Georgian tax rules treat software income generously. The paperwork around that income is where people get hurt. Accounting for IT companies in Georgia means picking a structure first, then feeding it monthly declarations, foreign-currency records and an annual report most freelancers never hear about. Choose well and compliance stays cheap. Choose badly and you unwind it later, under audit, in Georgian.
The four ways an IT business gets taxed here
Georgia gives software businesses four realistic structures. They differ less in headline rate than in how much bookkeeping each one drags behind it.
| Structure | Who it fits | Headline tax treatment | Filing weight |
|---|---|---|---|
| Individual Entrepreneur, small business status | Solo developers, designers, contractors | Turnover taxed at 1% up to an annual cap | Light: a monthly turnover declaration, no financial statements |
| LLC, standard regime | Agencies, teams, mixed revenue | Profit taxed only when distributed, plus withholding on the dividend | Medium: monthly declarations plus annual financial statements |
| LLC with virtual zone person status | Product companies supplying software abroad | Profit from qualifying IT supply outside Georgia is exempt from profit tax | Medium, plus evidence of where the work was actually done |
| International company status | Established firms with Georgian staff and premises | 5% profit tax and 5% on employment income | Heaviest: substance and qualifying-activity conditions apply |
Treat every rate above as a starting point, not a quote. Georgia has amended several of these figures since 2018, and the small print sits in the Tax Code rather than on a rate card, so confirm the current numbers with an accountant before you build a plan on them.
Individual Entrepreneur with small business status
This is the default for one-person software businesses. You register as an Individual Entrepreneur, apply for small business status, and pay a percentage of turnover rather than tax on profit. There is no separate legal entity, so your business money and your personal liability are the same thing.
It suits people who invoice a handful of foreign clients and have almost no deductible costs. It stops suiting you the moment you hire, take investment, or sign with a client whose procurement team refuses to contract with an individual. The mechanics, including the turnover cap and what happens when you cross it, are covered in our guide to how 1% small business status works.
The plain LLC
A Georgian LLC does not pay tax on profit as it is earned. Tax is triggered on distribution, which lets a company reinvest revenue without a yearly profit tax bill. The consolidated Tax Code of Georgia sets the rate applied on distribution, and a further withholding applies when the money reaches a shareholder.
The trade-off is administration. An LLC files monthly, keeps double-entry books, and reports annually to the state. If you have staff, a bank facility, or clients who want a real counterparty, that cost buys you something.
Virtual zone person status
Virtual zone status is the reason most IT founders look at Georgia at all. The Tax Code defines a virtual zone person as a legal entity engaged in IT activities and holding the relevant status, and defines those activities as studying, supporting, developing, designing, producing and introducing computer information systems that result in software products.
Status is granted through the Ministry of Finance, and applications run through the Financial-Analytical Service, which publishes the procedure and the forms. Our explainer on Georgian virtual zone company rules walks through the application itself.
International company status
International company status is the heavyweight option, aimed at firms that move real operations to Georgia rather than a registered address. The Tax Code sets the profit tax rate for an international company at 5%, taxes income earned from working for hire at such a company at 5%, and provides that a dividend paid by an international company is not taxed at source.
The conditions are the point. Qualifying activity, a track record in the sector, and genuine Georgian presence all get examined. This is not a status you apply for on a whim, and it is worth a conversation with one of the tax advisors in Tbilisi before you spend money on the attempt.
What you actually have to file, and when
Georgian compliance is monthly, not annual. That surprises people arriving from countries where a small company files once a year and forgets about it.
| Filing | Applies to | Frequency | Usual deadline |
|---|---|---|---|
| Withheld personal income tax and pension contributions | Anyone paying salaries | Monthly | 15th of the following month |
| VAT return | VAT-registered persons, and reverse-charge cases | Monthly | 15th of the following month |
| Profit tax declaration | LLCs on the distribution model | Monthly | 15th of the following month |
| Turnover declaration | Individual Entrepreneurs with small business status | Monthly | 15th of the following month |
| Financial statements | LLCs, according to size category | Annual | 1 October of the following year |
Monthly returns go through the Georgian Revenue Service e-services portal, which is where your accountant will spend most of their time on your file. The annual financial statement goes somewhere else entirely, which is the part small companies miss.
Under the Law of Georgia on Accounting, Reporting and Audit, a fourth-category enterprise is one that stays under GEL 1 million in assets, GEL 2 million in revenue and 10 employees. Almost every small IT LLC in Tbilisi is fourth category, and it still has to file, by 1 October of the following year.
