Georgia's 1% Tax for Small Businesses: How It Works & Who Qualifies

Georgia (the country, not the US state) has become a magnet for freelancers and entrepreneurs hunting for lower taxes.

The reason?

A special regime called Small Business Status lets qualifying individuals pay just 1% tax on their gross turnover - up to approximately $185,000 per year. No corporate structure required. No Georgian citizenship needed.

And the registration process takes about a day.

Quick Summary:

• Pay just 1% tax on gross turnover under 500,000 GEL (~$185,000) annually

• Register as an Individual Entrepreneur, then apply for Small Business Status

• No citizenship or residency required - open to foreigners from 95+ countries

• Certain professions like legal, medical, and financial consulting are excluded

• Monthly tax declarations required by the 15th of each month

What Is Georgia's Small Business Status?

Small Business Status is a special tax regime outlined in Article 90 of the Georgian Tax Code. It allows Individual Entrepreneurs (IEs) to pay a flat 1% tax on their gross turnover instead of the standard 20% income tax on profits.

This status is only available to individuals registered as Individual Entrepreneurs - not LLCs, joint stock companies, or other corporate structures. Think of it as a sole proprietorship with major tax benefits.

Once approved, the Revenue Service issues a Small Business Certificate. This certificate is valid for life unless your status gets revoked due to exceeding income limits or engaging in prohibited activities.

The key distinction here: you're taxed on turnover (total revenue), not profit. There are no deductions for expenses. If you bill 10,000 GEL in a month, you pay 100 GEL in tax - regardless of your costs. For service-based businesses with minimal overhead, this works out extremely well.

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Who Qualifies for the 1% Tax Rate?

Eligibility Requirements

To qualify for Small Business Status in Georgia, you need to meet these criteria:

• Your annual turnover must stay under 500,000 GEL (approximately $185,000 USD). This is calculated on a calendar year basis, January through December.

• You must first register as an Individual Entrepreneur with the National Agency of Public Registry. Small Business Status is a secondary application you submit after IE registration.

• You must be the sole operator of your business. This regime is designed for individuals working independently - no partners, no shareholders, no co-founders under the same registration.

• Your business activity cannot appear on the government's prohibited list (more on this below). Certain regulated professions and industries are excluded entirely.

Here's what surprises many people: you don't need Georgian citizenship or even residency to qualify. Foreigners can register as Individual Entrepreneurs and apply for Small Business Status just like locals.

Citizens from over 95 countries can also stay in Georgia visa-free for up to 365 days, making it easy to establish yourself here.

What Happens If You Exceed the Turnover Limit

The 500,000 GEL threshold isn't just a guideline.

If your turnover exceeds 500,000 GEL during the calendar year, your tax rate immediately jumps to 3% on all income from that point forward until December 31st. You don't lose your status, but you pay triple the rate for the remainder of the year.

Starting January 1st of the following year, you reset to 1% - assuming you stay under the limit again.

The real penalty comes if you exceed 500,000 GEL for two consecutive years. On January 1st of the third year, your Small Business Status is automatically revoked. You'll then be subject to the standard 20% income tax on net profit, with all the additional accounting and compliance requirements that come with it.

Excluded Activities - Who Cannot Qualify

This is where many entrepreneurs trip up. Not every business activity qualifies for the 1% rate, and the restrictions are non-negotiable.

Prohibited Business Activities

The following activities are completely excluded from Small Business Status under Government Resolution No. 415:

• Legal and notarial services cannot qualify. If you're a lawyer, notary, or provide legal consulting, the 1% regime is off the table.

• Medical and healthcare services are excluded. This covers doctors, dentists, therapists, and related medical professionals.

• Architectural services don't qualify either.

• Tax consulting, audit services, and financial advisory work are prohibited. This includes accountants offering advisory services beyond basic bookkeeping.

• Banking, insurance, and financial intermediation activities are excluded. Currency exchange operations fall under this category too.

• Gambling and iGaming businesses cannot obtain Small Business Status.

• Real estate brokerage - buying, selling, or renting property for profit - doesn't qualify.

• Any activity requiring a special government license is generally excluded, with one notable exception: M1 category private taxi permits in Tbilisi are allowed.

