Georgia Country Small Business Status 2026: How to Qualify for the 1% Tax Rate
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Georgia Country Small Business Status 2026: How to Qualify for the 1% Tax Rate
Getting small business status Georgia Country 1% tax treatment in 2026 takes three steps. You register as an individual entrepreneur in Georgia (the country), apply for the status with the Revenue Service, and keep annual turnover under the legal threshold. Consulting and licensed activities are excluded. Approved entrepreneurs pay 1% on gross turnover.
The regime is one of the main reasons freelancers and solo founders relocate to Tbilisi or Batumi. A designer from Poland invoicing 4,000 EUR a month pays about 40 EUR in income tax under it. The same income often costs her ten times that or more at home.
The rate is simple. The rules around it are not. Most rejected applications and surprise tax bills come from three gaps: the wrong activity code, a missed monthly filing, or a turnover breach nobody tracked. This guide covers each of them for the 2026 tax year.
What Small Business Status Actually Is
Small business status is a tax regime layered on top of an individual entrepreneur registration. It is not a separate legal entity. You first become a Georgian IE, then the Revenue Service grants the status on request.
The Two Layers: IE Registration and Status
The first layer is the IE itself. You register through the Public Service Hall, part of the House of Justice system. Your personal tax ID from rs.ge then doubles as your business ID.
The second layer is the status. You apply for it separately through the rs.ge online portal, usually right after registration. Without it, a Georgian IE pays the standard 20% personal income tax on profit. For a full walkthrough of both layers, see our guide to individual entrepreneur and small business status in Georgia.
What the 1% Covers
The 1% rate applies to gross turnover from qualifying activity. It replaces personal income tax on that business income. Key features:
Base: every lari of revenue received, not profit
Expenses: not deductible, so costs do not lower the bill
Filing: a monthly declaration due by the 15th of the following month
Payment: the tax is paid on the same monthly cycle
What the 1% Does Not Cover
The status shelters business turnover only. Several things sit outside it:
Employment salary from a Georgian employer, taxed at 20% through payroll
Rental income and other passive income, which have their own rules
VAT, which applies separately once you cross the VAT registration threshold
Income from excluded activities, even if you hold the status for other work
Who Qualifies for the 1% Rate in 2026
The test has three parts: your legal form, your activity, and your turnover. Fail any one and the Revenue Service either refuses the status or withdraws it later. Tax residency is not a precondition, so non-resident foreigners can hold it.
Activity Restrictions
Your activity must not appear on the excluded list. The exclusions target professions that are licensed or resemble employment. Commonly excluded categories include:
Consulting services, including management and business consulting
Licensed professions such as notaries, auditors and some medical practice
Activities needing a permit from a state body
Currency exchange and certain financial services
Production of excisable goods such as alcohol and tobacco
Software development, design, translation, copywriting and online retail typically qualify. The activity code you pick at registration matters more than your job title.
The Turnover Threshold
The annual cap has historically been 500,000 GEL (about 165,000 EUR at early 2026 rates). Confirm the current figure on rs.ge before planning around it, since thresholds are revised periodically.
Crossing the cap does not end the status on the spot. Turnover above the threshold is taxed at 3% instead of 1%. Repeated breaches can cost you the status entirely, so check the exact trigger with the Revenue Service.
A Worked Use Case
Consider a Ukrainian video editor who registered in March and invoiced agencies in Germany and the UK. By November her turnover reached 470,000 GEL. She deferred one December invoice to January, kept every lari at 1%, and saved roughly 600 GEL on the excess.
Small Business Status vs Standard IE Taxation
Feature | IE with Small Business Status | IE on Standard Regime |
Tax rate | 1% (3% above threshold) | 20% personal income tax |
Tax base | Gross turnover | Profit after expenses |
Deductible expenses | None | Documented business costs |
Turnover cap | Yes, set by law | No cap |
Excluded activities | Yes, consulting and licensed work | None |
Bookkeeping load | Income ledger only | Full expense records |
Typical user | Freelancer with low costs | Business with heavy costs |
When the Standard Regime Wins
The 1% rate looks unbeatable, but the maths flips when costs eat most of your revenue. Under the status, you pay tax on turnover even when your margin is thin.
