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Why Entrepreneurs Are Moving Their Taxes to Georgia
Georgia has emerged as a thriving hub for freelancers, small business owners, and digital nomads seeking a business-friendly tax system with low financial burdens and transparency.
One of the standout features of Georgia’s tax landscape is the 1% tax in Georgia, a groundbreaking initiative that offers qualifying individual entrepreneurs an exceptionally low tax rate. With a straightforward Georgia business formation process and unrestricted foreign ownership, this incentive has positioned the country as a desirable business destination.
Georgia Individual Entrepreneur tax laws provide an ideal solution for entrepreneurs looking to reduce their tax burden while maintaining a legal and transparent business structure. With Small Business Status Georgia, you can legally operate while benefiting from a single tax rate in Georgia of just 1% on turnover.
In Georgia:
Entrepreneurs can sometimes pay taxes as low as 0%. The country offers an attractive balance between low cost of living, modern infrastructure, and simplified bureaucracy, making it a rising hub for international business.
Setting up a business here is remarkably simple. Usually, entrepreneurs can register an individual business within two working days for a one-time fee without annual renewal requirements. This streamlined process reduces both administrative hassle and long-term expenses.
For those seeking tax optimization, Georgia’s High Net Worth Tax Residency Program allows residents to become tax residents and benefit from the country’s advantageous tax regime—often without needing to reside full-time. This makes Georgia a prime destination for digital nomads and international entrepreneurs looking to reduce their tax liabilities legally.
However, while Georgia offers incredible tax benefits, proper planning is essential to avoid double taxation, unexpected VAT obligations, and compliance errors. Gegidze's strategic approach ensures maximum savings while maintaining full legal and financial compliance. Our expertise helps entrepreneurs navigate the best way to move their taxes efficiently to Georgia.
How the 1% Tax System Works in Georgia
The Georgia turnover tax for individual entrepreneurs applies only to businesses registered under Small Business Status Georgia. If your annual turnover does not exceed 500,000 GEL, you will pay just 1% of your revenue. If your turnover surpasses this limit, the tax rate increases to 3% for exceeding 500,000 GEL.
Unlike many Western countries, Georgia eliminates unnecessary burdens. For example, freelancers and small businesses in Georgia pay high-income taxes and social security contributions. The Georgia self-employment tax system encourages entrepreneurship while ensuring compliance with local tax regulations.
Eligibility for 1% Tax in Georgia
To qualify for the Georgia small business tax regime, you must:
Operate within an industry that qualifies for Small Business Status Georgia.
Keep your annual turnover below 500,000 GEL.
Specific high-regulation industries like banking and insurance are excluded from this tax regime.
Why are Taxes so Low in Georgia?
Georgia maintains low taxes to encourage business growth and support entrepreneurial activities and economic expansion. A tax system functions to create fewer financial constraints and benefit more investment opportunities.
A tax benefit under the Small Business Status allows business owners to pay only 1% of their turnover, allowing them to allocate funds for reinvestment.
Micro-businesses operating below 30,000 GEL (~$11,000) annually face zero tax liabilities, which promotes industry-friendly conditions for entrepreneurs.
Virtual Zone Status eliminates corporate income tax and VAT on foreign services for IT professionals, making Georgia a key destination for tech startups.
Georgia has mastered building a thriving entrepreneurial ecosystem through low taxes, minimal bureaucracy, and a strong pro-business approach. The country attracts startups, freelancers, and investors seeking a cost-effective base by maintaining low tax rates. Rather than imposing heavy tax burdens, Georgia’s policies promote reinvestment, innovation, and economic growth.
Georgia’s low-tax policies are not just about cutting costs - they’re about opening doors. The country creates an ecosystem where businesses can flourish by reducing tax burdens and simplifying regulations. Whether you’re a freelancer, a startup founder, or an international investor, Georgia offers an unbeatable combination of financial efficiency, ease of doing business, and growth opportunities.
Should You Register for the Single Tax System?