• Staffing agencies and employment services are prohibited. If you're placing workers with other companies, this regime won't work for you.

• Production of excisable goods (alcohol, tobacco, fuel) is excluded.

• Activities requiring significant capital investment also don't qualify, though the exact threshold isn't precisely defined.

One critical detail: employment income is always taxed at the standard 20% rate. You can hold Small Business Status while also being employed, but your salary gets taxed normally - only your IE business income benefits from the 1% rate.

2025 Update: Construction Services Now Excluded

As of February 1, 2025, a significant change took effect. Income from construction-related services provided to Georgian companies, organizations, or Individual Entrepreneurs is no longer eligible for Small Business Status.

This specifically covers services under codes 41.2 (construction of residential and non-residential buildings), 42 (civil engineering), and 43 (specialized construction work) in the National Classification of Georgia.

If you provide these services to foreign clients, you may still qualify. But construction work for Georgian recipients will now be taxed at the standard 20% rate on net profit and must be reported in your annual declaration.

How to Register for Small Business Status

The registration process involves two steps: first becoming an Individual Entrepreneur, then applying for Small Business Status.

Step 1: Register as an Individual Entrepreneur

Head to your nearest Public Service Hall. The main locations are in Tbilisi (on Kostava Avenue or Gulua Street) and Batumi, though smaller offices exist throughout the country.

Bring these documents:

A valid passport (or Georgian ID if you're a local). Foreign passports work fine - no translation required for registration, though Georgian translations may help for banking later.

A Georgian legal address for official correspondence. This can be your rental apartment, a friend's address with their written consent, or a virtual office address. If you don't own property in Georgia, you'll need notarized consent from the property owner allowing you to register at their address.

Basic contact information - phone number and email.

The registration fee ranges from 26 to 75 GEL depending on processing speed. Standard processing takes one business day. Expedited service costs more but can be completed in hours.

Can't come to Georgia in person? Remote registration is possible through a notarized Power of Attorney. You'll authorize a representative (often a local law firm or service provider) to complete the registration on your behalf. The POA can be notarized in any country and any language, but will need Georgian translation.

Step 2: Apply for Small Business Status

After your IE registration is complete, visit the Revenue Service office or apply through your personal account on the rs.ge portal.

The process is straightforward. A representative will ask about your intended business activity. If you say "IT services," "marketing," "graphic design," or similar qualifying activities, they'll process your application without requesting contracts or proof.

If you mention consulting, legal work, or other excluded activities, your application will be denied on the spot.

The Revenue Service issues your Small Business Certificate typically the same day. However, your 1% tax rate doesn't kick in immediately - it becomes active on the first day of the month following your application.

For example: if you apply on March 15th and get approved, your Small Business Status begins April 1st. Any income earned in March would still be subject to standard taxation.

If you already have a Georgian Tax ID from a previous registration, merging it with your new IE account can delay the process by up to 10 business days. Plan accordingly if timing matters for your business.

Opening a Bank Account

You'll need a Georgian bank account to receive payments and pay taxes. The two most commonly used banks for entrepreneurs are Bank of Georgia and TBC Bank. Both offer English-language online banking and business-friendly services.

You can use either a personal account or a dedicated business account - there's no legal requirement to separate them, though keeping business finances separate makes accounting easier.

International payment platforms work well with Georgian banks. Clients can pay you via Wise, PayPal, Payoneer, or direct bank transfer. Income received through these platforms is reportable and taxable under your Small Business Status.

Tax Obligations and Compliance

Small Business Status comes with ongoing requirements. Miss them, and you risk penalties or losing your status.

Monthly Declarations

Every month, you must file an income declaration through the Revenue Service portal (rs.ge). The deadline is the 15th of the following month.

Earned income in January? File and pay by February 15th.

This applies even if you had zero income that month. A nil declaration is still required.

The 1% tax payment is due at the same time as your declaration. Late payments incur penalties and interest.

You're also required to maintain a "Book of Turnover" - a record of all your income transactions. This doesn't need to be submitted regularly, but must be available if the Revenue Service requests it during an audit.

