Taxes in the IT Sector in Georgia vs Belarus  

In recent years, the IT sector has become one of the most dynamically developing sectors of the economy, attracting the attention of specialists and states seeking to create favourable conditions for doing business. Georgia and Belarus are two striking examples of countries actively working to improve their tax policies to attract IT companies and talent worldwide.  

Georgia is known for its simplified tax regimes and small business support programs, which makes it attractive to startups and independent developers. Belarus, in turn, offers unique conditions for residents of the Hi-Tech Park (HTP), providing significant tax benefits and access to the developing CIS market.  

In this article, we will compare these two countries’ tax systems and analyse their features, advantages, and disadvantages to help you make an informed decision about choosing a jurisdiction for your IT business.

Why do we Compare Taxes for the IT Sector in Belarus and Georgia

In recent years, the IT sector has become one of the fastest-growing sectors of the economy in many countries, and Belarus and Georgia are no exception. Comparing the tax conditions for IT businesses in these two countries is important for several reasons:

First, both countries attract international investment in information technology through special tax regimes that offer favourable conditions for startups and large technology companies. 

Secondly, despite the similar goals, the tax conditions in Belarus and Georgia differ significantly, which makes their comparison interesting for companies choosing a place to operate or expand into the CIS and Eastern European markets.

Belarus is known for its development in high-tech and innovative fields. IT business support programs such as the Hi-Tech Park (HTP) offer significant tax benefits and preferences to IT companies. These measures include exemption from income taxes, tax levies, and other mandatory payments, which makes the country attractive to international companies wishing to minimise the tax burden.

Georgia, in turn, is also actively developing its IT industry, but its tax policy differs from that of Belarus. Georgia offers a relatively simple and transparent tax system that attracts IT companies due to its low tax rates and relatively few bureaucratic barriers. An important aspect is the income tax for IT companies and special tax regimes for new startups, which can significantly reduce costs at the initial stage.

Thus, comparing the tax conditions in these two countries is important for those considering expanding or opening an IT business in the region, choosing the most favourable tax environment for their company.

Favorable Tax Regimes for the IT Sector in Georgia and Belarus

Favourable regimes aim to develop the IT sector in Belarus and Georgia. Let’s examine the essence of such modes.

High-tech Park in Belarus

In Belarus, the government has provided a favourable tax regime to companies and individual entrepreneurs who are residents of the Hi-Tech Park (HTP). HTP is a special legal regime for businesses in the field of new and high technologies, including the IT sector. Only Belarusian companies and individual entrepreneurs (those registered in Belarus) can be HTP residents. The HTP has its territory within the borders of Minsk, but HTP residents can be located and registered throughout Belarus.

In addition to several benefits in the field of foreign trade, HTP residents have tax benefits:

1. Exemption from value-added tax (VAT) on turnover within the country and when selling a number of IT services to foreign partners, as well as when importing equipment for working on projects. The generally established VAT rate in Belarus is 20%.

2. Exemption from income tax, except in cases of income payments to foreign companies. The generally established income tax rate is 20%.

3. Exemption from offshore fees for the provision of advertising, marketing services, payment of dividends, and some other cases. The generally established offshore fee rate is 15%.

4. Exemption from land tax for 3 years in case of construction on the territory of an HTP for their own needs.

5. Exemption from real estate tax on HTP facilities (except when renting the property).

6. The 0% rate for a number of incomes of foreign companies to which the HTP resident pays income. The tax rates on the income of foreign companies in Belarus range from 6% to 15%.

Virtual Zone in Georgia

Georgia offers a special status for IT companies – “Virtual Zone”. Companies that are registered under this regime receive significant tax benefits:

• Income tax: 0% on income from exported IT services (provided that the services are provided outside Georgia).  
• VAT: 0% on the export of IT services.  
• Tax on dividends: 5% (or maybe lower, depending on the agreement on avoidance of double taxation).  

