Jul 4, 2019

A virtual zone IT company incorporation in Georgia and corporate account opening in the Bank of Georgia – starting from 3000 USD

Georgia is a wonderful country for a vacation: the nature is gorgeous, the people are friendly, and the prices are affordable. However, over recent years this country has been doing its best to become an attractive location for international business. The reforms that the Government introduced has made company registration in Georgia very simple, its taxation system transparent, and bureaucracy and corruption almost inexistent. With the view of the fact that Georgia’s IT sector is seriously lagging behind that of other countries, the authorities decided to offer special benefits to companies engaged in IT and computer business. Beginning 2011, all companies that develop software, make websites, write computer programs, and produce other IT-related goods and services in Georgia enjoy a special tax regime. They can acquire a ‘virtual zone company’ status, which will exempt them from all national taxes besides the dividend and interest tax. Thus, any non-resident Georgian can have an IT company registered in this country and work under very favorable tax conditions. The ‘virtual zone company’ status should be especially interesting for the software companies currently registered in jurisdictions where taxes are high. By relocating their companies to Georgia, they can lessen their tax burdens considerably.

We can register an IT company in Georgia for you and open a corporate account for it in one of the leading local banks, namely, the Bank of Georgia. Having a company registered in this country will allow reducing the production costs significantly and thus increasing your profits without breaking any national or international laws. The cost of the virtual IT company registration in Georgia and a corporate account opening with the Bank of Georgia is US$ 3,000 (one flat payment). We also provide accounting support for companies registered in Georgia. The cost of this service is only US$ 250 per month.

Taxes that a virtual zone IT company has to pay in Georgia

Early in 2011 Georgia passed the Law “On information technology zones”. This piece of legislation was meant to attract new IT companies to the country by offering them serious tax exemptions. The Law regulates the activities of companies engaged in research in information technology, development of computer programs and mobile applications, design of websites and computer games, implementation of software solutions, and all other IT-related types of business activities.

The Law “On information technology zones” grants such companies a possibility to apply for the ‘virtual zone company’ status that makes them exempted from the following taxes:

  • 15% income tax;
  • 18% VAT;
  • Export tax that can be as high as 12% for regular companies.

It should be borne in mind, however, that these tax exemptions are only applicable if the company has business with partners residing abroad, outside Georgia. All business transactions with the Georgian resident companies and private individuals are taxed at the normal rates.

The only tax that remains to be paid by a virtual zone company is the 5% dividend tax. But then again, even this tax can be evaded (or, to be more precise, it can be avoided) in a legal way if, for example, your home country has an avoidance of double taxation agreements with Georgia.

At the same time, any IT company registered in Georgia does have to pay the 20% payroll tax to the state budget in case it has salaried local citizens on the staff. Additional 2% of their salaries are also due to the Pension Fund.

Benefits of registering a virtual zone company in Georgia

In addition to the preferential taxation, there are other reasons to register an IT company in Georgia. The main of those are as follows:

  • Doing business in Georgia is easy;
  • The requirements for company registration are quite lax. For instance, no charter capital is necessary, the company can be registered in the name of a resident or non-resident Georgian, and so on;
  • Georgia is not a member of the Common Reporting Standard (CRS) group so its tax authorities do not automatically exchange information about Georgian taxpayers with tax authorities of other countries;
  • It is possible to use a virtual office as the company headquarters in Georgia;
  • Business transactions in this country can be made in a number of different currencies;
  • There is no obligation for a foreign company to hire local people.

These factors make establishing an IT company in Georgia potentially very lucrative. What is more, you can manage such a company remotely, from the country of your permanent residence. Many companies engaged in the IT sector habitually outsource partners and specialists, so remote project management is nothing new for them.

Specifics of and requirements to a virtual zone IT company registered in Georgia

If you decided to register a business company in Georgia without any assistance, you would probably run into a lot of trouble. First of all, you have to have a good command of the Georgian language in order to go through all the bureaucratic procedures. (They are not too numerous in this country, but they exist anyway.) All the application forms, bank agreements, tax reports, etc. have to be written in Georgian, thus knowing the language is essential. Some government agencies personnel and bank clerks will speak English but not everyone of them.

