2026 Special Tax Regimes: SBS (1% Tax), Micro Business, and More

Table of contents

TL;DR

How Georgia's special tax regimes work

Micro business status: 0% tax for the smallest operators

Small Business Status (SBS): the georgia 1% tax regime

Virtual Zone status: 0% CIT for IT companies

Fixed tax regime: sector-specific flat rates

Choosing the right regime: a decision framework

Compliance obligations across regimes

Common mistakes and how to avoid them

How Gegidze helps

Final thoughts

Frequently asked questions (FAQs)

TL;DR

• Georgia has four main special tax regimes for individuals and small businesses: micro business, Small Business Status (SBS), Virtual Zone, and the fixed tax regime.

• Micro business status gives individual entrepreneurs 0% income tax on gross turnover up to GEL 30,000 per year. Exceeding the threshold ends the status for that year.

• Small Business Status (SBS) gives individual entrepreneurs a 1% tax rate on gross turnover up to GEL 500,000 per year, one of the lowest effective rates available to service providers globally.

• Virtual Zone status gives Georgian LLCs 0% corporate income tax on qualifying IT income from foreign clients, and is covered separately in this guide series.

• Georgia 1% tax under SBS applies to gross revenue, not profit. There are no deductible expenses under SBS.

• Neither micro business status nor SBS requires georgian tax residency, they are available based on business registration, not personal tax status.

• Choosing the wrong regime, or exceeding a threshold without planning, triggers a tax reclassification that can be retroactive.

Georgia is one of the few countries in the world where a freelancer or consultant can structure their tax position legally and pay 1% of their gross revenue to the government. That is not a loophole. It is designed into the system.

The Georgia 1% tax, available to individual entrepreneurs under Small Business Status, is one of several special tax regimes that make Georgia country an unusually efficient jurisdiction for independent professionals, founders, and small businesses. The other regimes, micro business status, the Virtual Zone, and the fixed tax regime, each serve a different profile of business and come with different thresholds, structures, and compliance requirements.

This guide covers all four regimes in detail: how each works, who qualifies, what the compliance obligations are, and how to choose the right structure for your situation in 2026.

How Georgia's special tax regimes work

Georgia's tax system distinguishes between standard tax treatment and special tax regimes. Standard treatment means paying personal income tax at 20% on net income (for individuals) or corporate income tax at 15% on distributed profits (for LLCs). Special regimes replace the standard treatment with a simplified, lower-rate alternative, in exchange for accepting certain conditions (thresholds, restrictions, compliance requirements).

Special regimes are available to individual entrepreneurs and, in the case of the Virtual Zone, to Georgian LLCs. They are not available to standard employed workers. To access a special regime, you must first be registered as a business entity, either as an individual entrepreneur or as an LLC, and then apply for the regime separately.

For a comparison of whether to register as an individual entrepreneur or an LLC, see IE vs LLC in Georgia. The choice of legal structure is the first decision; the choice of tax regime is the second.

Micro business status: 0% tax for the smallest operators

Micro business status is the most favourable regime in Georgia's system on paper, 0% income tax on gross turnover. But the threshold is tight: gross turnover must not exceed 30,000 GEL in any calendar year.

Who qualifies

Micro business status is available to Georgian individual entrepreneurs. Foreign nationals who have registered as individual entrepreneurs in Georgia can access it on the same basis as Georgian citizens. There is no residency requirement. The business must be in an eligible sector, certain activities are excluded by law, including legal services, notarial services, medical services, and some trading activities.

How the 0% rate works

While under micro business status and within the 30,000 GEL threshold, no income tax is payable. The individual entrepreneur files declarations but pays zero tax. There is no corporate tax, no VAT registration requirement, and no payroll tax, unless the IE employs others.

What happens when you exceed the threshold

If gross turnover exceeds 30,000 GEL in a calendar year, micro business status is lost for that year. The IE automatically transitions to the standard individual entrepreneur rate (20% of net income) for the remainder of the year, applied to turnover from the point of breach. The Revenue Service Georgia must be notified. The following year, you can reapply for micro business status if turnover returns within the threshold.

Small Business Status (SBS): the georgia 1% tax regime

Small Business Status, SBS, is the flagship special regime for independent professionals and service-based businesses in Georgia. The Georgia 1% tax rate is applied to gross turnover, not profit, up to an annual threshold of 500,000 GEL.

Who qualifies

SBS is available to Georgian individual entrepreneurs. Foreign nationals who have completed individual entrepreneur registration in Georgia can apply for SBS. As with micro business status, certain business activities are excluded. Importantly, SBS is available to IEs who serve both local and foreign clients, the georgia 1% tax applies to all qualifying gross turnover, regardless of where the client is based.

How the 1% rate works

Under SBS, 1% of gross turnover is remitted to the Revenue Service Georgia each month. The declaration is filed monthly via the rs.ge portal. There are no deductible expenses, the 1% applies to total receipts, not net profit. This means an IE earning GEL 300,000 in a year pays GEL 3,000 in tax, regardless of what their costs were.

