About Setting Up Virtual Trade Zone in Georgia (And Free Industrial Zones)

A couple of years ago (in 2012) I met an American entrepreneur John Keogh here in Georgia. Back in these days, office coworking spaces were kind of popular and just obliviously popped up also in Georgia.

John had a business in Tbilisi, and in his blog (www.upsoni.com) he published some cool stuff about his vision of possible coop both for local and expat entrepreneurs - I contacted him and we had a lovely dinner at one of the lovely Tbilisi Restaurants (Capadoccia, more precisely)

A lot has changed since then, long are the days with office coworking spaces, the World has gone mad because of the cryptos (including me and many here in Georgia), but the question I first heard from John - Setting up the Virtual Free Trade zones in Georgia have remained. 

It was in the middle of January, when a question from another blog reader, pointed to me via John Keogh, asked the magical question once more:

Hi Reinis,

I'm planning to relocate to Georgia in order to work there, I'm planning to set up a small company. I contacted John Keogh and he pointed me to your blog and advised me to get in touch with you.

First of all, nice blog!!! It's a really great source of information.

I have read your article about Residence Permit and Residence Card where you described the process, do EU citizens (I'm Polish) also need to apply for permit in order to set up a company, work and live in Georgia?

I was also wondering if you know anything about setting up a company in Georgia and registering under virtual trade zone?

I'm looking forward to hear back from you!

Now regarding the part of setting up a company in Georgia and registering it under virtual trade zone.

Frankly speaking, I haven't ever dealt with incorporating virtual trade zone in Georgia (or any other country), but as this topic is quite popular (thanks to the John, I have received a dozen of related questions in the past couple of years)  I decided to make a quick investigation (Google search).

Unfortunately, John has shut down his website, but using Google Cache, I was able to recover, what he was to say all about this back in 2012: Georgia Virtual Trade Zone for IT Companies

One significant difference between American and Georgian business and government culture is that Americans tend to include marketing as part of product development, Georgians less so. This may be a legacy of the Soviet era when marketing was largely irrelevant, since you got what the state gave you, wherever the state decided to deliver it. An example of this difference is that I didn't hear about the Georgian Virtual Trade Zone (VTZ) for IT companies until I was talking with someone in the Revenue office here in Tbilisi. The Virtual Trade Zone (VTZ) permits Georgian companies that sell software or other technology outside Georgia to exclude the external revenue from the company's taxable revenue. This is very attractive for software companies, since software companies will likely get most or all of their revenue from abroad, and can exclude it from their Georgian corporate taxable revenue.

Now in 2018, I found a company helping customers from abroad both setting up a company and registering under Virtual Trade Zone in Georgia - Kaukapital.com

IT Companies In Georgia

IT or Information Technology involves the study, support, research and development, design, and deployment of computers and related technologies to produce software products. Georgia offers a favourable climate for IT companies to develop and expand their businesses. If you are planning to set up an IT company in Georgia, you should apply for a “Virtual Zone” status to get tax benefits from the Georgian Government. Georgia has a lower corporate tax rate with respect to other economically developed countries and, the “Virtual Zone” status will help you make the most of it.

What Is Virtual Zone?

A Virtual Zone status is granted to a professional or a group of professionals that has the legal rights and is subjected to obligations for carrying out business activities on the Georgian soil. Virtual Zones for IT companies are also known as Information Technology Zones.

Tax Benefits With The Status Of The Virtual Zone

Taxation of virtual zone persons complies with the rules and standards meted out by the Tax Code of Georgia. Any company or individual with this status are exempted from:

  • Taxes on the revenue earned by supplying their products beyond Georgian borders
  • VAT or Value-Added Tax on the products delivered outside the borders of Georgia
  • Export duties or taxes on products exported from the customs territory of Georgia

All the expenses with respect to the income earned by supplying information technology products outside or within the borders of the Georgian territory shall be deducted from the gross income according to the share of the earnings by supplying within its territory.

Furthermore, the Virtual Zone persons will also be exempted from any special regulation and they will not require licenses, permits or any other regulatory document to carry out business activities on the Georgian soil.

How To Apply For The Status Of The Virtual Zone?

If you are interested in setting up an IT company in Georgia, you can apply for a Virtual Zone Status to avail the aforementioned benefits.

Kaukapital has over a decade of experience in the field of business consultation. You can get in touch with our professional consultants in Georgia to apply for a Virtual Zone Status. We will make the process relatively easier for you by offering you maximum assistance, support and advice during the application process. Your application will be granted within 10 working days after submission and you will be able to carry out your IT business activities seamlessly. Talk to our company representatives if you wish to know more about Virtual Zone and the process of setting up an IT company in Georgia.

Learn more: Virtual Zone

Now, probably there are more companies in Georgia which might help to setup a virtual trade zone here in Georgia, but the offer from Kaukapital seems pretty good and well explained, that's why I'm ready to limit my investigation here.

In case you are willing to do all it by yourself, here are few useful links to get you started:

Free industrial zones in Georgia

From the written on BLC Law office of Georgia, I found following:

Free Industrial Zone is the type of a free zone envisaged by Customs Code of Georgia where the business-friendly regulations and favourable tax and customs system apply. FIZ is singled out during the limited time period for economical activity and the companies operating therein are subordinated to special regime, which is favourable from legal and commercial point of view. 

Perhaps the main privilege of FIZ which attracts business investments in Georgia and makes the place the most favorable to do business is the favorable tax and customs framework, which is as follows: 

  • FIZ incorporated entities are exempt from Property Tax;
  • No VAT applies to goods produced in other country imported in FIZ;
  • No VAT applies to transactions carried out among FIZ incorporated entities;
  • Supply of goods/services among enterprises of FIZ is VAT exempt; 
  • No Customs duty applies to goods produced in other country, imported in FIZ; 
  • Export of goods produced in FIZ within the territory of Georgia is free from Customs duty; 
  • No foreign exchange controls, trade barriers of quotas;
  • No restrictions on capital repatriation;
  • Profit gained by an international enterprise from an activity carried out in FIZ is exempt from Profit Tax; 

Apart form flexible tax system another advantage of the FIZ is simplified licensing/permitting regime. Once carried out in FIZ some types of activities, which normally require license/permit are released from such restrictions. Hereby, some types of license/permit can be obtained by more simplified procedures. 

In case you are looking to incorporate your Virtual Trade zone at one of the Free Industrial Zones of Georgia, here are some useful links to learn more: