How the 1% Tax Regime Works for Individual Entrepreneurs in Georgia Works (And How to Qualify)
- Tinatin Tolordava
- 7 days ago
- 12 min read
Table of contents
You’re not alone in this search
If you're reading this, chances are you've already done some digging. You’ve heard about Georgia’s incredibly low tax system. Maybe a friend mentioned it over coffee, or maybe you stumbled onto a Reddit thread filled with freelancers talking about how they’re only paying 1% tax while living in Tbilisi. You probably thought: Is that even legal? And how do I get that?
We’ve had the same conversations with hundreds of entrepreneurs, consultants, designers, developers, and small agency owners. Most of them are looking for the same thing: a simple, transparent tax setup that doesn’t punish you for being successful. Georgia’s Small Business Status (SBS) offers exactly that. But like most things that sound this good, it comes with rules you have to get right. Otherwise, you could get hit with the standard 20% rate or worse, lose eligibility altogether.
This guide exists to help you avoid that. We’ve helped many clients successfully register and navigate Georgia’s tax regime. We know what the Revenue Service looks for. We know the little missteps that quietly disqualify people. And we know how to build a structure that keeps things legal, sustainable, and straightforward.
So let’s break it all down: what this 1% tax really means, who it’s for, how to qualify, and what you need to do to protect yourself.
What the 1% tax really offers
Let’s start with the basics. Georgia’s 1% tax regime isn’t a loophole. It’s not an offshore scheme. It’s a legitimate legal framework designed to support small, independently owned businesses that operate under a certain revenue threshold.
Here’s what it actually means: if you register in Georgia as an Individual Entrepreneur and qualify for Small Business Status, you’ll pay just 1% tax on your annual turnover. That’s not a typo. One percent. Not of your profit. Of your gross revenue.
If you invoice $90,000 in a year for client work, your total tax liability to the Georgian state would be around $900. That’s it.
To be clear, this is not a tax deferral. You’re not postponing your obligation or hiding income. You’re paying it. Legally. Cleanly. And you’re done.
But it’s not automatic. To be eligible, you have to:
Register as an Individual Entrepreneur (IE) in Georgia.
Apply for and be approved for Small Business Status.
Stay under the 500,000 GEL (~$180,000) annual turnover limit.
Operate in a permitted business activity (we’ll cover that next).
There’s more. If you go over that revenue threshold, your tax rate jumps to 3% on the excess. And if you keep exceeding it for two years in a row, you’ll lose the Small Business Status entirely. That means 20% income tax from year three onward.
So, while this regime is incredibly appealing, it rewards those who plan ahead and take registration seriously from day one. It’s not something you want to stumble into casually.
Another detail that makes Georgia unique: you don’t need to open a company or have any employees to qualify. You also don’t need to be a Georgian citizen or resident.
Foreigners can register just like locals. That’s part of what’s made the 1% regime so attractive to digital nomads and remote-first founders.
If your business is truly solo, fully international, and under the 500,000 GEL threshold, you’re in the sweet spot.
But let’s make sure it actually fits what you do.
Who qualifies and who doesn’t
The 1% tax regime in Georgia was created with freelancers and small service providers in mind. It’s built for people running one-person operations or small teams that serve clients abroad. Suppose that’s you, great. But before you get too excited, you need to know where the lines are.
Let’s start with who it does work for:
Web developers and mobile app builders
Designers, illustrators, animators
Copywriters and translators
Freelance marketers, SEO consultants, and social media managers
Product managers and business consultants
Small creative agencies or digital service providers with international clients
These profiles are a good fit because their services are often delivered remotely and paid for from outside Georgia. That matters because income from within Georgia can raise complications, even under SBS.
Now, who doesn’t it work for:
Anyone on an employment contract (even remote)
People offering services inside Georgia (restaurants, retail, etc.)
Regulated professions like medical, legal, finance, or education
High-turnover businesses like trade, car sales, or real estate
People billing only one foreign client, especially if that client controls your schedule, tools, and output
That last one is subtle but crucial. If the tax authorities believe you’re essentially an employee disguised as a contractor, they can reclassify your income. That pushes you out of SBS and into standard income tax territory.
Another mistake we’ve seen: assuming that the 1% tax applies to any kind of income. It doesn’t. Capital gains? Not included. Dividends? Also separate. Rental income from property? Different rules. This regime is for business income generated by services you personally provide.
If your business model is built around selling physical goods, managing investments, or anything tied to Georgian clients, then SBS might not be the right fit. And that’s okay. Georgia has other regimes (like Virtual Zone or International Company Status) that might suit you better.
We always recommend talking to someone before you register. One 30-minute consultation could prevent a year of paperwork headaches or an expensive tax bill.
But if you’re still here, and this sounds like you? Then you’re in a great position to move forward.
How to actually register and get approved — not just on paper
Reading a blog and thinking, “Okay, I’ll just register online, get the 1% tax, and boom — done.” sounds easy. But in reality? Many people get stuck between steps. They either miss a document, choose the wrong business activity, or realize too late that they needed help from someone who speaks fluent Georgian.
