Georgia's Small Business Status: How the 1% Tax Actually Works

Ask any freelancer why they moved their business to Georgia and you'll hear the same number: 1%. Georgia's Small Business Status lets qualifying individual entrepreneurs pay one percent of turnover in tax. It's not a loophole and it's not too good to be true — but it does have rules, and misunderstanding them is the most common tax mistake we see expats make.

The basics

Small Business Status (SBS) is a special tax regime available to registered Individual Entrepreneurs (IEs) in Georgia. Instead of the standard 20% tax on profit, an IE with SBS pays:

• 1% of gross turnover, up to 500,000 GEL per calendar year;
• 3% of turnover on the portion above 500,000 GEL in a year (and the status can be revoked if you exceed the ceiling two years in a row).

Note that the 1% applies to turnover, not profit. There are no deductions for expenses — which is why the regime suits service businesses with low costs, like consultants, developers and designers.

Who qualifies

To use the regime you must:

1. Register as an Individual Entrepreneur at the Public Service Hall — a same-day procedure.
2. Apply for Small Business Status with the Revenue Service.
3. Carry out an activity that is not on the excluded list.

Status generally takes effect from the first day of the month following your application, so timing your registration matters.

The excluded activities

This is where people get caught. Activities that cannot use the 1% regime include, among others:

• Activities requiring licences or permits
• Currency exchange operations
• Medical, architectural, legal, notary, audit and consulting activities in certain regulated forms
• Gambling
• Staffing / personnel provision
• Production of excisable goods

Some categories — especially "consulting" — have nuances that depend on how your activity is classified. Getting this wrong can mean retroactive reassessment at 20%. It is worth a professional opinion before you register, not after.

Employment income doesn't qualify

A crucial point: the 1% regime covers entrepreneurial income. If your relationship with a single foreign company looks like disguised employment — fixed hours, one client, employment-style control — the Revenue Service can reclassify that income as salary, taxed at 20%. The distinction is fact-based, and structuring your contracts properly from day one is far cheaper than arguing later.

Your ongoing obligations

The regime is light, but not zero:

• Monthly declarations by the 15th of the following month, even for months with no income;
• Monthly payment of the 1% on that month's turnover;
• Keeping basic records of income (bank statements and invoices are usually sufficient).

Miss declarations and penalties accumulate quietly. Most of our clients hand this to us for a small monthly fee and never think about it again.

Is it right for you?

SBS is superb for independent professionals earning up to ~500,000 GEL a year with international clients. It may not be right if you have significant expenses (an LLC deducting costs can beat 1% of turnover in some cases), if your activity is excluded, or if your home country's tax rules complicate things.

Want a definitive answer for your situation? Book a consultation — we'll check your eligibility, register you and set up your monthly filings.