Georgia’s Innovation Law

Georgia’s Innovation Law

Georgia has introduced a new innovation-support framework under the Law on Innovations and related Tax Code amendments, effective from 24 September 2025. The reform allows companies to obtain one of three official statuses:

1. Innovative Startup
2. Innovative SME
3. R&D Company (R&D Service Provider)

Each status provides specific tax incentives and is granted through the Innovation Registry administered by GITA. Below is a practical summary of benefits, eligibility, application timelines and what is required to maintain status.

 

1) Innovative Startup Status

Tax benefits (up to 10 years, phased)

Innovative Startup status is the most generous and applies in stages:

• Years 1–3

o 0% Personal Income Tax (PIT) on employee salaries
(applies within a 10,000 GEL monthly cap per employee set by the Government).

• Years 4–6

o 5% PIT on salaries

o 5% Corporate Income Tax (CIT) on distributed profit.

• Years 7–10

o 10% PIT on salaries

o 10% CIT on distributed profit.

For Innovative Startup status, the tax relief is phased and tied to renewal thresholds. The company receives Year 1–3 benefits based on the initial qualification, but to continue into Years 4–6 it must confirm that it has attracted a significantly higher cumulative investment (around 5 million GEL) and still meets all innovation and compliance criteria. To extend the status further into Years 7–10, the cumulative investment requirement increases again (around 15 million GEL). In other words, the state expects startups to demonstrate real scale-up through verified funding at each renewal stage, otherwise the preferential tax regime ends.

Important restriction: Innovative Startup status cannot be used simultaneously with other special IT regimes (such as International Company or Virtual Zone Person).

Eligibility criteria (core requirements)

A company may qualify if it:

• Is developing an innovative product, service, technology, or business process (new or substantially improved).
• Received within the last 2 years either:

o ≥ 100,000 GEL investment from an accredited venture/angel/accelerator source, or

o ≥ 150,000 GEL grant funding from a recognized innovation or development program.

• Demonstrates that most revenue and expenses relate to the innovative activity.
• Has no tax arrears, is not insolvent, and not in liquidation.

Documents and audit requirement

Typical submission package includes:

• Company registration extract and ownership details.
• Description of the innovation and business plan/roadmap.
• Investment or grant agreements and proof of receipt.
• Audited financial statements and/or auditor’s assurance confirming that activity and costs are innovation-related.
• Tax compliance confirmation.

Keeping the status

• Startup status is granted for 1 year.
• To keep it, the company must re-apply annually through the Registry and confirm it still meets all criteria.
• Renewal is possible up to a maximum total of 10 years, if requirements continue to be satisfied.

 

2) Innovative SME Status

Tax benefits

Innovative SMEs receive an R&D-based tax incentive:

• When profit distribution triggers CIT under Georgia’s “Estonian model,” the company may reduce the taxable base by 3 times qualifying R&D expenses from the previous financial year.

This effectively lowers the tax cost of dividends for R&D-intensive businesses.

Eligibility criteria (including SARAS category rule)

To apply, a company must:

• Be registered in Georgia.
• Be classified only as a Category 3 or Category 4 entity under SARAS enterprise size categories.
  (Larger Category 1–2 entities are not eligible for Innovative SME status.)
• Have R&D expenses in the prior year of:

o at least 100,000 GEL, and

o at least 5% of annual revenue.

• Meet at least one innovation indicator, such as:

o owning a patent or registered/deposited software tied to the R&D work,

o purchasing R&D services from accredited/certified entities,

o maintaining R&D cost accounting in line with approved rules.

• Have no tax debt, insolvency, or liquidation proceedings.

Documents and audit/verification requirement

The application typically includes:

• Financial statements and SARAS category confirmation (only category 3 and category 4 entities are eligible).
• R&D expense calculation with methodology.
• Supporting R&D evidence (contracts, project descriptions, technical documentation).
• Independent verification / auditor or accountant confirmation is expected to support R&D expense eligibility.

Keeping the status

• Innovative SME status has no fixed end date, but it remains valid only while requirements continue to be met.
• Annual compliance confirmation is required: each year the company must submit updated evidence showing:

o it still qualifies as Category 3 or 4 under SARAS criteria,

o R&D spending thresholds are met,

o R&D costs are properly tracked and supported.

• If documentation is weak or thresholds are not met, status may be suspended or revoked.

 

3) R&D Company (R&D Service Provider) Status

Tax benefits

R&D Companies enjoy stable low rates:

• 5% PIT on salaries
• 5% CIT on distributed profit

Eligibility criteria

This status is for companies whose main business is delivering R&D services (e.g., engineering R&D, software R&D, applied science, lab/prototype work). Approval focuses on whether the company:

• Performs real R&D operations in Georgia.
• Employs qualified R&D personnel.
• Has clear R&D project documentation.
• Keeps transparent R&D cost accounting.
• Has a clean tax/compliance record.

Documents and audit/verification requirement

Applicants typically submit:

• Service and project portfolio showing R&D nature.
• Staff qualifications and infrastructure overview.
• R&D accounting records and cost allocation method.
• Auditor/accountant verification supporting R&D classification and expenses.

Keeping the status

• Status is granted indefinitely, but requires annual compliance confirmation.
• Each year the company must prove R&D services remain the core activity and documentation remains audit-ready.

 

Application Timeline (How long it takes)

The law sets clear deadlines mainly for GITA’s review stage:

1. GITA verification – 15 working days
   From the moment your application is submitted, GITA has 15 working days to review and verify compliance.
2. If additional information is required

o GITA issues a request for corrections/additional documents.

o The applicant has 10 working days to submit missing or corrected materials.

o After resubmission, GITA reviews within another 10 working days.

3. Government approval
   Once GITA confirms eligibility, the file is forwarded through the Ministry of Economy to the Government for final approval. 

How Ants Can Help

Innovation status can reduce salary taxes and profit-distribution tax significantly, but approval and renewal depend on proper R&D accounting, strong documentation, and audit-level evidence.

Ants supports clients with:

• Managing the entire application process and annual confirmations,
• eligibility assessment and choosing the best status,
• structuring and tracking R&D costs correctly,