Small Business Status with 1% taxation 

 

Small Business Tax Status (1% Tax) in Georgia – Who Is It For?

Georgia offers one of the most attractive tax regimes in the region for independent professionals and small entrepreneurs. Under the Small Business Status (SBS), registered Individual Entrepreneurs can benefit from a reduced income tax rate of only 1% on their annual turnover up to 500,000 GEL. For many freelancers, consultants, and digital entrepreneurs working with international clients, this regime provides a simple, transparent, and highly efficient tax structure.

Small Business Status is particularly suitable for remote professionals, freelancers, IT specialists, consultants, designers, developers, online service providers, and other self-employed individuals who provide services locally or internationally. Many foreign entrepreneurs choose Georgia because the registration procedure is straightforward and the tax reporting obligations are minimal compared to most European jurisdictions.

Important Note for Foreign Citizens

Foreign nationals operating as Individual Entrepreneurs in Georgia may also need to consider work permit and residence permit requirements. Recent regulatory practice increasingly requires foreign entrepreneurs to demonstrate legal grounds for working in Georgia, particularly when opening bank accounts, applying for residence permits, or establishing long-term operations. Our team can assist with both Individual Entrepreneur registration and work permit compliance when necessary.

Typical Activities Suitable for the 1% Small Business Tax Regime

The Small Business tax regime is primarily designed for service-based activities. Typical examples include:

• Software development and IT consulting
• Web development, website maintenance, and digital services
• Graphic design, digital marketing, and online advertising
• Business consulting and project management
• Freelance programming and remote technical services
• Translation and language services
• Online education, coaching, and professional training
• Content creation, media production, and creative services
• E-commerce management and digital platform services
• Remote administrative or support services

These types of activities are commonly performed by independent professionals working remotely or internationally and therefore fit perfectly within the Georgian Small Business framework.

Annual Revenue Limit – How the 1% Tax Works

To maintain the Small Business Status, the annual turnover of the Individual Entrepreneur must not exceed 500,000 GEL. Income within this threshold is taxed at the preferential 1% rate. If the annual revenue exceeds 500,000 GEL, the portion above this threshold will be taxed at 3%.

However, if the revenue exceeds the 500,000 GEL limit in two consecutive calendar years, the Individual Entrepreneur will lose the Small Business Status and will not be able to apply for it again for the next two years. For this reason, many entrepreneurs carefully monitor their annual turnover to ensure they remain within this advantageous tax regime.

For freelancers and international service providers, Georgia’s Small Business Status remains one of the most attractive tax structures available, combining low taxation, simple reporting requirements, and a straightforward registration procedure.

Activities and Restrictions Not Eligible for Small Business Status in Georgia

1. Activities that require special licensing
2. Production of excise goods
3. Advocatory services and law firms
4. Tax and legal consulting services
5. Medical services
6. Architectural services
7. Auditing and notary services
8. Beauty centers
9. Car repair services
10. Gambling activities
11. Foreign exchange transactions

These restrictions exist to ensure compliance with specific professional regulations and to maintain fairness within the Georgian tax system. It is therefore important to review whether your business activity qualifies before applying for Small Business Status.

Annual Revenue Limit Under Small Business Status in Georgia

Individual Entrepreneurs registered under Georgia’s Small Business Tax Status (SBS) enjoy preferential taxation with a reduced income tax rate of 1%. However, this special tax regime is subject to an annual revenue threshold of 500,000 GEL.

 

What Happens If You Exceed the 500,000 GEL Limit?

• You will be taxed at 3% on the portion of income above 500,000 GEL for that year.
• If you exceed the limit twice within two consecutive calendar years, your Small Business Status will be revoked.
• Once revoked, you cannot reapply for Small Business Status for the next two years.

 

Example:

If you earn 600,000 GEL in a given year:

• You pay 1% tax on the first 500,000 GEL = 5,000 GEL
• You pay 3% tax on the remaining 100,000 GEL = 3,000 GEL
• Total tax: 8,000 GEL

 

Small Business Status and VAT 

Individuals who qualify as Small Business taxpayers in Tbilisi, Georgia benefit from a reduced personal income tax rate of 1% instead of the standard 20%. However, it is important to understand that being classified as a small business does not automatically exempt an entrepreneur from Value Added Tax (VAT). VAT obligations arise once the entrepreneur’s turnover exceeds 100,000 GEL within any continuous 12-month period.

 

In certain cases, when services are provided exclusively to foreign customers, VAT may not apply due to the nature of cross-border services. Each situation must be assessed individually. Our team can assist in determining whether VAT registration is required and ensure that your business remains fully compliant with Georgian tax regulations while maximizing the benefits of Small Business Status.

 

Our Pricing for Small Business Tax Status Activation