2025 Declaration Changes

Starting with the December 2024 reporting period, Georgia introduced a more detailed declaration format. You now need to break down your income by source:

Column 18: Income received via cash register (cash payments with receipts) Column 19: Payments received through physical POS terminals Column 20: Income received to your bank account (including wire transfers) Column 21: All other income - this includes transfers via Payoneer, PayPal, Wise, cryptocurrency transactions, and barter agreements

The system automatically calculates your tax rate and amount based on the data you enter. Keep accurate records of how you receive payments throughout the month to make filing easier.

VAT Considerations

Small Business Status doesn't exempt you from VAT. These are separate systems with different thresholds.

If your taxable turnover exceeds 100,000 GEL in any rolling 12-month period, you must register for VAT. The VAT rate in Georgia is 18%.

Here's the good news for those serving international clients: B2B services provided to non-residents (businesses outside Georgia) are typically exempt from Georgian VAT. These transactions also don't count toward your 100,000 GEL VAT threshold.

For many freelancers and remote workers whose clients are all foreign companies, VAT registration never becomes necessary. But if you serve Georgian businesses or individual consumers, watch your numbers carefully.

Some entrepreneurs voluntarily register for VAT even below the threshold. This allows them to claim back VAT paid on business expenses and avoid reverse VAT charges when paying foreign contractors. Whether this makes sense depends on your specific situation.

Benefits and Special Considerations

Advantages of the 1% Regime

The tax rate speaks for itself - 1% is among the lowest in Europe for individual entrepreneurs. But there are additional benefits worth noting.

Monthly reporting keeps things simple. Unlike annual tax systems where you might face a large bill at year-end, paying as you go prevents surprises.

No corporate structure is required. You avoid the costs and complexity of forming an LLC, maintaining corporate records, and filing separate corporate returns.

Cryptocurrency profits are not subject to tax in Georgia. If you trade crypto or receive payment in cryptocurrency, those gains aren't taxed under current Georgian law.

You can hire employees while maintaining Small Business Status. Their salaries will be subject to standard payroll taxes (20% income tax, plus 2%+2% pension contributions for Georgian residents), but this doesn't affect your personal 1% rate on business income.

Tax Residency: Do You Need It?

Georgian tax residency is not required to obtain Small Business Status. The Revenue Service will issue your certificate without asking about your residency status.

However, tax residency matters for other reasons.

You become a Georgian tax resident by spending at least 183 days per year in the country, or by proving your main economic interests are located here.

Without Georgian tax residency, you might face a problem: the income you earn and tax at 1% in Georgia could be taxed again in your home country. Many countries tax their residents (or citizens, in the case of the US) on worldwide income. Georgia's 1% payment likely won't satisfy your home country's tax obligations.

Georgian tax residency helps solve this through double taxation treaties. Georgia has agreements with numerous countries that prevent the same income from being taxed twice. If you're a Georgian tax resident, these treaties can protect you.

The most effective approach for fully benefiting from the 1% rate: relocate to Georgia and become solely a Georgian tax resident, or become a tax resident of no country at all. This is a complex topic with many personal variables - consider consulting a tax professional familiar with your specific situation.

For Digital Nomads and Remote Workers

Georgia has become popular among digital nomads, and the tax system is a major reason why. But there's an important nuance to understand.

The 1% rate applies to "Georgian-source" income. Generally, this means the service must be performed while you're physically in Georgia.

If you're sitting in a Tbilisi cafe providing marketing services to a client in London, that's Georgian-source income - taxable at 1%.

If you're working from Bali for the same London client, that income may not qualify for the 1% rate. It could be subject to taxation wherever you're physically located, and international tax rules become relevant.

The practical takeaway: spending substantial time in Georgia (ideally becoming tax resident) gives you the clearest path to benefiting from the 1% regime. The 365-day visa-free stay available to citizens of 95+ countries makes this relatively easy to arrange.

Special Tax Thresholds for 2025

Standard Threshold

For most business activities, the annual turnover limit remains 500,000 GEL (approximately $185,000 USD). Stay under this, and you pay 1%. Exceed it, and you pay 3% on income from the month of excess through year-end.

Agro and Wine Tourism Exception

Starting January 1, 2025, businesses engaged in agricultural tourism and wine tourism enjoy a higher threshold: 700,000 GEL annually.

