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Following amendments adopted on June 27, 2025, Georgia recently introduced a set of tax benefits to support innovative startups, small and medium-sized enterprises (SMEs), and research and development (R&D) service providers. Each category comes with its own eligibility criteria and tailored tax benefits that we shall examine below.
Innovative Startups
Innovative startups are newly established businesses engaged in developing products, processes or services with a strong focus on innovation. To qualify for this status, businesses must demonstrate a tangible commitment to their ideas, either by securing at least 100 000.00 GEL from investors and/or accelerators, or by receiving a minimum of 150 000.00 GEL in government grant funding.
The startup status is granted for one year, with the option of annual renewal for up to ten years. Tax incentives are structured in stages:
- Years 1–3: Salaries are exempt from income tax (within a government-defined limit).
- Years 4–6: Salaries are taxed at 5%, and profit tax is also reduced to 5%.
- Years 7–10: Salaries are taxed at 10%, with profit tax at 10%.
It is important to note that startups cannot simultaneously hold the status of an International Company or a Virtual Zone entity.
Small and Medium-sized Enterprises (SMEs)
SMEs, on the other hand, are established businesses that commit a substantial share of their revenue to research and development. To qualify, they must allocate at least 5% of annual income, amounting to no less than 100 000.00 GEL, to R&D activities. Qualifying expenses can include patent development, software registration, or services purchased from accredited R&D providers.
This status is granted indefinitely, provided companies remain compliant with legal requirement. Tax advantages include the ability to reduce taxable profit when distributing dividends by an amount equal to three times the R&D expenses incurred in the previous financial year. Furthermore, SMEs that reinvest their profits can access additional government support mechanisms.
R&D Service Providers
R&D service providers are companies whose core business is scientific and engineering research. To qualify at least 80% of their annual revenue must come from R&D activities classified under Georgia's national economic activity code 72.1.
These companies enjoy long-term tax benefits:
- Employee salaries are taxed at a reduced rate of 5%.
- Profit tax is also capped at 5%.
Similar to SMEs R&D Service Providers are also required to submit annual compliance reports by April 30.
The introduction of these measures signals Georgia's ambition to foster an environment conducive to innovation and investment. By easing tax burdens, the government aims to encourage startups during their early stages, stimulate SMEs to channel more resources into R&D, and ensure that specialized research companies can thrive in a predictable fiscal environment.
Both the amendments to the Tax Code and the Law on Innovation will come into force on September 24, 2025, 90 days after publication.
What Eurofast Can Do for You
At Eurofast, we support entrepreneurs, SMEs, and R&D providers in navigating Georgia's new incentive framework. Our team helps you:
- Assess eligibility for startup, SME, or R&D tax statuses.
- Prepare and submit the required documentation and annual compliance reports.
- Optimise profit reinvestment and dividend planning under the new regime.
- Provide cross-border insights for investors seeking to establish innovative businesses in Georgia.
With a local presence in Tbilisi and regional expertise, Eurofast ensures your innovation journey in Georgia is fully compliant, tax-efficient, and built for long-term growth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.