Let’s be real: registering as an Individual Entrepreneur in Georgia is fast, often done in 1–2 business days. But being approved for Small Business Status is the part that triggers your eligibility for the 1 percent tax in Georgia. And this is where most people make unintentional mistakes.
Here’s what the full process really looks like if you want it to work without surprises:
Choose the right business activity code.
This isn’t about choosing a random category. It has to match the work you actually do and be one that’s permitted under SBS. Pick the wrong one, and your 1% status might get rejected. Worse, you won’t realize it until after your first tax return.
Get your documents translated and notarized properly.
Georgia requires official documents (like your passport) to be translated by a certified notary in Georgian. Do it through the wrong channel, and the Registry might bounce your application back.
Register as an Individual Entrepreneur (IE).
You’ll receive your business identification number and tax ID. This part is usually quick if you're doing it in person or through a local legal partner.
Apply for Small Business Status.
This is what gives you the 1% tax. It’s a separate application, and yes, it can be rejected if anything looks off. Applications are reviewed manually by the Revenue Service.
Open a business bank account.
Banks like Bank of Georgia and TBC are the go-to for most entrepreneurs. You’ll need a local account to receive client payments and manage your finances properly.
Set up access to the Georgia Revenue Service portal.
This is where you’ll submit monthly declarations. It’s all in Georgian, and you’re legally responsible for accurate filings, even if you don’t understand the language.
A small but crucial tip: registering your business before you issue your first invoice makes a huge difference. Any income earned before registration will be taxed at 20%, not 1%. That’s a costly mistake we see too often.
If all this sounds like something you’d rather not mess up, that’s precisely what we help with at Gegidze. We don’t just walk you through it, we handle it for you, from translating your documents to dealing with the Revenue Service directly.
Monthly declarations and tax filings: the part no one tells you about
Once your business is up and running, the story isn’t over. You’ve secured the 1 percent tax in Georgia, but to keep it, you have to stay compliant. And that means filing monthly income declarations.
Every. Single. Month.
Even if you made zero income, you still need to declare it. If you miss a deadline (usually the 15th of the following month), you can be fined. And if you repeatedly file late or fail to declare income properly, the Revenue Service might revoke your SBS status entirely.
Here’s what you’re expected to do every month:
Submit a turnover declaration for your business income.
Pay 1% of your gross revenue.
File reverse VAT reports if you’re purchasing services from abroad (like ads or SaaS tools).
Maintain accounting records: yes, even if you're a solo freelancer.
While there’s no requirement to hire an accountant, most solo entrepreneurs either:
Spend hours every month decoding the Revenue Service platform, or
Find a local tax consultant to file on their behalf.
Many use the business online Bank of Georgia portal to track expenses and send payments, but it doesn’t integrate automatically with the tax system, so don’t assume it’s doing the filings for you.
Also, here’s something worth noting if you're coming from a country with VAT systems: Georgia doesn’t require VAT registration unless you exceed 100,000 GEL of annual income or want to reclaim VAT on local expenses. If you’re working with foreign clients, VAT won’t apply, but you may still need to file reverse VAT reports.
That’s why we built a monthly service at Gegidze that handles income declarations, reverse VAT, and communication with tax officers, all in Georgian, on time, and with zero stress for you.
We know what it feels like to get an email from the Revenue Service and wonder, Did I miss something? Am I in trouble? You don’t need that in your life. Let someone else deal with it so you can keep focusing on your business.
The traps that kill your 1% status (and how to avoid them)
It’s easy to get approved for Small Business Status in Georgia. It’s even easier to lose it without realizing.
Most people don’t lose their 1 percent tax in Georgia because they break the law. They lose it because they miss something small. Something no one explained. Something they assumed wasn’t a big deal, until it was.
Here are the top traps we've seen freelancers and founders walk into:
1. You start working before registering
Let’s say you land in Tbilisi, start sending invoices, and figure you’ll register next week. The problem? Any income you earn before your Small Business Status is approved will be taxed at 20 percent. That’s the default.
There’s no way to apply 1 percent on that income retroactively. It doesn’t matter that you intended to register. The tax office only cares when you officially do it.
What to do instead: Register as soon as you arrive, before you start working. Gegidze can get you set up in 48 hours.
2. You go over 500,000 GEL
This is the hard cap. If your business earns more than that in a calendar year, two things happen:
The amount above 500,000 GEL is taxed at 3 percent
If it happens two years in a row, you lose your Small Business Status entirely.
And no, the Revenue Service won’t remind you when you’re close. You need to track this yourself.
What to do instead: Set quarterly reminders to check your turnover. If you’re getting close, talk to a tax advisor to plan next steps.
3. You have one client who treats you like an employee
This is where the lines blur. If you’re invoicing a single client, using their tools, working on their schedule, and doing what they assign, the tax office might consider you a disguised employee. That can lead to your income being reclassified and taxed at 20 percent.
What to do instead: Diversify your client base if you can. Or, document your independent contractor status clearly in contracts. This is one of those grey areas where a local expert’s opinion can save you from a reclassification letter.