The categories and the deadline come from the Law on Accounting, Reporting and Audit, and submissions are supervised by Georgia's accounting and audit supervision service. We go through the full calendar in our post on annual reporting deadlines in Georgia.
The VAT trap on foreign software
Here is the thing most IT companies in Georgia get wrong, in both directions.
Services you supply to a business client outside Georgia are generally treated as supplied where that client is, which puts them outside the scope of Georgian VAT. That is why a developer can invoice six figures to clients in Berlin and Austin without a VAT registration obligation ever appearing. The VAT registration thresholds in Georgia apply to taxable transactions, and a supply outside scope is not one of them.
Services you buy from abroad are the mirror image. When a non-resident supplies services to you and the place of supply lands in Georgia, the obligation to account for the VAT shifts to you as the buyer. Cloud hosting, seat licences, ad platforms and offshore contractors can all land in that bucket.
Reverse-charge VAT can apply even when your company is not VAT-registered. A company running USD 4,000 a month of foreign SaaS and contractor invoices with nobody watching this line can accumulate an unfiled liability plus interest before anyone notices. Ask your accountant to confirm your exposure in writing.
Bookkeeping when the money arrives in three currencies
Georgian books are kept in lari. Your invoices are probably in dollars or euros, and your money probably lands in a payment platform before it reaches a Georgian bank. Three habits keep that clean.
Record revenue gross, then the processor fee as a separate expense. Netting a Stripe or Payoneer payout into a single line understates turnover, which matters directly when turnover is the tax base under small business status.
Convert at the official National Bank of Georgia rate for the transaction date, not at the rate your bank gave you, and keep the difference as an exchange gain or loss. Then keep three documents per client: the contract, the invoice and the bank credit. Georgian banks and auditors ask for the set, not for one of them. The detail sits in our guide to bookkeeping requirements for a Georgian LLC.
Paying developers: employee, contractor or IE
How you pay people changes your filings more than any other decision in a small software company.
| Arrangement | What you pay | What you withhold | Where it goes wrong |
|---|---|---|---|
| Employee on payroll | Gross salary under an employment contract | Personal income tax, plus pension contributions where the person is in scope | Late monthly filings, unregistered staff |
| Georgian contractor with IE status | The invoice, in full | Nothing, they declare their own turnover | A "contractor" on fixed hours under your direction can be recharacterised |
| Non-resident contractor | The invoice, in full | Withholding may apply depending on the service and any treaty | Assuming no Georgian tax touches a foreign invoice |
Paying your whole team as Individual Entrepreneurs is common in Tbilisi and it is not automatically wrong. It becomes wrong when the arrangement has every feature of employment except the contract. If your headcount is past three or four, hand this to one of the payroll providers in Tbilisi rather than running it in a spreadsheet.
What virtual zone status does not do
Virtual zone status is a profit tax exemption on a specific kind of income. It is not a general exemption, and reading it as one is the most expensive mistake we see in this cluster of clients.
Dividends are still taxed when you take money out. Payroll obligations continue for everyone on the books. VAT obligations, including reverse charge on what you buy, continue. The annual financial statement is still due. Costs attributable to exempt income do not get to shelter income that is taxable.
The exemption also attaches to IT products supplied outside Georgia, which makes the question of where the work happened a live one. A company whose only Georgian footprint is a registered address and a bank account has a weaker story than one with developers, contracts and a lease here. Keep the evidence as you go, because assembling it two years later during a review is miserable.
Save signed client contracts, delivery records, repository history and proof of where your team sits. Virtual zone reviews turn on evidence of qualifying activity, and evidence is much easier to file monthly than to reconstruct.
We research the accountants working in Tbilisi and rank the ones worth paying. Independently researched, re-checked quarterly, free to read.
See the ranked list
Hiring an accountant who has actually done IT files
Most Tbilisi bookkeepers are competent with a shop or a restaurant. Fewer have filed for a virtual zone company or argued a reverse-charge position. Four questions separate them quickly.
Ask whether they have filed for a virtual zone or international company, and how many. Ask how they treat VAT on foreign SaaS purchases, and listen for whether reverse charge comes up unprompted. Ask who submits your annual financial statement, and by what date. Ask whether they work inside your Revenue Service account or their own.
Pricing for a small IT company is usually a monthly retainer with the annual report either included or billed separately, and the gap between quotes is wide. We break the numbers down in what accounting services cost in Georgia, and the firms we rate are listed on our ranked list of Tbilisi accountants.
