Comparison of Georgia’s virtual zone with similar programs in other countries

When considering the choice of jurisdiction for an IT business, it is useful to compare Georgia’s virtual zone with similar programs in other countries.

Estonia, known for its developed digital society, offers free economic zones located in ports. However, these zones focus mainly on goods in transit and offer exemptions from customs duties, VAT and excise taxes on goods in transit, which is different from the Georgian virtual zone’s focus on IT services and exemptions from income tax and VAT on exports. Nevertheless, Estonia is also attractive to IT companies due to its developed digital infrastructure and cybersecurity.

Lithuania also offers a number of free economic zones (FEZs) that may be of interest to IT companies. Lithuanian FEZs provide corporate tax exemptions (full exemption for the first 6 years and reduced rate for the next 10 years for certain investments), exemption from real estate tax and dividend tax in some zones. The comparison shows that Lithuania also seeks to attract investments in the IT sector by offering tax incentives, although the structure and duration of these incentives may differ from those in Georgia. In addition, Lithuania’s membership in the European Union can be both an advantage and impose certain obligations not present in Georgia.

Finally, it is worth mentioning other jurisdictions known as tax havens, such as Hong Kong, Switzerland or the Cayman Islands. These countries offer low or zero corporate tax rates and a high level of financial privacy. The Georgian virtual zone also offers zero corporate tax for a certain sector, but focuses on IT companies and strives for business transparency. Unlike some classic tax havens, Georgia is actively developing its IT infrastructure and striving to build a reputation as a reliable and attractive jurisdiction for technology businesses.

The key differences between Georgia’s virtual zone and similar programs lie in the specifics of the tax incentives offered (exemption from income tax and VAT on exports of IT services), the requirements for the type of activity (mainly software development), as well as the general business climate and the level of development of digital infrastructure in each country.