If your agro or wine tourism income stays under 700,000 GEL, you pay the standard 1% rate.

If you exceed 700,000 GEL during the year, your rate increases to 3% starting from the month you crossed the threshold, continuing through December.

This change reflects Georgia's push to develop its tourism sector, particularly around its famous wine regions. If you're operating guesthouses, wine tours, or agricultural experiences, this expanded limit gives you more room to grow while maintaining favorable tax treatment.

FAQ

Do I need to live in Georgia to get the 1% tax rate?

No, Georgian residency is not required to register as an Individual Entrepreneur or obtain Small Business Status. However, becoming a Georgian tax resident (183+ days per year) helps you avoid double taxation in your home country. Without tax residency, your home country may still tax the same income you've already paid 1% on in Georgia.

Can I register as an Individual Entrepreneur remotely?

Yes, remote registration is fully possible through a notarized Power of Attorney. You authorize a representative in Georgia to complete the registration process on your behalf. The POA can be notarized in any country and language, then translated into Georgian. Many law firms and service providers offer this as a standard package.

What documents do I need for registration?

You need a valid passport, a Georgian legal address for official correspondence, and basic contact information. If you don't own property in Georgia, you'll need notarized consent from a property owner allowing you to use their address. For remote registration, add a notarized Power of Attorney to the list.

How long does registration take?

In-person registration typically completes within one business day - sometimes just a few hours with expedited service. Remote registration through Power of Attorney takes approximately 3 business days. If you already have a Georgian Tax ID that needs merging, add up to 10 additional business days.

Can freelancers and consultants use this regime?

Freelancers in IT, marketing, design, writing, and similar fields generally qualify. However, "consulting" is a gray area - tax consulting and financial advisory services are explicitly excluded. General business consulting may qualify, but the Revenue Service evaluates based on the actual nature of your work, not just how you label it. If your services resemble excluded professions, your status could be challenged.

What if my income exceeds 500,000 GEL?

Your tax rate increases to 3% starting from the month you exceed the threshold, continuing through December 31st. You don't lose your status for one year of excess. However, if you exceed 500,000 GEL for two consecutive years, your Small Business Status is automatically revoked on January 1st of the third year.

Do I need to register for VAT?

Only if your taxable turnover exceeds 100,000 GEL in any rolling 12-month period. B2B services provided to foreign clients are typically VAT-exempt and don't count toward this threshold. Many freelancers serving international clients never reach the VAT registration requirement.

Can I hire employees with Small Business Status?

Yes, you can hire employees while maintaining your 1% status. Employee salaries are subject to standard payroll taxes - 20% income tax withheld, plus pension contributions (2% employee + 2% employer) for Georgian residents. Your personal business income remains taxed at 1%.

What's the difference between Micro Business and Small Business Status?

Micro Business Status offers 0% tax on annual turnover up to 30,000 GEL (approximately $11,100). However, Micro Business has restrictions - you cannot hire employees, and certain activities requiring licenses are prohibited. Small Business Status allows higher income (500,000 GEL), permits hiring employees, and covers a broader range of activities, but charges 1% instead of 0%.

How do I pay taxes and file declarations?

All filing and payment happens through the Revenue Service portal at rs.ge. You'll create a personal account after registration. Each month, log in, enter your income data in the declaration form, and submit by the 15th of the following month. Tax payment is made electronically through the same portal or via bank transfer to the Revenue Service.

Can I lose my Small Business Status?

Yes, in several ways. Exceeding 500,000 GEL turnover for two consecutive years triggers automatic revocation. Engaging in prohibited activities can result in your status being revoked and back taxes assessed. Providing false information about your business activities is grounds for revocation. Failing to file monthly declarations or pay taxes on time can also put your status at risk.

Conclusion

Georgia's 1% tax regime offers a legitimate, straightforward path for freelancers and small business owners to minimize their tax burden.

The registration process takes just 1-3 days, compliance involves simple monthly declarations, and foreigners are welcome without residency requirements. The key is ensuring your business activity qualifies - stay off the prohibited list, monitor your turnover to remain under 500,000 GEL, and file your declarations on time each month.