Key takeaways
- Pick the structure before you worry about bookkeeping. Individual Entrepreneur with small business status, a plain LLC, virtual zone status and international company status carry very different filing weights.
- Georgian compliance is monthly. Most declarations fall due on the 15th of the following month.
- The annual financial statement is separate from your tax filings and is due by 1 October of the following year, even for the smallest LLC.
- Services sold to foreign business clients usually sit outside Georgian VAT. Services bought from abroad can pull VAT back onto you through reverse charge.
- Virtual zone status exempts qualifying profit, not dividends, payroll, VAT or reporting.
- Rates and thresholds change. Confirm the current figures with an accountant before planning around them.
FAQ
Do I need an accountant as a freelance developer in Georgia?
Not always, but usually. An Individual Entrepreneur with small business status and a few foreign clients has a genuinely simple monthly declaration that many people file themselves. Once you add Georgian clients, employees, an LLC or purchases from foreign suppliers, the filing count rises fast. At that point the retainer costs less than one corrected return.
Is virtual zone status better than 1% small business status?
It depends on your scale and your costs, not on the headline rate. Small business status taxes turnover, so it is brutal on a business with real expenses and generous on a solo developer with none. Virtual zone status exempts qualifying profit but sits inside an LLC, with dividend tax on the way out and a heavier compliance load. Model both against your actual numbers before choosing.
Does a virtual zone company pay any tax at all?
Yes. The exemption covers profit from qualifying IT supply outside Georgia. It does not cover the tax charged when profit is distributed to shareholders, nor payroll taxes on salaries, nor VAT obligations, nor the duty to file annual financial statements. Companies that assume otherwise usually discover the gap when they first take money out.
Do I charge VAT to my foreign clients?
Generally no, because a service supplied to a business customer abroad is usually treated as supplied outside Georgia and therefore falls outside Georgian VAT. The rules turn on the type of service and the status of the customer, so selling to consumers rather than businesses can change the answer. Get the position confirmed once, in writing, and then apply it consistently.
Do I owe Georgian VAT on AWS, Google Workspace and other foreign software?
Often yes, through the reverse-charge mechanism. When a non-resident supplies services that are treated as supplied in Georgia, the Georgian recipient accounts for the VAT rather than the supplier. This can apply even to companies that are not VAT-registered for their own sales. It is the single most common unfiled item we see on IT company files.
What happens if my turnover passes the small business cap?
Exceeding the cap moves you off the preferential rate, and repeated breaches can cost you the status entirely. The switch is not automatic in your favour, so it needs planning rather than discovery. If your revenue is trending toward the limit, model the move to an LLC a full quarter ahead. The exact cap and the consequences of crossing it should be confirmed with your accountant.
Does a small Georgian IT LLC have to file financial statements?
Yes. Under the Law on Accounting, Reporting and Audit, a fourth-category enterprise, which covers almost every small IT LLC, still submits financial statements by 1 October of the year following the reporting period. This is separate from your monthly tax declarations and is supervised by a different body. Missing it is common and avoidable.
Can I keep my books in dollars?
No, Georgian books are maintained in lari. You can invoice and bank in any currency, but each transaction is converted for accounting purposes using the official rate for the relevant date, and the resulting exchange differences are recorded. Keeping a parallel dollar view for management purposes is fine, as long as the statutory books are in lari.
How do I pay an overseas developer from a Georgian company?
Through a written services contract and an invoice, paid from the company account. Two Georgian issues attach to that payment: possible withholding at source on certain payments to non-residents, and possible reverse-charge VAT on the service you received. Both depend on the service type and any applicable treaty, so confirm the treatment before the first payment rather than after the twelfth.
How much does accounting for an IT company cost in Georgia?
Small IT companies in Tbilisi generally pay a monthly retainer that scales with transaction volume and headcount, with the annual financial statement either bundled or billed on its own. Prices vary widely between solo bookkeepers and firms with English-speaking tax staff. Ask for the retainer, the annual report fee and the hourly rate for anything outside scope, in one written quote.
Can I switch from Individual Entrepreneur to an LLC later?
Yes, and plenty of freelancers do it once they hire or land an enterprise client. The LLC is a new legal entity, so contracts, bank accounts and client invoicing all have to move, and the Individual Entrepreneur is usually kept open or closed deliberately rather than abandoned. Plan the changeover for a clean month boundary to keep the filings tidy.