Entrepreneurs lose their Georgia small business status 1% tax up to 500,000 GEL official Revenue Service regime every year because they make simple, avoidable mistakes.

Here are the biggest ones, and the real stories that prove why you must avoid them.

7 tax mistakes list on dark background. Errors include TIN, VAT, and tax residency issues. Red flags highlight each mistake.

Mistake #1: Invoicing Before Registration

Levan, a freelance designer, moved to Tbilisi excited about the Georgia 1% tax. He registered as an Individual Entrepreneur Georgia but didn’t wait for his Georgia tax ID number before invoicing his first client.

The Georgia Revenue Service taxed that income at the default Georgia country tax rate of 20 percent. Instead of paying 1 percent (just $50 on his $5,000 invoice), he paid $1,000. One careless move erased the advantage of the SBS Georgia program.

Lesson: Never invoice before your registration and TIN are complete.

Mistake #2: Forgetting Zero Declarations

Anna, a copywriter under SBS Georgia, had three months with no clients. She assumed there was nothing to report, so she skipped her filings.

The Revenue Service flagged her for non-compliance. Even without income, failing to file monthly Georgia tax declarations is a violation. Her status was temporarily suspended, and she had to fight to get her Georgia 1% tax back.

Lesson: In Georgia, even “nothing” must be declared.

Mistake #3: Excluded Activities

David wanted to register business in Georgia to run an online betting platform. He tried to apply for SBS Georgia small business status.

The problem? Gambling is an excluded activity. The Georgia Revenue Service disqualified him immediately, and his income defaulted to Georgia self-employment tax at 20 percent.

Lesson: Not every business can qualify. Finance, gambling, and large-scale trade are excluded from the Georgia small business status 1% tax up to 500,000 GEL official Revenue Service program.

Mistake #4: Mixing Personal and Business Income

Sophia, a marketing consultant, opened a Georgia business bank account but kept using her personal account for transfers from clients. She also sent personal remittances into the same account.

When the Georgia Revenue Service reviewed her case, they treated part of her personal inflows as taxable business income. She ended up paying more tax than she owed.

Lesson: Keep business and personal income separate. Use the account tied to your Georgia taxpayer identification number.

Mistake #5: Ignoring Tax Residency Rules

Mark, a digital nomad on the Georgia digital nomad visa, thought he was safe with SBS Georgia. But after spending more than 183 days in the country, he became a Georgia tax resident.

That meant he had to consider double taxation with his home country.

He did not plan ahead with the treaties Georgia has in place. For months he risked paying taxes twice. Only after consulting experts did he manage to use Georgia’s territorial system to stay compliant.

Lesson: Georgia tax residency rules matter. Spending 183+ days changes your obligations.

Mistake #6: Missing VAT Registration

Nino’s consulting business grew quickly, crossing the 100,000 GEL turnover threshold. She did not realize this meant she had to register for VAT.

The Georgia Revenue Service fined her for non-compliance. Even worse, she missed her chance to claim a Georgia VAT refund on business expenses, which would have saved her money.

Lesson: VAT registration is not optional once you pass the threshold.

Mistake #7: Choosing the Wrong Structure

Tomas tried to run his IT startup as an Individual Entrepreneur Georgia to enjoy the 1 percent regime. But his turnover exceeded 500,000 GEL, and his business should have applied for Georgia Virtual Zone status.

By the time he realized, he had lost months of potential tax benefits. Instead of 0 percent corporate tax on foreign IT income, he was paying 20 percent under the Georgia country tax rate.

Lesson: Pick the right structure from the start. Some businesses belong as LLCs. Some qualify for Virtual Zone. Forcing yourself into SBS Georgia when it does not fit costs money.

How to Avoid These Mistakes

Every mistake on this list is avoidable. The rules are clear. The Georgia Revenue Service is transparent. The problem is usually rushing, guessing, or copying what someone else did.

If you want to keep your Georgia small business status 1% tax safe, follow three rules:

Do not invoice before registration.
File monthly, even with zero income.
Use the right structure for your business model.

Professional support matters here. At Gegidze, we register businesses, secure Georgia 1% tax status, manage filings, and prevent errors that lead to penalties.

Table: Mistakes That Kill the 1% Tax

Mistake	Consequence
Invoicing before TIN	Income taxed at 20% instead of 1%
Skipping zero declarations	Loss of SBS Georgia status
Registering excluded activity	Automatic rejection, taxed at 20%
Mixing personal and business income	Audits and higher effective tax
Ignoring Georgia tax residency	Double taxation risks
Missing VAT registration	Fines and lost Georgia VAT refund
Wrong structure choice	Missed benefits, higher tax burden

Day 6 Action Step

Look at your setup honestly.

Have you invoiced before your TIN was active?

Did you skip zero declarations?

Are you mixing personal and business income?

Fix it now before penalties add up.

The Georgia 1% tax is one of the best business regimes in the world. But it only works if you protect it.

What’s Next: Day 7 - Scaling Beyond the Basics

Day 6 showed you how easy it is to lose the SBS Georgia small business status.

Day 7 is about growth. Once you master compliance, how do you scale? Should you upgrade to LLC Georgia? Apply for the Georgia Virtual Zone? Explore International Company Status?

Tomorrow we cover how to move beyond 1 percent and build a structure that grows with your business.

Want to protect your 1% tax status?

Book a consultation with Gegidze today.

We help entrepreneurs register business in Georgia, secure SBS Georgia, avoid penalties, and keep your taxes at the legal minimum.