What Every Virtual Zone Company Should Know

The New Year is a time for new goals, but before planning for the future, it’s crucial to reflect on the challenging journey of Virtual Zone Persons (VZPs). Equally important is recognizing the achievements of the Association of Georgian Virtual Zone Persons and its members over the past two years. The Association has proven its ability not only to protect the interests of its members but also to reshape the rules of the game in favor of the entire sector.

 

 

A Major Challenge and Decisive Action

 

In 2021–2022, Virtual Zone companies faced unexpected fines and tax liabilities. These sanctions resulted from ambiguous interpretations of legislation, posing serious risks to investor confidence and their continued operations in Georgia. Tax authorities raised concerns such as:

 

• What qualifies as the creation of a software product within Georgia;

• How to define an informational product;

• What evidence is sufficient to confirm software development;

• Whether tax liabilities from previous years can be reconsidered;

• Whether the tax authority’s methods (correspondence, phone surveys) align with legal standards.

 

The law lacked clear requirements for company operations within the country. Vague and incomplete criteria were outlined only in a methodological guide, which tax authorities could interpret at their discretion. For instance, software development was deemed to have occurred in Georgia if developers were physically present in the country. Adding to the complexity, the tax authority issued this methodological guide retroactively, applying it to prior periods.

 

The Association acted swiftly to address the crisis. It defended the interests of all Virtual Zone companies, providing benefits that extended beyond its members to the broader VZP community. Key actions included:

 

• Persistent negotiations with government bodies (Revenue Service, Ministry of Finance, and Parliament of Georgia), international partners, and the Business Ombudsman;

• Actively raising awareness of the issue through media channels;

• Contributing to the clarification of tax authority guidelines and providing recommendations.

 

The result? Fines amounting to millions of GEL were lifted for thousands of companies. While this was a significant success, challenges in tax and specialized legislation remain. Resolving these issues requires close collaboration between the Association and its members.

 

 

Key Achievements

 

The Association’s efforts extended beyond resolving fines. Other notable accomplishments include:

 

• Clarifying the procedures for obtaining Virtual Zone status;

• Promoting the benefits of this status, which attracted more international IT companies to Georgia.

 

Today, over 1,200 Virtual Zone companies are registered in Georgia, and this number continues to grow.

 

 

Why Join the Association?

 

The Association of Georgian Virtual Zone Persons is more than just an organization that protects business interests. It is an advocate that:

 

Addresses systemic challenges by directly influencing the development of legislation and regulations. The Association actively collaborates with government bodies, participates in discussions of new initiatives, and proposes improvements to create a more favorable business environment for the IT sector.

 

Provides access to key contacts in government agencies, international organizations, and the private sector, enabling members to establish connections that open new opportunities for growth.

 

Keeps members informed about crucial changes in legislation, tax regulations, and other important developments, offering practical guidance to help businesses adapt.

 

Fosters a transparent and supportive business environment by removing barriers and simplifying operations for IT companies in Georgia.

 

Joining the Association means becoming part of a community that works together to create the best conditions for doing business in Georgia.

 

(You can become a member of the Association by filling out the form.)

 

 

Looking Ahead

 

The Association is committed to building on its successes. In 2025, it plans to:

 

• Strengthen partnerships with local and international organizations;

• Further develop the IT sector in Georgia;

• Continue improving tax policies and special legislation;

• Organize meaningful meetings and webinars for its members.

 

In the near future, the Association will host discussions on tax cases that remain relevant today and could also be useful in your own business operations.

 

Stay tuned for our announcements to stay informed about key changes and learn how to apply them in your work. Don’t forget to join our Telegram channel or updates.