The Association of Georgian Virtual Zone Persons achieves the set goals step by step

Tbilisi GBC discusses in detail the main goals of the Association – protecting the interests of foreign investors and Georgian IT companies with Virtual Zone status, for which the Association has many supporters, such as the Business Ombudsman and various associations.

The Association and its chairman, Shorena Kopaleishvili, have already submitted a request for legislative changes to the Parliament of Georgia. The position of the state regarding this topic will be known in the near future.

In the article, you will also find  information regarding the final goals of the Association.

VZP – The effective Association achieves the set goals step by step

Tbilisi (GBC) – Illegal tax audits and the imposition of millions of GEL in fines and surcharges for Virtual Zone Persons, i.e., international IT companies attracted by tax incentives in Georgia, have made the Association of Georgian Virtual Zone Persons the defender of their interests. This non-profit Association, headed by Shorena Kopaleishvili, a highly qualified lawyer with over 15 years of experience, was founded in February 2022.

In its first year of operation, the Association has made significant progress in protecting the interests of foreign investors and Georgian IT companies with the status of a Virtual Zone. The main purpose and activity of the Association are to bring together foreign and local investors who, in their opinion, have been affected by illegal tax audits. By communicating with the media and the government, the Association promotes transparent and clear legislation in the field of information technology.

During this time, the position of the chairman of the Association was actively covered in the media – Shorena Kopaleishvili urged the state to establish a dialogue and cancel the fines charged in the past.

International relations

European organizations also responded to the problem identified by the Association. The Association became a member of the European Economic Cooperation Platform (EECP). The chairman of the Association was actively involved in business meetings, including events organized by the European Business Association (EBA). Shorena Kopaleishvili actively used business forums organized by the EBA with the support of the European Union to raise concerns about violations of foreign investors’ rights and Virtual Zone Persons, which were supported by the European Business Association.

Support of the Business Ombudsman

The support of Otar Danelia, the Business Ombudsman of Georgia, was very important for the Association, because his position is being considered in court proceedings. The Association of Georgian Virtual Zone Persons informed the Business Ombudsman about the critical situation around the companies with the Virtual Zone status and provided materials confirming the unfair decisions of the tax authorities. Finally, the Business Ombudsman fully agreed with the position of the chairman of the Association. Also, he issued an official position (Amicus curiae) that all Virtual Zone companies can benefit from. This document gives the affected companies more chances to conduct the proceedings in their favor.

Communication with the government

In the Association, it is said that at the initial stage, it was the most difficult to establish communication with representatives of state agencies. Although at first they avoided explanations and answering questions, after a great response to the problem of Virtual Zone Persons, Shorena Kopaleishvili managed to organize meetings and receive written answers from government agencies.

At the meeting with the representatives of the Ministry of Finance and Revenue Service of Georgia, the following issues were discussed: improvement of the law, establishing clear criteria, and exemption from retrospective taxes, fines, and penalties.

At the meeting, the parties confirmed their readiness for cooperation. The association also was promised that they would not adopt new regulations without consulting the Association and would consider their proposals.

With the support of the Business Ombudsman and the establishment of communication with government agencies, based on the immediate response of the chairperson of the Association, Shorena Kopaleishvili, and the appeal sent to the head of the Revenue Service, where the Association expressed a critical position regarding the issued first methodological reference, and requested clarifications on several issues that were vaguely presented in the document, the Association achieved the abolition of the first methodology and, accordingly, began to review the decisions of the members of the Association, to recalculate the accrued taxes and fines, and to remove or reduce the fines imposed on some companies. In addition, Shorena Kopaleishvili sent an official appeal to the Prime Minister of Georgia, Irakli Gharibashvili, where she drew attention to some issues that may significantly harm the investment climate of the country, foreign investments, and the reputation of Georgia.

Since its inception, the Association has been actively informing relevant agencies of business positions and practices, which ultimately found reflection in the third methodological reference issued by the Revenue Service. However, the main goal of the Association remains to clarify the law, because only the law is the main legal act on which the controlling body should rely.

The Association has already submitted a request for legislative changes to the Parliament of Georgia. In February, a meeting was held with Davit Songhulashvili, the chairman of the sectoral economy and economic policy committee. In the near future, a meeting is planned with the representatives of the Ministry of Finance and Revenue Service of Georgia on the mentioned topic. According to the Association, the position of the state regarding this topic will be known in the near future, and the chairman of the Association is sure that the parties will work together on this issue.

Ultimate goals of the Association

The goals of the Association do not change, and its main tasks are:

• Uniting more companies 

• Cancellation of taxes, fines, and penalties accrued for the past period

• Achieving legislative changes in favor of business

• Establishing clear IT criteria for VZP companies 

• Close cooperation with government agencies and other partners

• Promoting the development of this industry in the country

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