Take a reseller importing electronics. He turns over 300,000 GEL a year but spends 285,000 GEL on stock and shipping. Under the status he owes 3,000 GEL. Under the standard regime he owes 20% of 15,000 GEL profit, also 3,000 GEL. Any further margin squeeze makes the standard regime cheaper.
As a rule of thumb, the status wins when expenses stay below about 95% of turnover. That covers almost every service freelancer, but not every trader.
When an IE Is the Wrong Vehicle Entirely
Small business status suits a solo operator. It is the wrong choice in a few specific cases:
Investor funding: venture investors want shares, and an IE has none to issue
Personal liability concerns: an IE owner answers for business debts with personal assets
Expected growth past the cap: a business projecting 900,000 GEL in year two will pay 3% on much of it
In those cases a limited liability company usually fits better. An LLC pays 15% corporate tax only when it distributes profit. Retained earnings stay untaxed. If an IE still looks right, our team handles IE registration and small business status end to end, including the activity code choice that decides eligibility.
Once the status is granted, the real work shifts to keeping it. That means monthly declarations, threshold tracking and clean records. The monthly and annual tax deadlines in Georgia set the rhythm you will follow for as long as you hold the status.
How You Lose Small Business Status
The 1% rate is not permanent. The Revenue Service grants small business status on conditions, and it can end the status once those conditions stop being true. Most holders who lose it do so through one of a few predictable events.
Crossing the Annual Turnover Cap
The status is tied to an annual turnover ceiling. Turnover above that ceiling has historically been taxed at 3% instead of 1%. The status then ends from the following tax year. Confirm both the current cap and the excess rate on rs.ge before you plan around them.
The cap counts gross receipts, not profit. A freelancer who invoices steadily and gets one large project in November can cross the line in a single month. Track your running total from January, not just your monthly figures.
What Happens After You Cross
Status ends from the start of the next calendar year.
Standard IE taxation applies from that point, with 20% personal income tax on profit.
Your IE stays registered. Only the tax regime changes, not your legal identity.
Reapplication is possible later if turnover falls back under the cap. Check the current waiting rules with the Revenue Service.
Adding an Activity That Does Not Qualify
Your status covers the activities you declared. Income from an excluded activity does not get the 1% rate, even if your other work qualifies. Take a Polish web developer who also starts reselling imported electronics. That trading income may fall outside the regime and need separate treatment.
Some income never counted toward the 1% regime in the first place. Typical examples:
Sale of real estate or a car you hold personally.
Salary from a Georgian employer, which the employer withholds at 20%.
Investment income such as interest or dividends.
Activities on the excluded list, which you should check against the current rs.ge list.
Filing Gaps and Compliance Slippage
Missing monthly declarations does not usually cancel the status on its own. It triggers late-filing penalties and interest first. Repeated gaps, though, invite scrutiny of the whole account.
A separate business account makes this easy to prove. Our guide to opening a bank account in Georgia online covers which banks accept IEs registered by non-residents.
How to Get Small Business Status Step by Step
The full path from arrival to 1% taxation usually takes 3-7 business days if your documents are in order. A Ukrainian UX designer who lands in Tbilisi on a Monday can often be invoicing under small business status by the following week.
Registering the Individual Entrepreneur
You register the IE at the House of Justice through the National Agency of Public Registry (NAPR). Standard registration is typically processed within 1 business day. The fee depends on the processing speed you choose. Check the current tariff with the House of Justice.
Documents You Bring
Valid passport, with a notarized Georgian translation if required.
Legal address in Georgia for the IE. This can be a rented flat or a leased address.
Activity description that matches the work you actually do.
Power of attorney, apostilled and translated, if someone registers on your behalf.
The activity description matters more than it looks. It decides whether your work falls inside the qualifying categories. A vague entry like "consulting" can cause problems later.
Applying Through the Revenue Service
After registration you receive login access to the rs.ge taxpayer portal. You submit the small business status application there. There has historically been no state fee for the application itself.
The Revenue Service reviews your activity code against the excluded list. Decisions usually arrive within a few business days. The status applies from the date set in the decision, not from your IE registration date.
Timing Your Application
Apply immediately after registration, before your first invoice.
Avoid invoicing early. Turnover earned before the status starts is taxed under standard IE rules.
Save the decision. Banks and foreign clients sometimes ask for proof of your tax regime.