Leveraging from a single tax system sounds easy, and it is. But we are still talking about the big concept—taxes—and there are so many ways to become a taxpayer in Georgia that might go wrong.
As with any tax system, what seems simple at first can quickly become a maze of unexpected obligations. Many entrepreneurs move to Georgia excited about the 1% tax in Georgia for small businesses, only to realize that without timely registration, they might end up paying the full Georgia self-employment tax of 20% on their income. This is why securing your Georgia tax ID and registering for Small Business Status in Georgia should be at the top of your to-do list.
Timing is everything. If you earn remotely before registering under the Georgia small business tax regime, that income is taxed at the standard rate—no exceptions. Likewise, if you exceed 183 days in the country without proper tax planning, your home country’s tax treaty may not protect you from double taxation, even if you have already paid tax elsewhere. The Georgia business-friendly tax system has its perks but also requires entrepreneurs to stay proactive.
Another pitfall? Many assume that because Georgia offers low taxes, they don’t need to structure their business carefully. However, missing deadlines or failing to obtain a tax identification number in Georgia on time could cost you. The single tax rate in Georgia only applies once your status is officially recognized—until then, the standard tax applies. This is why understanding how to register a business in Georgia is critical to maximizing the Georgia tax benefits for entrepreneurs.
If you plan on starting a business here, don’t wait until tax season to get your paperwork in order. The Georgia Revenue Service tax filing deadlines are strict, and missteps can result in unnecessary financial burdens. Securing your Georgia business formation as soon as possible ensures you’re making the most of the Georgia low-tax business setup rather than paying more than necessary.
For tailored guidance, consider consulting one of our experts, who can help you navigate Georgia small business taxes efficiently. A little planning now can save you from significant tax headaches later!
⚠️ Mistake | ❌ Consequence | ✅ Solution |
Delaying registration for Small Business Status | Pay 20% Georgia self-employment tax instead of the 1% tax in Georgia | Register for Small Business Status in Georgia ASAP upon arrival |
Earning income before tax registration | Income earned before registration is taxed at 20% | Get your Georgia tax ID and register before invoicing clients |
Staying in Georgia for 183+ days without tax planning | It may trigger double taxation, even if you pay tax elsewhere | Check Georgia tax residency for entrepreneurs rules before extending your stay |
Not knowing tax deadlines | Late filing could mean penalties and unnecessary tax payments | Mark your calendar for Georgia Revenue Service tax filing deadlines |
Incorrectly assuming all income qualifies for 1% tax | Some types of income (like employment income) don’t qualify for the single tax rate in Georgia | Confirm your business model fits Georgia’s small business tax regime |
Not keeping track of foreign tax obligations | Tax treaties may not apply, leading to unexpected liabilities | Consult a tax expert to avoid double taxation surprises |
Tax Residency in Georgia
Most people's number one mistake when moving their taxes to Georgia is not understanding how tax residency or the tax system works here. The best way to minimize taxes is to know the steps in advance and follow them.
Establishing tax residency is the most critical tax law for small businesses and individual entrepreneurs.
Establishing tax residency in Georgia is straightforward. If you spend 183 days in the country within any rolling 12-month, you automatically become a tax resident. This applies regardless of whether your stay is consecutive or broken up over time.
Key Points on Tax Residency
No application required: The tax residency status activates itself without any special process once you meet the 183-day rule.
After tax residency activation, you must register with the Georgian Revenue Service and file your tax declaration with this body by March 31st of the following year.
Strategic planning of tax residency matters especially for Georgia-based small business operators who seek ideal tax obligations.
Certificate: A tax residence certificate becomes available after you obtain tax resident status. Your official tax residency certificate assists you in losing any other foreign tax residential status, which could protect you from claims of foreign taxes.
For proper understanding, one needs to distinguish legal residency from tax residency status.