To become a virtual zone company, you need to register a company in Georgia and apply for this status. The process is simple and takes about 10 working days.  

Individual Entrepreneurship and the “Small Business” Regime for the IT Sector in Georgia

Preferential conditions are also provided for IT freelancers and individual entrepreneurs:  

• Small Business mode:  The fixed income tax is 1% (up to an income of 500,000 lari per year, about $185,000).  

If the income exceeds this threshold, the tax rate increases to 3%.  

There is no tax on dividends, as they do not apply to individual entrepreneurs.  

Total Tax Burden in Georgia 

Georgia has an “Estonian model” taxation system, where companies pay income tax only if dividends are distributed. It reduces the overall tax burden.

When IT Companies in Belarus Do Not Have Tax Benefits

Not all IT companies in Belarus have tax benefits. For example, IT companies that are not HTP residents pay taxes on general terms. HTP-resident IT companies may also lose tax benefits under certain conditions. Here are the main cases when this can happen:

1. Loss of HTP resident status

The tax benefits of an HTP resident are lost if an IT company or individual entrepreneur loses its HTP resident status. It can happen, for example, for the following reasons:

• Violation of the rules of conduct: Engaging in prohibited activities and non-compliance with the activities specified in the HTP Regulations and the business project.
• Providing false information in the reporting.
• The HTP Supervisory Board’s decision to expel the company.

2. Failure to comply with the terms of use of benefits

HTP residents can use tax benefits only if they comply with the rules established by the legislation on benefits.

Examples of violations in which you can lose benefits:

• Violation of tax legislation.
• Non-payment of taxes or contributions in full.
• Delay in submitting mandatory reports.

3. Activities outside the legal framework

The HTP allows certain IT-related activities (software development, IT consulting, etc. – the permitted activities are listed in the HTP Regulations).

If a company begins to engage in activities not covered by the HTP rules (for example, trading or providing services outside of IT), it loses the right to tax benefits.

4. Changes in legislation

Tax benefits can be abolished at the legislative level.

5. Withdrawal from HTP at one’s own request

The company can apply to renounce its HTP resident status. After leaving the HTP, the benefits cease, and the company begins to operate on a general basis.

6. Liquidation or reorganisation of the company

Tax benefits often cease to apply when a company is liquidated or reorganised (merger, affiliation, etc.).

The Main Tax Consequences of the Loss of Benefits

1. The transition to a common taxation system.
2. Accrual of taxes at generally accepted rates for previous periods when benefits were lost due to business irregularities.

Complying with the legislation, regularly checking compliance with HTP requirements, and properly organising activities is important to preserve the benefits of HTP resident companies.

Comparison of the IT Regime in Georgia with the HTP in Belarus  

The Georgian regime for the IT sector is slightly different from the Belarusian Hi-Tech Park:  

1. Localisation: Georgia does not require employees or companies to be located in the country, which makes it attractive for remote work.  

2. Ease of registration: Registering a company and obtaining preferential status in Georgia is easier and faster.  

3. Fewer international sanctions: Georgia is more focused on integration with international markets.  

Georgia may be a great option if you plan to open an IT business or become an entrepreneur. Let us know if you need help registering a company or choosing a tax regime!

Conclusion

Taxation in Belarus and Georgia for IT companies demonstrates two approaches to creating conditions for business in the technology sector. With its High-Tech Park, Belarus offers residents significant benefits and preferences aimed at developing the domestic IT industry. Georgia, in turn, focuses on a simplified tax system and low rates, which makes it attractive to international companies and digital nomads.  

The choice between these countries depends on the specifics of the business, its size, goals and development strategy. Companies focused on exporting services can appreciate the flexibility of the Georgian system. At the same time, organisations interested in developing within the region and supported by the state will find suitable conditions in Belarus. It is important to consider not only tax rates but also administrative aspects, such as access to talent and infrastructure, to make the best decision for your IT business.