IT companies with virtual zone status require fair treatment by the state

Tbilisi (GBC) – Strengthening local IT companies and attracting virtual zone residents and international IT companies to Georgia through tax benefits is one of the important steps towards increasing the country’s economy, labor market and employees’ qualification or salary.

Thanks to tax incentives in this area, it can be said that hundreds of Georgian IT specialists without leaving the country receive the same remuneration as their colleagues in developed Western countries.

However, in recent years, the industry has faced some problems due to the ambiguous nature of the tax legislation text, which became the basis for interpretation of the norms by tax authorities. This circumstance has significantly reduced the motivation of these companies. However, the Association of Georgian Virtual Zone Persons has actively engaged in interaction with the government, to address the latter issues.

The Association notes that some changes have already been made in this direction, and there is hope for positive action from the Ministry of Finance. In particular, members of the Association are working on bringing together the positions of business and the state, promoting the attractiveness of the industry, improving legislation, and other important issues.

“The virtual zone is one of the important engines of economic growth in Georgia, providing a stable and smooth operation of the information technology industry. This sector plays an important role in the development of the labor market by providing highly skilled jobs. Due to its flexibility and ability to quickly adapt to changing market requirements, the virtual zone helps to attract foreign investment and increase economic opportunities in Georgia,” notes the Association of Georgia’s Virtual Zone Residents.

For information, according to the Revenue Service of the Ministry of Finance of Georgia, only in 2021 companies with virtual zone status contributed more than 66 million Georgian lari to the Georgian budget in the form of taxes.

Table 1. Information about the taxes paid by the taxpayers with the status of a virtual zone for the period from 01.01.2021 to 31.12.2021.

Source: Revenue Service of the Ministry of Finance.

Consequently, according to their opinion, the development of this area is of great importance to the Georgian economy and is mutually beneficial for all market participants.

However, inconsistent actions of the Tax Service, retrospective fines and changes in tax approaches have caused many investors and businesses to leave the Georgian market, which is significantly detrimental to the investment attractiveness of the country and the economy as a whole.

According to the latest data, about 1,100 companies in Georgia have been given the status of a virtual zone person, and their tax contribution is clearly presented above.

In addition to the above-mentioned problems, Virtual zone companies face a shortage of qualified specialists, which in the future can only be solved by the joint participation of these enterprises, the state and educational institutions.

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