An amendment to the Tax Code of Georgia will enter into force on September 24, 2025,  according to which: the legal basis for tax benefits for persons with the status of an innovative startup, an innovative small and medium-sized company, and a company providing research and development services provided for by the Law of Georgia “On Innovations” was determined.

The aforementioned amendment to the Tax Code became a logical consequence of the amendment to the Law of Georgia “On Innovations”, according to which a number of new terms, statuses and their supporting mechanisms (tax benefits) were defined in the legal regulation of the field of innovations.

According to the explanatory memorandum, the draft law, which has already become law and will enter into force on September 24, 2025, will have a significant impact on entities with a newly defined status in the field of innovation, namely, they will have a reduced income and profit tax rate (or taxable amount) and, accordingly, the absolute amount of tax payable, which will improve cash flow for those enjoying the status and allow them to direct financial resources to the development of their own product and/or service and/or process.

Innovative Startup

An innovative startup is an entrepreneurial company carrying out innovative activities, registered in accordance with the Law of Georgia “On Entrepreneurs”, which meets the requirements for granting the status of an innovative startup set out in the Law “On Innovations”.

The status of an innovative startup can be granted to an entity that meets the following requirements:
a) it creates an innovative product, develops an innovative process and/or provides an innovative service;
b) It has received an investment of at least 100,000 GEL from an investment fund, angel investor network or a member of this network and/or accelerator during the last 2 years prior to submitting the application for the granting of the aforementioned status, or has received grant funding of at least 150,000 GEL from an agency (such investment shall include funds raised in a similar manner from a parent company or/and subsidiary based in another country).
c) In order to obtain the aforementioned status, it carries out the activities provided for in subparagraph “a” of the same paragraph, financed by the mechanisms provided for in subparagraph “b” of this paragraph, and in addition, the income received and expenses incurred by it are essentially related to this activity;
d) It has no tax arrears from the date of submission of the application for granting the aforementioned status to the moment of granting the status, it is not registered in the debtors’ register, there are no insolvency proceedings against it and it is not in the process of liquidation.

The entity is granted the status of an innovative startup for a period of 1 year, which may be extended for an additional 1 year in accordance with the conditions provided for by law, but the status may be enjoyed for a total period of no more than 10 years.

Tax benefits for innovative startups:


a) During the first 3 years after granting the status of an innovative startup:
The salary paid by it shall be exempt from income tax within the amount determined by the resolution of the Government of Georgia, in agreement with the Finance and Budget Committee of the Parliament of Georgia;
b) From the 4th year of granting the status for the next 3 years:
The salary paid by it is taxed at a 5% income tax rate, and during the same period the profit tax rate for an innovative startup is 5%;

c) From the 7th year of granting the status of an innovative startup for the next 4 years:


The salary paid by it is taxed at a 10% income tax rate, and during the same period the profit tax rate for an innovative startup is 10%.

It is also worth noting that the law restricts/prohibits the use of the status of an international company or a virtual zone person along with the status of an innovative startup.

Innovative Small and Medium-sized Company

The status of an innovative small and medium-sized company shall be granted for a lifetime and may be granted to an entrepreneurial society registered in accordance with the Law of Georgia on Entrepreneurs, which meets the following requirements:


a) at the time of submission of the relevant application, as well as subsequently, at the time of confirmation of compliance provided for by this Law, the volume of expenses incurred for research and development during the previous financial year is at least 5% of the volume of revenues received in the same financial year, not less than 100,000 GEL, and it meets at least one of the following conditions:


a.a) it has a patent and/or a deposited computer program and the expenses incurred for research and development are directed towards the development of a product created within the framework of this patent and/or deposited computer program,