Georgia's 1% small business tax: who qualifies, how to register, what you pay

Small business status is the reason freelancers and remote specialists register as individual entrepreneurs in Georgia: instead of 20% income tax on profit you pay 1% of turnover on everything you receive from clients, as long as turnover stays within 500,000 GEL a year. The status is open to foreigners, needs no residence permit and is granted within a month of applying. This guide covers who qualifies, who is excluded, how to register in two steps, what you owe every month and what goes wrong most often.

What is small business status?

Small business status is a special tax regime for individual entrepreneurs under the Tax Code of Georgia. A regular IE pays 20% income tax on profit; an IE with the status pays 1% of turnover, meaning gross revenue before any expenses, while turnover since the start of the calendar year stays within 500,000 GEL. Expenses are not deducted, so a low-cost service business gains the most.

The regime is designed for one person selling their own work. Employees are allowed, but each hire adds payroll obligations that the status does not cover.

Who is the 1% regime for?

The typical profile is a specialist working with clients abroad: a developer, designer, marketer, copywriter, translator, online teacher or coach. Income arrives in dollars or euros, the clients are outside Georgia, and expenses are small compared with revenue.

Citizenship does not matter and a residence permit is not required. Registration needs an identity document and a legal address in Georgia, which can be a rented flat or an address provided by a registration service.

Who is excluded

Some activities are excluded from small business status by Government Decree No. 415. The main groups:

• consulting services of any kind, including tax consulting;
• legal, notarial and advocacy services, audit, bookkeeping and accounting;
• medical and architectural practice and other activities that require a licence or certification;
• financial intermediation, lending, currency exchange, investment and fund management, crypto exchange and custody;
• gambling and betting;
• trade in excise goods, and activities that need a permit.

Two things trip people up. First, the decree does not define "consulting", so a contract that describes your work as consultancy is a risk even when the work is software or design; describe the actual service. Second, the Revenue Service distinguishes self-employment from disguised employment: one long-term client that sets your hours and place of work looks like a salary, and salary cannot be taxed at 1%.

Separately from prohibited activities there are excluded incomes: rent, interest, dividends, capital gains and similar passive income can still be earned with the status, but they are taxed under the general rules, not at 1%.

What you pay: 0%, 1%, 3% or 20%

Regime	Who	Rate	Base	Limit
Micro business	individual without employees	0%	turnover	30,000 GEL a year
Small business	individual entrepreneur	1%	turnover	500,000 GEL a year
Small business over the limit	same IE	3%	turnover	from the month the limit is crossed to year end
General regime	any IE	20%	profit	none

VAT is separate from all of these. Registration as a VAT payer becomes mandatory once taxable turnover exceeds 100,000 GEL in any continuous 12 months; the standard rate is 18%. Most services sold to clients outside Georgia are treated as export of services and are outside VAT, but the classification depends on the service, so check it with an accountant once you approach the threshold.

The 500,000 GEL threshold

The limit is counted on turnover since the start of the calendar year. From the month in which the cumulative turnover crosses 500,000 GEL the rate becomes 3% and stays there until 31 December; on 1 January the count starts again at 1%. If you exceed the threshold two calendar years in a row, the status is revoked and the income falls under the general 20% regime.

At the current exchange rate the limit is roughly 180,000 US dollars a year, so most freelancers stay well within it. Keep an eye on it in a good year: the switch to 3% applies from the month of crossing, not from the following year.

How to register: two steps

Step 1. Register as an individual entrepreneur

IE registration is done at a Public Service Hall (House of Justice) in person or through a representative with a power of attorney. You need an identity document and a legal address in Georgia. The registration is usually ready the next business day; a same-day option costs more. The state fee is a few dozen lari and depends on the speed you choose.

Along with the registration you receive a taxpayer identification number and access to the taxpayer portal eservices.rs.ge. A Georgian mobile number is needed: the portal confirms every login by SMS.

Step 2. Apply for small business status

With the IE registered, apply for small business status through your rs.ge account or at a Revenue Service service centre. The status takes effect on the 1st of the month after you apply. Until then income is taxed under the general rules, so apply as early as possible, ideally on the day the IE registration is ready and before the first invoice.

Your obligations once you have the status

Monthly declaration

The declaration is filed on eservices.rs.ge every month, from the 1st to the 15th of the month after the reporting one, and the tax is paid by the same date. The form takes one number, the month's turnover in lari; the system calculates the 1%. The whole procedure is in the step-by-step rs.ge filing guide.

Converting foreign-currency income

Turnover is declared in lari. Each foreign-currency payment is converted at the official National Bank of Georgia rate for the date the money arrived, not your bank's rate and not the rate on filing day, at its full amount before payment-system fees. Example: $2,000 received on 12 August at an NBG rate of 2.70 is 5,400 GEL of turnover and 54 GEL of tax. The free NBG rate calculator gives the rate and the tax for any date; MyIncome.ge converts every payment at the NBG rate for its arrival date and adds up the month's turnover and 1% tax, so the declaration takes two numbers copied from the report; signing up is free.

Zero declarations

A month without income still needs a declaration, with turnover set to zero. A skipped month counts as an unfiled return and risks a fine even though no tax is due.

Records

Keep the documents behind your turnover: contracts, invoices and payment statements. A cash register is required only if you accept cash; foreign-currency transfers to a bank account are documented by the bank statement. Under the status you are also expected to keep a simple record of income, which the Revenue Service may ask for.

Penalties

Late payment accrues interest of 0.05% of the unpaid tax per day (Tax Code, article 272). A declaration filed after the 15th carries a fine (article 274); the amount depends on how late it is and shows in your rs.ge account. Working under the status with a prohibited activity is more expensive: the status is revoked and the income is recalculated at the general 20% rate.

Tax residency is a separate question

Small business status does not require Georgian tax residency, and Georgian tax residency is not granted by the status. You become a tax resident of Georgia after 183 days in the country within any continuous 12-month period. Residency decides where your worldwide income is taxed and whether the tax authority of your home country still sees you as its resident; the 1% regime decides only how the Georgian entrepreneurial income is taxed. If you split the year between countries, check both sides.

Before your first invoice: a checklist

1. Check your activity against the prohibited list and describe the actual service, not "consulting", in contracts.
2. Register the IE at the Public Service Hall; keep the taxpayer number and the rs.ge access details.
3. Apply for small business status the same day; remember it starts on the 1st of the next month.
4. Open a business bank account (Bank of Georgia and TBC are the usual choices) and get a Georgian SIM for rs.ge codes.
5. Put the 1st to the 15th of every month in your calendar: declaration and payment.
6. Set up a way to convert each payment at the NBG rate for its date, from a calculator to MyIncome.ge.

Common mistakes

• Calculating the tax on the amount that reached the account after Payoneer, Wise or Upwork fees instead of the full amount the client paid.
• Using a commercial bank's rate or the rate on filing day instead of the NBG rate for the date the income arrived.
• Skipping months with no income instead of filing a zero declaration.
• Starting to invoice before the status is active, since it starts on the 1st of the following month, and falling under the general rate for the first payments.
• Describing software or design work as "consulting" in contracts and putting the status at risk.
• Missing the switch to 3% in the month the 500,000 GEL threshold is crossed.

Disclaimer: this material is general information, not tax advice. Rules change; verify current requirements on rs.ge or with a qualified accountant.