Georgia has long positioned itself as a competitive destination for tech entrepreneurs and innovative businesses. Special tax offerings such as the Small Business Status, Virtual Zone status, International Company Status, and others have become popular setups for many innovative entrepreneurs to base their operations in Georgia.
However, recent legislative changes have taken this commitment to an entirely new level. In June 2025, significant amendments to the Law on Innovations introduced three distinct tax-advantaged statuses designed to attract and support innovation-driven companies.
These changes represent a fundamental shift in Georgia’s approach to fostering its innovation ecosystem. The centerpiece is the Innovative Startup Status, which offers substantial tax relief for up to 10 years, alongside two complementary regimes for Innovative SMEs and R&D service providers.
For entrepreneurs building innovative products, developing new technologies, or conducting research and development activities in Georgia, understanding these regimes could translate into significant tax savings and competitive advantages. This guide breaks down everything you need to know about qualifying, applying, and maintaining these statuses.
Innovative Startup Status
An Innovative Startup is defined as a business enterprise registered under Georgian law that conducts innovative activities. But what counts as “innovative”? According to the legislation, your company must be:
- Creating an innovative product – a new or significantly improved product that goes beyond mere aesthetic changes to existing products
- Developing an innovative process – a new or significantly improved production or service delivery method
- Providing innovative services – services that represent genuine innovation or improvement
The key requirement is that your innovation must have economic, scientific, or social value and be practically applicable. This is deliberately broad to encompass various types of innovation across different sectors.
Conditions for Obtaining the Status
To qualify for Innovative Startup Status, your company must meet several specific criteria:
1. Investment or Grant Funding Requirement
Within the two years prior to applying, your company must have secured at least one of the following:
- 100,000 GEL minimum investment from:
- A registered investment fund
- An angel investor network or its members
- A registered accelerator
- 150,000 GEL minimum grant funding from the Georgian Innovation and Technology Agency (GITA)
Important nuance: If your Georgian entity received funding through a parent or subsidiary company abroad, this counts as a qualifying investment provided the parent/subsidiary itself received the funds from one of the approved sources mentioned above.
2. Business Activity Alignment
Your revenues and expenses must be substantially related to the innovative activity being funded. This means you can’t receive innovation funding and then pivot to unrelated business activities while claiming the tax benefits.
3. Clean Financial Standing
At the time of application and status grant, your company must:
- Have no tax debts
- Not be registered in the debtors’ registry
- Not be undergoing insolvency proceedings
- Not be in liquidation
4. Legal Structure
You must be registered as a commercial legal entity under Georgian law, essentially meaning you need to be a Georgian LLC or JSC.
Duration, Extension, and Reporting Requirements
The Innovative Startup Status operates on a tiered system that can last up to 10 years maximum, with different requirements at each stage:
Years 1-2: Initial Period (2 renewals possible)
- Status granted for 1 year initially
- Can be renewed twice, for 1 year each time
- Must continue meeting the original criteria
- Annual reporting is required 30 days before expiration
Years 3-5: Growth Stage (3 renewals possible)
- Must have raised at least 5 million GEL total investment by the end of year 3
- At least 30% must come from approved sources (investment funds, angel networks, accelerators)
- Foreign parent/subsidiary investment counts if 30%+ came from approved sources
- Annual compliance reporting is required
Years 6-10: Scale-up Stage (4 renewals possible)
- Must have raised at least 15 million GEL in total investment by the end of year 6
- At least 30% must come from approved sources
- The same foreign investment rules apply
- Continued annual reporting
Annual Reporting Process
Companies must submit a comprehensive renewal application 30 days before their status expires, including:
- Description of innovative products/processes/services
- Audited financial statements
- Proof of continued investment (where applicable)
- Confirmation of no insolvency proceedings
- Evidence that revenues and expenses remain tied to innovative activities
The Georgian Innovation and Technology Agency (GITA) reviews applications within 10 calendar days. If deficiencies are found, you have 5 calendar days to remedy them. Failure to maintain compliance results in automatic status termination. The initial registration fee is 200 GEL.
Overview of the Application Process
Step 1: Prepare Documentation
Gather the required documents:
- Recent business registry extract (updated within 1 month)
- Detailed description of your innovative product/process/service
- Investment agreements or GITA grant documentation
- Audited financial statements with a certified auditor’s report
- Confirmation of no insolvency proceedings
Step 2: Submit to GITA
Applications are submitted to the Georgian Innovation and Technology Agency (GITA). Your application will be reviewed by a special commission for innovative aspects, and by GITA generally for compliance with other requirements.
Step 3: GITA Review (15 business days)
GITA examines your application for compliance with all legal requirements. If issues are found, you’ll have 10 business days to remedy them. If everything is in order, GITA forwards your application to the Ministry of Economy and Sustainable Development.