This simplicity is the point. SBS is designed for service-based businesses where the compliance cost of full-expense accounting would outweigh the benefit. For businesses with high cost-to-revenue ratios (where deducting expenses under the standard 20% regime would produce a lower effective rate), SBS may not always be optimal.

The 500,000 GEL threshold

If gross turnover exceeds 500,000 GEL in a calendar year, SBS status is lost for that year. The IE is reclassified to the standard individual entrepreneur rate (20% of net income) from the point of threshold breach. Importantly, exceeding the threshold in three consecutive quarters triggers mandatory transition to standard IE status or to an LLC structure.

For IEs approaching the SBS threshold, planning the transition to an LLC structure in advance is essential. The annual reporting requirements for IEs include turnover monitoring that Gegidze manages for clients.

VAT under SBS

Individual entrepreneurs under SBS are exempt from VAT registration unless their turnover exceeds 100,000 GEL in any consecutive 12-month period. Exceeding the VAT threshold requires registering for VAT and adding 18% VAT to client invoices, a meaningful change to pricing and client relationships that must be planned for.

Virtual Zone status: 0% CIT for IT companies

Virtual Zone status is available to Georgian LLCs providing information technology services to foreign clients. Under this regime, qualifying IT export income is subject to 0% corporate income tax and 0% VAT. It is the most tax-efficient structure available in georgia country for IT businesses serving international markets.

Virtual Zone status is covered in depth in the separate Gegidze guides on VZS for SaaS companies and the VZS export rule. For the full framework, see the Virtual Zone compliance guide.

The key distinctions from the IE-based regimes above: Virtual Zone status applies to an LLC, not an individual entrepreneur. The 0% rate applies to corporate income, not personal income. Distributions from the LLC to shareholders are subject to separate tax treatment. And the regime is conditional on the "foreign client" export rule, revenue from Georgian clients is taxed at the standard 15% corporate rate.

Fixed tax regime: sector-specific flat rates

The fixed tax regime applies to specific categories of business activity defined by Georgian law, primarily retail trade, hospitality, and certain service categories. Instead of paying a percentage of turnover, businesses under this regime pay a fixed monthly amount determined by their business category and location.

The fixed tax regime is less relevant for the international founder and professional services audience this guide primarily addresses. For businesses in applicable sectors, the regime simplifies compliance by replacing income tax calculation with a flat monthly payment. It does not exempt from VAT obligations.

Choosing the right regime: a decision framework

The right tax regime depends on your business structure, your projected turnover, and the nature of your clients.

Use micro business status if

• You are in the early stages and do not expect to exceed GEL 30,000 in gross turnover in the current year.

• You want the simplest possible compliance structure with zero income tax while below threshold.

• You are testing a market or building a client base before committing to a higher-threshold structure.

Use Small Business Status (SBS) if

• You are a freelancer, consultant, or service provider expecting annual gross turnover between GEL 30,000 and GEL 500,000.

• Your business is service-based and your cost ratio is relatively low, meaning the gross-turnover basis of the 1% tax is not punitive.

• You want the simplicity of monthly fixed-rate declarations without full expense accounting.

Use Virtual Zone status (LLC) if

• You are providing IT services primarily or exclusively to foreign clients.

• Your revenue exceeds or is likely to exceed the SBS threshold, or you want the structural protection of an LLC.

• You are building a product or service that requires a corporate entity for contracts, investment, or employment of others.

Compliance obligations across regimes

All special tax regimes in Georgia require active compliance. There is no passive status, if you stop filing declarations, the regime can be revoked.

Monthly filings

Both micro business status and SBS require monthly tax declarations filed via the rs.ge portal. The declaration reports gross turnover for the month. Under SBS, 1% of reported turnover is remitted simultaneously. Filing deadlines are the 15th of the following month. There is no grace period.

Annual reporting

Individual entrepreneurs under micro business status and SBS are also required to file annual income declarations. The annual declaration reconciles monthly filings and confirms the annual turnover figure. For the full compliance calendar, see Georgia's tax deadlines.

VAT obligations

VAT registration is required when 12-month rolling turnover exceeds 100,000 GEL, regardless of which income tax regime you are under. VAT registration triggers an 18% VAT obligation on taxable supplies. This is a separate obligation from the income tax regime and operates independently.

Common mistakes and how to avoid them

Exceeding the threshold without planning

The most common mistake is breaching a threshold, 30,000 GEL for micro business, 500,000 GEL for SBS, without a prepared transition plan. The result is a retroactive reclassification to the 20% standard rate from the point of breach, which can produce an unexpected tax bill for the remainder of the year. Track turnover monthly and plan the regime transition in advance.

Treating SBS as a zero-expense regime

Individual entrepreneurs under SBS sometimes run business expenses through their personal accounts and treat them as deductible. They are not. SBS is a gross-turnover tax, no expenses are deductible. If your cost structure is significant, the standard 20% regime with expense deductions may produce a lower effective rate than SBS at 1% of gross.