Apart from that, the legislation of a foreign country is something that cannot be grasped in an instance. At the same time, you have to know the local laws if you want to avoid mistakes when communicating with the tax and other regulatory authorities.

Thus, without the knowledge of the Georgian language and local legislation, foreigners in Georgia are bound to have difficulties if they try to register a virtual zone company in this country on their own. Instead of wasting a lot of time on overcoming all the obstacles, it would be wiser to seek assistance.  We have experienced lawyers on our staff who are native speakers of Georgian. They can register the type of the company you want, with all the specific legal characteristics you have in mind and in a perfect accordance with the Georgian legislation. The moderate sum of money that you will have to pay for this service can help you save a lot of time and effort.

The small amount of red tape allows having a company registered in Georgia in only one business day. Company registration happens in the Houses of Justice, and it costs 200 laris (around US$ 72), if you want to collect the corporate documents on the day of application, and it costs 100 laris (around US$ 36), if you are ready to wait until tomorrow.

Even though Georgia has a rather liberal legislation regulating the entrepreneurial activities, there are still some requirements that a Georgian IT company has to meet:

  • Any business company in this country must have a legal address. Without it registering a company is impossible;
  • All virtual zone companies have to file monthly financial reports;
  • A company must have constitutive documents that certify its registration with the state and tax authorities.

We will take care of all these requirements. In addition, we can provide a virtual office to you, and this service is free of charge. At the same time, it would be a better idea to have a real office for your company in Georgia from the viewpoint of acquiring some economic substance in the country. The rent price of a real office depends on many factors, such as its size, location, utilities supplied, etc.

The price of our accounting support starts at US$ 250 per month. The ultimate price will depend on the number of transactions that your company makes monthly. This small sum of money will make studying Georgian fiscal legislation unnecessary for you. Besides, you will be able to avoid the risk of being fined for late reporting or late payment of taxes. You do not have to hire a bookkeeper and/ or an accountant for your Georgian company, as we will do all the accounts for you.

As far as the drafting of the constitutive documents is concerned, our lawyers will work very diligently to satisfy all the requirements that you may have pertaining to the legal specifics of your prospective company. We will draft the Company Charter, the Protocol of Shareholders’ Meeting, the Power of Attorney, and all other documents that may be required and then send the texts to you for approval.  You will have to have the Power of Attorney in the name of our agent notarized in your home country, and then the agent will submit all the documents to the House of Justice for registration on your behalf.

Registering an IT company in Georgia does not provide for instant tax exemptions. To receive those the enterprise must obtain the ‘virtual zone company’ status, which is granted by a special government agency.

An IT company is entitled to filing an application for this status only after it has been registered with the Georgian tax authorities. When registering, the company receives access to a personal account on the tax department website that allows calculating and paying the taxes, viewing the payment history, keeping an eye on the due payments with the help of a tax calendar, and doing other necessary things.  Only after obtaining the login and password for this account, the company may apply to the government agency mentioned above for the status of a ‘virtual zone company’.

While the Law “On information technology zones” allows ten days for the registration of a company governed by this Law, we will have an IT company registered for you in Georgia within an even shorter timeframe – two or three days maximum.

The main differences between Georgian Free Industrial Zones and Virtual IT Zones

In addition to Virtual Zones, there is another type of Zones with a preferential taxation regime in Georgia. Companies can also be registered in what is called ‘Free Industrial Zones’, or ‘Free Economic Zones’, or simply ‘Free Zones’. There are five such zones in Georgia, but only four of them are actually in operation: Poti, Tbilisi, Kutaisi and Kutaisi Hualing Free Industrial Zones (FIZ).

The table below describes the similarities and differences between taxation regulations for a FIZ company and a virtual zone company.

FIZ Company Virtual IT Zone Company
Corporate income tax 0% 0%
Dividend and Interest tax 0% 5%
Payroll tax 20% (it is the salaried person who has to declare his or her income and pay this tax) 20% (it is the employer who has to pay this tax)
VAT 0% 0%
Regular financial reports not required required
Types of business activities any type of activities permitted in the Zone IT-related activities

Corporate account with the Bank of Georgia for Virtual IT Zone companies in Georgia

Having a corporate account in the second largest Georgian bank will let you perform full-scale business operations in this country. In terms of its net profit in 2018, the Bank of Georgia is second only to TBC Bank. Around 30% of all the Georgian banking sector profit was made by this bank in that year. Every third deposit in the country is made with the Bank of Georgia. It services around two million customers in total. It is the bank with the largest network of ATMs and branch offices in Georgia.