Example Scenarios:
Scenario 1: The Early PlannerArrive March 15, 2025. Stay 183 days. You become a tax resident on September 14, 2025. Since this is within the same calendar year, you are recognized as a tax resident for all of 2025, meaning potential taxation on worldwide income for the entire year. However, if planned correctly, you could align your business income to benefit from Georgia's 1% tax rate.
Scenario 2: The Strategic Late ArrivalArrive August 1, 2025. Stay 183 days. You become a tax resident on January 31, 2026. You now qualify for a 2026 tax residency status, avoiding 2025 tax liability while having months to find a business under Georgia's small business tax system using their turnover tax structure.
A lack of strategic planning may lead to being charged with tax twice - double taxation. Working with a professional tax adviser provides the best assurance for tax compliance by fully utilizing Georgia's generous tax terms.
Guide to Monthly Tax Declarations for Small Business Owners in Georgia
1. Income Tax Declaration (1% on Turnover)
A Small Business Status tax registrant must submit a 1% tax declaration on their monthly revenue through the 15th deadline. The taxation method for small businesses is simple because the tax calculation uses total revenue figures.
Do You Need a Tax Identification Number in Georgia?
All businesses conducting operations in Georgia require getting a Georgia tax ID number, also known as an identification number. Receiving a tax identification number is a crucial requirement for Georgian company registration since it creates your payment ability for taxes while enabling access to VAT registration services and employee salary deduction programs. Early application for this number remains crucial so your business setup does not experience delays.
2. VAT and Reverse VAT Declarations
If your business is VAT-registered, you are required to submit monthly VAT declarations. This includes reporting both:
VATable (18%) and
Non-VATable (0%) turnover.
You must track these sales carefully if your services or goods are taxable under the Georgian VAT law.
Businesses that do not need VAT registration must prepare reverse VAT declarations for their international service purchases (18%). All companies must perform these declarations regardless of whether they have VAT registration, but the good news is that VAT-registered businesses can typically recover costs from reverse VAT declarations.
Should You Register for VAT?
If your business derives income primarily from B2B transactions with foreign clients, registering for VAT is often a good decision. The ability to claim back VAT on business expenses, including reverse VAT on international service purchases, makes VAT registration a wise choice for many entrepreneurs.
To determine if VAT registration is proper, read our in-depth guide on Georgia VAT and its advantages.
3. Salary Taxes and Social Contributions
A salary tax is applicable for those employing Georgian citizens or permanent residents.
The salary tax rate is 20% for employees, alongside 2+2% pension contributions.
It is important to note whether your business has local employees. However, this might not apply to you if you operate as a sole proprietor or with foreign clients only. For companies operating within Georgia's territory, staying updated on the Georgia self-employment tax rules is essential.
4. General Record-Keeping and Journal Maintenance
While not a tax payment, all businesses in Georgia must maintain a general journal of their business activities, essentially a record of their expenses and income. This is a key part of the Georgia tax filing process, as you will need to provide these records in the event of an audit.
Remember that this journal must be maintained regularly, though it is only submitted if required by the Georgia Revenue Service.
Monthly Tax Obligations for Small Businesses in Georgia
Whether you’re considering Georgia business formation or are already established, understanding taxation laws in Georgia is essential. Your business in Georgia needs proper comprehension of state tax regulations because they affect your company's growth trajectory.
Professionals specializing in registering individual entrepreneurs and small business taxes in Georgia should be hired to ensure compliance and reduce tax-related stress.
If you prefer an expert to handle your tax filings and declarations, consider our services tailored for individual entrepreneurs.
Book a free consultation with Gegidze today, stay on top of your taxes, and focus on quickly growing your business in Georgia’s thriving entrepreneurial landscape.
Frequently Asked Questions
What is the tax rate for businesses in Georgia?
Georgia offers some of the most competitive tax rates globally:
Corporate Tax: 15% on distributed profits.
Personal Income Tax: Flat rate of 20%.
Dividend Tax: Only 5%.
Special statuses like the Virtual Zone or International Company can further reduce these rates.