Eternity Law International News Changing Virtual Zone firm status to International Organization

Changing Virtual Zone firm status to International Organization

April 14, 2023

IT-sector has possessed a strong place in the global economic space, becoming an essential and integral element of global economy. Firms are eager to find their place in the jurisdiction with the most favorable conditions in order to enlist constant and significant support in terms of scale. Many countries have upgraded their laws and regulations in order to attract IT firms. In particular, countries have begun to offer advantageous taxation rates, skilled workers to hire, and appealing business environments.

In Georgia, IT-companies can obtain two statuses with regard to applicable taxes-rates: Virtual Zone and International Organization.

These firms differ in the amount of income tax and income tax. Next, we will consider what opportunities the VZ company has, which has been actively operating in the IT industry for more than 2 years.

Companies can obtain IO status if they follow normative points set out in Decree No. 619 “Determining International Organization status and approving the list of activities permitted, and appropriate expenses”, adopted by local Government on October 8, 2020

IOs are free from dividends and property taxes, excluding land ownership. The tax rate on profits received by the company is 5% if profits are distributed. Tax on payment of wages to company’s workers is also 5%.


If the firm got a profit before it became the owner of IO-status, and such profits were not subject to distribution among the participants, then incomes obtained will not be from payment of taxes and after the firm is assigned the status of an IO. It is worth noting that even with certain benefits, some transactions are subject to taxation in the usual manner, which is provided for by the Tax Code.

Certain normative points are put forward to the substance of such firms. The Commission conducts a thorough check regarding compliance with the adopted taxation regime.

All documentation that’s mandatory for formation and sending of applications must be translated into Georgian and certified by a notary.

When a company achieves IO status, it automatically loses its VZ status. IO status can only be nominated by Georgia Government.

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