The bank is listed on the London stock exchange, which serves as a confirmation of its reliability and international recognition.

The Bank of Georgia is a multi-service bank. It provide a wide variety of banking services to private individuals and business corporations. On top of that, the Bank of Georgia is one of only a few banks in the country where a non-resident can set up a corporate account without visiting Georgia.

With the Bank of Georgia, the clients can do the following, among other things:

  • Set up a multi-currency account that allows keeping money in different currencies in the same account with the same number. The bank accepts over thirty world currencies, which is of great importance for IT companies as they work at the global level and converting currencies often causes them money losses;
  • Acquire MasterCard, Visa, and American Express corporate payment cards. It should be noted here that the Bank of Georgia is the only authorized issuer of American Express cards in the Caucasian region. All payment cards issued by the bank have high daily cash withdrawal limits. The cardholder can spend up to 100,000 laris (about US$ 36,000) a day in POS terminals. There are no limits for cash withdrawal in the Bank of Georgia branch offices. The fact that these are international payment cards allows the cardholder to make payments and withdraw cash anywhere in the world;
  • Acquire an American Express credit card with the period of grace of up to 36 days. This credit card gives the holder an opportunity to earn bonus points when shopping. The effective interest rate is from 19,3% a year in Georgian laris;
  • Have permanent access to the corporate account regardless of the client’s location via various remote banking systems. The Bank provides Internet, telephone, mobile phone, and SMS banking services. The clients can also use automatic payment and direct debit services.

In addition to the services mentioned above, the Bank of Georgia offers different package services, loan programs, asset management programs, leasing opportunities, and other banking services.

Documents required for registering an IT company in Georgia and opening a corporate account for it in the Bank of Georgia

The list of documents required for registering a virtual zone IT company in Georgia is the same as the list of documents for setting up any other kind of company in this country. If the company constitutor is a foreign private individual, he or she needs to submit a copy of his or her foreign passport. In addition, passport copies of the people who will act as company directors/ managers have to be supplied.

If the constitutor is a legal entity, the following documents are required:

  • Company corporate documents, such as the charter or the by-laws, protocol of shareholders’ meetings, an extract from the home country registry of legal entities, and so on;
  • Copies of foreign passports of the shareholders and directors, as well as the director appointment order;
  • The ultimate company beneficiary’s (or beneficiaries’) details.

Please be aware that if a legal entity is among the virtual zone IT company constitutors, the registration price increases by US$ 500 due to a larger volume of documents to be processed.

When we receive all the required documents from you, we will draft a power of attorney in the name of our agent who will register the company for you in Georgia and send it for your approval. You will have to have it notarized, and if the power of attorney has to be translated into English, the translation is to be apostilled. The same applies to all other translated documents.

When we receive all the documents, the notarized power of attorney, and the full payment, we will start the process of company registration and then the account opening.

The procedure of registering a Virtual IT Zone company in Georgia with a corporate account opening in the Bank of Georgia

If your company works in the IT sector or it is engaged with computer technologies, and if you want to significantly reduce your tax burden, please do not hesitate to write to us to: [email protected]. Our experts will contact you in a short instant to discuss all the details related to your IT company registration in Georgia and applying for the Virtual Zone Company status.

After we clarify what exactly your intentions are and what exactly services you require, we will send you the bill for the assistance that our highly-qualified lawyers will be happy to provide to you. You can pay this bill in many different ways: a bank transfer, a credit card, or by use of such payment systems as PayPal, WebMoney, Bitcoin, or Western Union. The price of the combined service of the Virtual IT Zone company registration and corporate account opening in the Bank of Georgia starts at US$ 3,000. For additional US$ 250 a month, we will provide the accounting support for your new company.

If you have any questions please contact us at: [email protected]. We will gladly consult you free of charge on all matters related to IT company incorporation in Georgia and assist you in setting up a profitable business in this beautiful country.