4. You don’t file monthly declarations
Even if you earn zero in a month, you have to submit a declaration. Miss it repeatedly and you risk fines or worse, revocation of your tax status.
What to do instead: Set up a monthly reminder, or work with an agency like Gegidze to handle all filings for you. It's often cheaper than fixing the damage later.
5. You assume “foreign income” means no VAT
If you’re buying tools or services from abroad, such as Google Ads, Meta ads, or software subscriptions, the Georgian Revenue Service expects a reverse VAT filing. This surprises many, especially those used to tax systems where foreign purchases don’t trigger any extra paperwork.
What to do instead: Understand your VAT obligations. They may not apply to your income, but they can apply to your expenses.
What happens if you do it right
When you take the time to register properly, file correctly, and manage your income under the rules, the payoff is simple: you legally run your business while paying the lowest tax rate in Europe. The 1 percent tax in Georgia isn’t a trick. It’s a long-term opportunity, and for many entrepreneurs, it’s a financial reset.
Here’s what life looks like once you’re set up:
You pay 1% of your revenue. No extra social contributions, no complicated deductions, no progressive brackets.
You invoice international clients in EUR, USD, or GBP and get paid into your Bank of Georgia account.
You file one monthly declaration and know exactly what’s due.
You keep your profit. No dividend tax unless you distribute from a company. No capital gains tax if you’re working under the right structure.
This setup attracts digital service providers from all over, developers from Germany, marketers from the UK, and consultants from the Netherlands. They come for the low tax, but they stay for the simplicity.
If you’re used to navigating VAT audits, quarterly prepayments, and international tax headaches, Georgia feels like fresh air. You focus on your business, not just your accountant.
One of our clients, a UX designer from Barcelona, said it best: “Back home, I was working 10-hour days just to keep half. Here, I work 6 hours and keep 99%.”
This isn’t just about saving money. It’s about building your life around work that matters, without losing it all to the system.
Why entrepreneurs choose Georgia — and why you might, too
Georgia has quietly become a hub for location-independent professionals. And it’s not just the tax. It’s the full package.
Business registration in Georgia is fast, cheap, and available to foreigners with no restrictions.
You can complete your company formation in Georgia in 1–2 days, without needing a Georgian partner or complicated documents.
The cost of living is low, especially compared to Europe or North America. You can rent a modern apartment in Tbilisi for a fraction of what you’d pay in Berlin or Amsterdam.
The lifestyle? Cafés, coworking spaces, mountain weekends, and wine that costs less than your coffee.
You can open a Bank of Georgia business account and access online banking that works just as smoothly as in any EU country.
But what really matters: Georgia respects entrepreneurs. It doesn’t punish you for earning more. It gives you room to grow.
And if you need more than Small Business Status, Georgia offers other incentives:
Virtual Zone status for IT companies
International Company status for tech-related services
High Net Worth residency programs for those with global income
It’s not just a low-tax country. It’s a flexible country. And if you’ve ever felt boxed in by your home country’s tax code, that matters.
Why Gegidze clients don’t worry about tax surprises
We built Gegidze to take care of the things you shouldn’t have to figure out alone.
Our team helps entrepreneurs at every stage:
Planning the best way to move your income to Georgia
Completing your business registration in Georgia from start to finish
Getting your Small Business Status approved
Opening your Bank of Georgia account
Filing your monthly declarations (yes, in Georgian)
Explaining your tax residency situation, especially if you’re traveling or spending 183+ days here
Avoiding double taxation if your home country has a treaty with Georgia
We don’t offer cookie-cutter advice. We look at what you actually do, how you get paid, and what matters most to you.
Maybe you want to keep things lean and freelance under the 1 percent tax in the Georgia system. Or maybe you’re building a remote team and want to explore payroll, benefits, or VAT. We can help with both.
And if you’re not sure what you need yet, that’s okay too. Most of our clients weren’t either, until we talked.
What’s next?
If you’re serious about reducing your tax burden legally, without hiding behind offshore schemes or burying your income, Georgia is one of the clearest options on the map.
The 1 percent tax in Georgia works best for:
Solo entrepreneurs
Freelancers and consultants
Remote-first business owners
Digital service providers with clients abroad
Founders who want to keep more and simplify operations
It’s legal. It’s transparent. And it works if you set it up right.
But if you miss a filing, delay your registration, or exceed your income threshold without noticing, the system will quietly default to higher rates and more complexity.
That’s why we’re here.
Gegidze exists to make business setup and tax compliance in Georgia easy, ethical, and strategic. So you can stop worrying about how much tax you're paying and focus on building what matters.
Book your free consultation
Ready to make the 1 percent tax in Georgia work for your business?
Let’s talk. No pressure, no jargon, no vague promises. Just a conversation about whether Georgia is right for you and how to set things up safely from the start.
Because the best tax system in the world only works if you understand it.
Frequently asked questions (FAQ)
Who qualifies for Georgia’s 1% tax regime?
Freelancers and solo service providers with less than 500,000 GEL in annual turnover who operate in eligible industries and serve international clients can apply for Small Business Status.