Step 4: Government Decision
The Georgian Government makes the final decision on granting the status via a government decree.
Step 5: Status Activation
Your Innovative Startup Status becomes effective from the first day of the month following the Government’s decision. This is when tax benefits begin.
Step 6: Registry Entry
GITA registers your company in the Innovations Registry within 1 business day of the Government decree.
Tax Benefits
The tax benefits are structured in three phases, becoming progressively less generous as your startup matures:
Years 1-3: Maximum Benefits
During the first three years:
- Income tax exemption on salaries paid to employees
- Maximum qualifying salary: 10,000 GEL per month per employee
- This means zero income tax on salaries up to 10,000 GEL monthly per employee
Example: If you have 10 employees each earning 8,000 GEL/month, you’d normally pay 20% withholding income tax (1,600 GEL per employee = 16,000 GEL monthly). With Innovative Startup Status, this entire amount is exempt, saving you 192,000 GEL annually.
Years 4-6: Reduced Rate Phase
From the 4th through 6th year:
- Withholding tax on salaries: 5% (instead of standard 20%)
- Corporate income tax: 5% (instead of standard 15%)
- Salary threshold: 10,000 GEL per employee monthly
Example: Using the same 10 employees at 8,000 GEL monthly:
- Withholding tax: 5% × 80,000 = 4,000 GEL/month vs. 16,000 GEL normally
- Annual saving: 144,000 GEL
Years 7-10: Moderate Benefit Phase
From the 7th through 10th year:
- Withholding tax on salaries: 10% (instead of 20%)
- Corporate income tax: 10% (instead of 15%)
- The same salary threshold applies
Notably, you cannot simultaneously hold Innovative Startup Status and International Company Status or Virtual Zone Status. If you obtain either of those statuses while holding Innovative Startup Status, the latter is automatically revoked.
Other Innovation Tax Regimes
Georgia’s innovation support framework includes two additional statuses worth considering:
Innovative SME Status
Who qualifies:
Companies that invest heavily in R&D as a proportion of revenue. Specifically, you must meet these criteria:
- R&D expenses ≥ 5% of annual revenue
- Minimum 100,000 GEL in R&D spending
- Qualify as a Category 3 or 4 enterprise under accounting law (essentially medium to large SMEs)
- Must satisfy at least one of the following criteria:
- Hold a patent or a computer software related to your R&D
- Purchase R&D services from research institutions or registered R&D service companies
- Track R&D expenses according to the government-approved R&D Expenses Manual
Tax benefits:
- Triple R&D expense deduction: When distributing dividends, you can reduce taxable profit by 3× your previous year’s R&D expenses
- Profit reinvestment grant: If you reinvest profits, you can receive a grant worth 20% of your R&D expenses (maximum 100,000 GEL)
Duration: Granted indefinitely, but requires annual compliance verification by April 30th each year.
Application fee: 500 GEL
Why it matters: This status is particularly valuable for profitable companies conducting substantial R&D. The triple deduction mechanism can significantly reduce dividend tax exposure.
R&D Service Provider Status
Who qualifies:
Companies primarily engaged in providing research and development services:
- At least 80% of revenue from NACE activity code 72.1 (“Research and experimental development in natural sciences and engineering”)
- Clean financial standing (no tax debts, not in insolvency/liquidation)
Tax benefits:
- Withholding tax on salaries: 5% (vs. 20% standard)
- Corporate income tax: 5% (vs. 15% standard)
Duration: Granted once, indefinitely (one-time permanent status)
Application fee: 500 GEL
Strategic use: This status is ideal for consulting firms, research labs, and specialized R&D service providers. The low permanent tax rates make Georgia highly competitive for establishing regional R&D centers.
Conclusion
Georgia’s new innovation tax regimes represent a serious commitment to building a knowledge-based economy. The Innovative Startup Status, in particular, offers one of the most generous tax incentives for early-stage innovative companies in the region – potentially saving hundreds of thousands of lari over a 10-year period.
However, these benefits come with real compliance requirements. The annual reporting obligations, audit requirements, and ongoing verification processes mean this isn’t a “set it and forget it” tax optimization. You’ll need proper accounting systems, documentation practices, and likely professional advisory support to maintain status.
For startups meeting the criteria, the potential tax savings are substantial enough to materially impact runway and growth trajectories. For established companies investing in R&D, the SME status offers meaningful profit tax optimization. And for specialized R&D service providers, the permanent 5% rates are difficult to beat anywhere in the region.
As Georgia continues developing its innovation ecosystem, these regimes signal a clear message: if you’re building innovative technology or conducting serious R&D, Georgia wants your business and is willing to offer significant tax advantages to get it.
This article provides general information based on legislation effective as of late 2025. Tax law is subject to change, and individual circumstances vary. Consult with qualified tax advisors and legal professionals before making business decisions based on this information.
