Georgia's Virtual Zone (VZ) status allows IT and IP companies to pay just 1% corporate tax on income from foreign clients — making it the lowest-cost, lowest-tax jurisdiction globally for Indian software companies, SaaS founders, and IP owners serving international clients.
Why Georgia for IP Holding?
- 1% corporate tax on IP and royalty income from foreign clients (VZ status)
- 0% VAT on services and royalties to foreign clients
- 0% capital gains tax on IP asset sales
- Company formation in 1 day — world's fastest
- Lowest setup cost globally — USD 200–500 total
- DTAA with India — reduced withholding tax on royalties
- No minimum share capital
- Simple annual compliance — very low accounting costs
What is Virtual Zone (VZ) Status?
VZ status is Georgia's flagship tax incentive for IT companies. To qualify your company must:
- Provide IT services, software, or IP licences to clients outside Georgia
- Be registered as an IT company with the Georgian Revenue Service
VZ companies pay just 1% corporate tax on qualifying foreign income — compared to India's 25.17%. Income from Georgian clients is taxed at the standard 15% rate.
How the Georgia IP Structure Works for Indians
- Georgian VZ IP Co owns your software, algorithm, or trademark
- Indian company signs a licence agreement and pays royalties
- Royalties are tax-deductible in India (saving 25% Indian tax)
- Withholding tax deducted under India-Georgia DTAA
- Georgian IP Co pays just 1% tax on royalty income
- Net effective tax rate: dramatically lower than keeping IP in India
Georgia vs India — IP Tax Comparison
| Item | India | Georgia (VZ) |
|---|---|---|
| Tax on royalty/IP income | 25–30% | 1% |
| VAT on foreign client services | 18% GST | 0% |
| Capital gains on IP sale | 20%+ | 0% |
| Company setup cost | High | USD 200–500 |
| Annual compliance cost | High | Very low |
Step-by-Step: Setting Up a Georgia IP Company
Step 1: Register LLC (Shpk) at House of Justice
Same-day registration. Fee: GEL 100 (approx. USD 35). No minimum share capital required.
Step 2: Apply for Virtual Zone Status
Submit application to the Georgian Revenue Service. Processing: 5–10 business days. This is what unlocks the 1% tax rate.
Step 3: Transfer or Develop IP in Georgia
Transfer existing IP with proper arm's length valuation, or develop new IP within the Georgian entity for cleaner substance.
Step 4: Draft IP Licence Agreement
Create a formal licence agreement between your Indian entity and Georgian IP Co at arm's length. Maintain transfer pricing documentation for Indian compliance.
Step 5: Open Corporate Bank Account
TBC Bank or Bank of Georgia — both internationally connected. Account opening: 1–3 days.
Step 6: Indian Compliance
- File ODI with RBI (Indian residents investing abroad)
- Withhold TDS on royalty payments under India-Georgia DTAA
- Maintain transfer pricing study justifying royalty rate
- Disclose in Schedule FA of Indian ITR every year
Types of IP Suitable for Georgia IP Company
- Software source code and SaaS platforms
- Mobile applications and APIs
- Proprietary algorithms and AI/ML models
- Domain names and digital assets
- Trade secrets and know-how
- IT consulting methodologies
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Disclaimer: Educational purposes only. Tax laws change frequently. Consult a qualified CA and legal advisor before implementing any offshore structure. FEMA · RBI · Income Tax Act compliant.