Georgia's Virtual Zone status for IT companies: tax treatment and getting paid by foreign clients

A Tbilisi software company with 18 developers builds apps for clients in Germany, the US and the UK. It holds Virtual Zone status, so its profit from those contracts is exempt from Georgian profit tax. A local bank asked to develop an app too. The founders declined: Georgian clients would not qualify for the exemption, and mixing them in complicates the books.

What the Virtual Zone is

Georgia introduced the Virtual Zone regime to attract IT businesses. A Georgian legal entity, typically an LLC, applies to the Ministry of Finance for Virtual Zone Person status. Once certified:

• profit from supplying qualifying IT products and services to persons outside Georgia is exempt from profit tax,
• such supplies are generally treated as outside Georgian VAT,
• the company still pays other taxes, such as payroll taxes on employees.

Dividends paid to shareholders generally remain subject to dividend withholding tax.

Client location is the test

The exemption depends on the client being outside Georgia. Services to Georgian clients are taxed normally. That makes three records essential:

1. Contracts that identify the foreign client and its address.
2. Invoices issued to that client.
3. Payments coming from the client abroad.

A payment from a Georgian intermediary for a foreign end client can raise questions. Keep the contract chain clear.

Currency

Georgia has an open currency regime. Companies receive dollars and euros freely, hold them in foreign currency accounts and convert to lari when they choose. Many Virtual Zone companies keep salaries partly pegged to dollars, so holding dollars until payroll avoids converting twice.

How foreign clients pay

A Berlin client paying a Georgian IBAN sends an international transfer, often SWIFT, which can lose fees on the way. A US client sends an international wire. Neither is domestic for them. Giving US clients US account details and EU clients a euro IBAN, where your structure allows, lets them pay locally and in full.

Where Rivet fits

A Rivet business account accepts registered companies after verification, including Georgian LLCs. Approved companies get US dollar details in their own name on every plan, so American clients pay by ACH, and euro details with an IBAN plus sterling details from the Growth plan. Payments are matched to invoices, which keeps the client-location trail tidy, and balances convert at a rate shown before you confirm. Rivet is not a bank; regulated partner institutions hold the funds.