Sole proprietor-small entrepreneur VS virtual zone person
What is the best way to conduct an IT business in Georgia?
August 9, 2019
If you are a Specialist in the field of IT technologies, including studying, supporting, developing, designing, manufacturing and implementing computer information systems or conducting any other commercial activity related to IT and your clients are NOT residents of Georgia, we remind you that you can conduct business in a general manner or register your a company in a virtual zone is a special preferential zone created in 2011 exclusively for companies working in the field of IT technologies.
We propose to compare these two options for doing IT business by key indicators
Company registration
| THE BASIS OF COMPARISON | GENERAL ORDER | VIRTUAL ZONE |
|---|---|---|
| Form of doing business | Organization (LLC, JSC) or individual entrepreneur (including those with the status of a small business) | Only LLC, JSC |
| Registration procedure | Registration in the Public Register of Georgia and with the tax authority (personal presence is required or by proxy) | Registration in the Financial and Analytical Service (company registration online) |
| Registration period | Up to three days | 10 days |
The tax regime
| THE BASIS OF COMPARISON | GENERAL ORDER | VIRTUAL ZONE |
|---|---|---|
| VAT | 0% if the income does not exceed 100.000 GEL 18% of the amount of income exceeding 100,000 GEL | 0% |
| Income tax from a source received abroad | General mode: 15% in the distribution of profits Small business entity: 1% of the amount of income, if it does not exceed 500,000 GEL per year (hereinafter – 15% of the amount exceeding 500,000 GEL) | 0% |
| Tax on dividends paid to an individual, an NGO or a non-resident enterprise | 5% | 5% |
So, if you plan to work independently without hired Employees and at the same time:
• Your income per year will not exceed the amount equivalent to 100,000 GEL (today slightly less than 30,000 USD), it is advisable to conduct business as an individual entrepreneur with the status of a small business entity.
Your tax in this case will be 1% of the income received.
• Your income per year will not exceed the amount equivalent to 100,000 GEL (today slightly less than 30,000 USD), it is advisable to conduct business as an individual entrepreneur with the status of a small business entity.
Your tax in this case will be 1% of the income received.
- Your income per year will exceed the amount equivalent to 100,000 GEL (today a little less than 30,000 USD), it is advisable to conduct business through a company registered in the virtual zone of Georgia.
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MARIA GUSEINOVA
Leading Manager of Commercial Department
Leading Manager of Commercial Department