Setting Up for Ongoing Compliance
Open a business bank account in the IE's name. Then file your first monthly declaration by the 15th of the month after your first month of status. That first filing confirms your rs.ge access and payment method work.
Most IEs set up three habits in the first month:
A turnover tracker with a running annual total.
Currency records for every foreign payment received.
A calendar reminder a few days before each 15th.
Not everyone should take this path. If you plan to hire a team or expect turnover well above the cap within a year, an IE locks you into a structure you will outgrow. In that case opening an LLC in Georgia from day one saves you a second registration and a migration of client contracts.
What a 1% IE Costs to Run Each Year
Cost item | How it works | Example at 120,000 GEL turnover (2026) |
Turnover tax | 1% of gross receipts, paid monthly | 1,200 GEL (about 390 EUR) |
Turnover above cap | Excess historically taxed at 3% | Not triggered at this level |
IE registration | One-off House of Justice fee, varies by speed | Confirm current tariff with NAPR |
Status application | Filed on rs.ge, no state fee historically | 0 GEL |
Bank account | Monthly maintenance plus transfer fees, set by each bank | Varies by bank and tariff plan |
Accounting support | Optional fixed monthly fee for declarations | Varies by provider and volume |
Legal address | Needed if you have no Georgian residence of your own | Monthly lease fee, varies |
Pension contributions | Apply to Georgian citizens and permanent residents, foreign IEs usually outside | Confirm your status with rs.ge |
GEL to EUR conversions use a rate of roughly 3.1 GEL per EUR, as of early 2026.
How the Monthly Declaration Works
Each month you report the previous month's gross turnover on rs.ge. You pay 1% of that figure by the 15th. Months with no income still need a declaration showing zero.
The declaration is short. Most IEs complete it in under 15 minutes once the first one is done. The work sits in the records behind it, not in the form.
Converting Foreign Currency Correctly
Most foreign founders get paid in EUR or USD. You convert each payment to GEL at the National Bank of Georgia (NBG) official rate for the day you receive it. Using your bank's buy rate or a monthly average gives the wrong figure.
Worked Example
Payment received: 3,000 EUR on a given date.
NBG rate that day: say 3.10 GEL per EUR.
Turnover recorded: 9,300 GEL.
Tax due: 93 GEL (about 30 EUR).
Small errors compound across 12 months and several clients. If you invoice in multiple currencies, a bookkeeper who handles tax accounting and bookkeeping in Georgia removes the conversion work entirely.
Frequently Asked Questions
Do I need Georgian tax residency to keep small business status?
No. The status depends on your IE registration and activity, not on the 183-day residency test. Your home country may still claim you as a tax resident and tax your worldwide income. Read our guide to Georgian tax residency requirements before you assume the 1% is your only tax bill.
What happens if I file a monthly declaration late?
The Revenue Service applies a late-filing penalty plus interest on any unpaid tax. The exact amounts change periodically, so check the current schedule on rs.ge. Correcting a missed filing quickly keeps the penalty small and avoids a pattern that draws attention.
Can I earn a salary and run a 1% IE at the same time?
Yes. Your Georgian employer withholds 20% income tax on the salary as usual. Your IE turnover is declared separately at 1%. Keep the two income streams in separate bank accounts so the salary never appears as IE turnover.
Does VAT apply to a small business status IE?
It can. VAT registration is triggered by taxable turnover above a separate threshold, historically 100,000 GEL (about 32,000 EUR) over any 12-month period. Services sold to foreign clients are often supplied outside Georgia for VAT purposes and may not count. Confirm the current threshold and your place-of-supply position with the Revenue Service.
Can I move from an IE to an LLC mid-year?
Yes, but it is not a conversion. You register a new LLC, move client contracts across, then close or suspend the IE. Turnover the IE earned before the switch stays at 1%. The LLC starts under its own regime from registration.
Do refunds or chargebacks reduce my turnover?
Generally yes, if the refund relates to income you already declared. You report the adjustment in the month the refund happens, with documentation such as the original invoice and the refund record. Keep this evidence for at least the standard audit period, because refunds are a common audit question.
Can a foreign client ask for proof that I pay tax in Georgia?
Many do, especially larger EU and US companies. You can download an extract from rs.ge showing your IE registration and tax regime. If a client needs a tax residency certificate for treaty purposes, that is a separate document. You only qualify for it if you meet the residency rules.
