sectors of the economy;
- A wide range of innovative banking products and services on favorable terms;
- Value-added banking and advisory services to manage your investment, and the use insurance and leasing services if necessary.
Remote Account Management at the Bank of Georgia
In order to provide their clients with the most convenient account management, the Bank of Georgia offers the following services:
- Internet banking;
- Phone banking;
- Mobile banking;
- SMS-banking;
- Online payments;
- Direct Account Debiting.
Bank products for remote account management are specifically designed to help you save your time by managing your corporate account from anywhere in the world 24/7.
Deposits at the Bank of Georgia
Clients of the Bank of Georgia have two types of deposits available:
- Fixed-Term Deposit in GEL or foreign currency (USD, GBP, RUR, TRY, CAD, AZN, AMD, SEK, NOK, DKK, AUD, JPY, ILS, CZK, PLN, BYR, HUF), the minimum amount is 500 units of the relevant currency, for a period of 3 to 24 months (GEL) or 6 to 24 months (foreign currency).
- Demand Deposit in GEL or foreign currency (USD, GBP, RUR, CHF, TRY, CAD, AZN, AMD, SEK, NOK, DKK, AUD, JPY, ILS, CZK, PLN, BYR, HUF), unlimited term, unlimited initial deposit amount.
Loan Products of the Bank of Georgia
There are three main types of business loans available to the corporate clients of the Bank of Georgia:
- Credit Line;
- Fixed-Rate Loan;
- Overdraft.
An active business can get loans for:
- financing of working capital or fixed assets;
- property purchases;
- renovation works;
- current business expenses;
- repayment of other debts and liabilities;
- resolving of private consumer issues.
European Business Loans
Corporate clients of the Bank of Georgia can get a European business loan. This type of loan is provided as part of the EU and the European Bank for Reconstruction and Development project to support small and medium-sized businesses. Clients of the Bank of Georgia can enjoy this opportunity to receive financial support of 100,000 to 3 million euros (or the equivalent in another currency) and return 15% of the loan amount.
International Trade
The Bank of Georgia provides the following products to finance the trade:
- Letter of Credit;
- Documentary Collection;
- All types of local and international bank guarantees;
- Export Financing;
- Discounting Credit;
- Financing of long-term and medium-term imports via documentary operations;
- Factoring.
Bank of Georgia Payment Cards
Corporate clients of the Bank of Georgia can order the following types of plastic payment cards:
- MasterCard/VISA Business;
- American Express Business Card;
- Cash Card.
You can also use card insurance against fraud.
Other services of the Bank of Georgia
Among the many other services that the Bank of Georgia offers its clients are the following:
- Individual payroll programs;
- E-commerce solutions;
- Asset/wealth management;
- Bank certificates;
- Payment terminals;
- Leasing;
- Brokerage services.
Procedure of the Virtual IT Company Incorporation in Georgia with an Account with the Bank of Georgia
- If you are interested in our offer, please do not hesitate to contact our experts by email to info@offshore-pro.info to start the procedure.
- Once your request is confirmed, you will need to pay for the professional assistance in incorporating a virtual IT company in Georgia with a corporate account with the Bank of Georgia. This payment can be made by bank transaction, payment card, via PayPal, WebMoney, Western Union. The cost of this service is 7500 EUR.
Subsequent extension of the Virtual Zone Entity status in Georgia is provided free of charge. We may also provide the necessary support to the company, should you need it. This may include accounting and advisory services related to state taxes. We can also present the client to the state authorities and banks. The cost of accounting services starts from 500 EUR (the exact cost depends on the number of transactions made).
3. The third step is to prepare the documents required for incorporating the company and opening a bank account.
Documents Required to Incorporate a Virtual IT Company in Georgia
The list of documents required to incorporate a virtual IT company is no different from the one required to incorporate a standard Georgian firm.
- If the company’s founder is an individual:
- current travel documents of director( s), shareholder( s), all authorized representatives of the future company.
2. If the company’s founder is a legal entity:
- current travel documents of director( s), shareholder( s), all authorized representatives and ultimate beneficiaries;
- Articles of Association of the foreign legal entity;
- Certificate of Incorporation of the foreign legal entity or an extract from the Trade Registry.
If the founder of the parent company is another company, you will also need a Certificate of Incorporation of the founding company and its Articles of Association (it must be possible to trace the entire chain of ownership down to the ultimate beneficiary).
Having received all the necessary documents, we will prepare the Power of Attorney. Then the Power of Attorney must be apostilled.
The authority to incorporate a company and open a corporate account is included in the text of the Power of Attorney. All the company’s founding documents will be available for inspection carried out by the bank in the open State Registry in the digital form. After the Power of Attorney arrives in Georgia, it will be translated into Georgian and notarized.
In order to start the procedure of incorporating a virtual IT company in Georgia with an account with the Bank of Georgia, please contact us right away by email to info@offshore-pro.info.