Missing monthly filing deadlines

Monthly declarations are due on the 15th of the following month. Missing a deadline triggers a penalty. Penalties accumulate. There is no automatic forgiveness mechanism. Use the rs.ge portal or appoint an accountant, such as Gegidze, to manage declarations. See bookkeeping for individual entrepreneurs for what managed compliance looks like.

How Gegidze helps

Gegidze manages special tax regime registration, compliance, and transition planning for individual entrepreneurs and LLCs operating in Georgia.

• Regime selection advice: We assess your business profile, projected turnover, and client base to identify the optimal tax regime from day one.

• IE registration and SBS application: We handle individual entrepreneur registration and the simultaneous application for Small Business Status or micro business status.

• Monthly declaration management: We file monthly turnover declarations via the rs.ge portal for all managed clients, tracking deadlines and remittances.

• Threshold monitoring: We track cumulative turnover against SBS and VAT thresholds and alert clients when a transition is approaching.

• Regime transition planning: We manage the transition from IE to LLC, including company registration, regime application, and accounting handover, when turnover approaches the SBS threshold.

• VAT registration: We manage VAT registration when the 100,000 GEL threshold is reached, and advise on the impact on pricing and client invoicing.

Final thoughts

Georgia's special tax regimes are one of the most compelling features of the country's business environment. A 1% tax on gross turnover for freelancers and consultants, 0% for the smallest operators, and 0% corporate income tax for IT companies serving foreign clients, these are not concessions. They are designed into Georgian law as deliberate policy.

The key is matching the right regime to the right business profile. Micro business status is for the earliest-stage operators. SBS is for the professional service provider who wants simplicity and a low rate. Virtual Zone is for the IT company scaling internationally. Getting the match right from the beginning avoids retroactive reclassifications, missed thresholds, and compliance penalties.

Georgia 1% tax under SBS is the entry point most international professionals start with. It is simple, low-cost, and accessible. The question is when to grow out of it, and that question is best answered before you breach the threshold, not after.

If you are ready to register and apply for the right regime for your business, book a free consultation with Gegidze to get the structure right from day one.

Frequently asked questions (FAQs)

Can a foreign national access Small Business Status in Georgia?

Yes. Small Business Status is available to any individual entrepreneur registered in Georgia, regardless of nationality or tax residency status. Foreign nationals must first register as an individual entrepreneur with the Revenue Service Georgia, then apply for SBS. There is no requirement to be a georgia tax resident. The georgia 1% tax rate applies to all qualifying gross turnover, including income from foreign clients.

What happens if I accidentally breach the SBS threshold?

If gross turnover exceeds 500,000 GEL in a calendar year, SBS status is lost for that year from the point of breach. The Revenue Service Georgia must be notified. Income earned after the threshold breach is taxed at the standard individual entrepreneur rate of 20% on net income for the remainder of the year. The following year, you can reapply for SBS if projected turnover is within the threshold, or transition to an LLC structure.

Can I have both SBS status and a Georgian LLC at the same time?

Yes. You can operate as an individual entrepreneur under SBS and separately own a Georgian LLC. These are distinct legal entities with separate tax registrations. Income earned under the IE is taxed under SBS at 1%. Income earned by the LLC is subject to the LLC's own tax regime (standard Estonian model, or Virtual Zone if applicable). The two structures do not interfere with each other, but they must be managed separately, separate declarations, separate accounts, separate tax registrations.

Is the Georgia 1% tax rate the effective rate, or are there additional taxes?

Under SBS, the 1% rate is the income tax rate on gross turnover. It is not the only tax that may apply. If your turnover exceeds the 100,000 GEL VAT threshold, you will also be required to register for VAT and charge 18% VAT on taxable supplies. If you employ staff, payroll taxes apply to their salaries. The 1% is the personal income tax on your IE income, it does not cover employment taxes or VAT. Most solo freelancers under the 100,000 GEL VAT threshold pay only the 1% income tax.

What business activities are excluded from SBS and micro business status?

Georgian law excludes certain regulated activities from special regime eligibility. Excluded categories include: legal services, notarial services, accounting and auditing services (in some interpretations), medical services, veterinary services, gambling and casino operations, and import/export trading of certain goods. The full exclusion list is set out in Georgian tax legislation. Gegidze reviews activity eligibility as part of the IE registration and regime application process.

Do I need an accountant to manage SBS compliance?

Not legally, SBS is designed to be simple enough for self-management. But in practice, monthly declarations must be filed on the 15th without exception, turnover must be tracked accurately, and the VAT threshold must be monitored. For most professionals operating above GEL 100,000 in annual turnover, or with multiple income streams, managed compliance reduces risk and frees time. Gegidze offers monthly declaration management as a standalone service for SBS clients.

Can I switch from micro business status to SBS within the same year?

Yes. If you start the year on micro business status and your turnover approaches or exceeds 30,000 GEL, you can transition to SBS, which covers turnover up to 500,000 GEL, before or at the point of exceeding the micro threshold. The transition requires notification to the Revenue Service Georgia. Gegidze manages threshold monitoring and handles the regime switch notification for managed clients.