Georgia’s Small Business Status is one of the most attractive tax regimes in the world. It allows freelancers, entrepreneurs, and solo business owners to pay just 1% tax on turnover up to 500,000 GEL per year (around €170,000). It’s simple, transparent, and accessible, no complicated tax returns, no corporate bureaucracy.

That’s why thousands of foreigners register in Georgia every year to take advantage of it. Developers, marketers, designers, consultants, and remote professionals all use the Individual Entrepreneur (IE) model to work legally and reduce taxes.

But there’s one important rule many people overlook: not every activity qualifies. Some businesses are excluded under the Georgian Tax Code. If you fall into one of those categories, you can lose your Small Business Status and that means losing your 1% rate.

This blog covers the full list of prohibited activities, explains what happens if you make a mistake, and shows how to stay compliant.

Understanding Georgia’s Small Business Status

To qualify for Small Business Status in Georgia, you must:

Be an individual, not a legal entity.
Register as an Individual Entrepreneur (IE) with the Revenue Service Georgia.
Keep your annual turnover below 500,000 GEL.
Submit monthly tax reports, even if you have no income.
Conduct activities that are legally permitted under the Tax Code.

If any of these conditions are violated, the Revenue Service Georgia can revoke your status. Once revoked, your income is reclassified and taxed at the standard 20% personal income tax rate, and in some cases, additional penalties apply.

The key to keeping your 1% tax rate is simple: know what you can and cannot do.

The Main Restrictions: Activities That Disqualify You

The Georgian Tax Code provides a list of prohibited activities that make you ineligible for Small Business Status. To make it easier to understand, here’s a breakdown by category.

1. Financial and Legal Activities

If your business involves managing money, investments, or legal services, it will not qualify. These fields are regulated and require professional licenses, which automatically exclude them from the small business program.

Disqualified activities include:

Banking, lending, and financial intermediation.
Investment management or fund administration.
Legal consultancy, notarial services, and advocacy.
Audit, bookkeeping, and accounting.
Insurance and brokerage services.

For example, if you offer accounting support to other businesses or provide financial planning advice, your work is considered a regulated financial service. You cannot register as a 1% taxpayer for those activities.

2. Real Estate and Construction

Real estate is another excluded sector. If your business involves buying, selling, renting, or brokering property, you do not qualify for the 1% regime.

This includes:

Real estate agency or brokerage activities.
Construction or renovation under contract.
Property management for third parties.
Buying and reselling apartments or land for sale in Georgia for profit.

These activities are excluded because they often involve large capital turnover and regulated contracts. If you are registered as a real estate agent, you are considered a professional service provider, not a small business under the IE regime.

Even if you own apartments in Tbilisi Georgia or apartments in Batumi Georgia and rent them out privately, the Revenue Service may classify that as passive income, not business income.

3. Gambling, iGaming, and Lottery Activities

Georgia regulates gambling and iGaming under strict licensing laws. Because of that, anyone involved in these industries cannot hold Small Business Status.

This includes:

Casino operators.
Online betting or iGaming companies.
Lottery and raffle organisers.
Sports betting agencies.

If you are working in the iGaming crypto Georgia space, you need a separate structure, such as an International Company Georgia or a Virtual Zone company, not a 1% IE registration.

The same rule applies if you’re offering development services for a gambling or iGaming platform. Those services fall under restricted industries, so it’s better to consult before applying.

4. Cryptocurrency and Exchange Services

Georgia is known as a crypto-friendly country, but crypto exchange and custody activities are tightly regulated.

If your business involves handling other people’s crypto assets, you may need VASP registration Georgia (Virtual Asset Service Provider license). That automatically makes you ineligible for the Small Business Status.

Ineligible activities include:

Running a crypto exchange or custodial wallet.
Providing crypto asset management for clients.
Offering investment or trading advice for tokens.
Mining or staking outside a Free Industrial Zone mining Georgia setup.

However, if you simply earn from your own crypto investments, you remain exempt. Crypto tax in Georgia for individuals is 0% on capital gains, which is still one of the best regimes globally.

5. Professional Consulting and Intermediation

Certain professional services are considered “licensed or regulated professions,” and those cannot operate under the 1% scheme.

Prohibited categories include:

Legal, architectural, or engineering consulting.
Audit, tax advisory, or accounting services.
Financial, medical, or educational consulting that requires a state license.
Recruitment, brokerage, or intermediary services where commissions are earned from third parties.

These are excluded because they fall under professional certification systems, not general freelance or entrepreneurial work.

If you work as an unlicensed business consultant, you can still qualify, but once your activity crosses into licensed territory, your Small Business Status can be cancelled.

6. Import, Export, and Trade in Restricted Goods

Georgia’s small business regime is designed for service providers, not for large-scale trading companies. You cannot use the 1% tax rate if your business involves restricted or excisable goods.

This includes:

Alcohol, tobacco, fuel, and other excisable products.
Wholesale or retail trade of regulated commodities.
Import or export businesses handling restricted goods.
Freight forwarding, customs brokerage, or intermediary trade.

If you are importing goods for resale, you fall under regular business taxation. But if you provide digital services to clients abroad, such as web design, IT support, or marketing, you are eligible.

7. Employment and Grant-Based Income

Small Business Status applies only to self-employed activities, not to wages or grants. You cannot register as an IE if your main income comes from:

Salaries paid under a labor contract.
Government grants or stipends.
Payments from state-funded programs or NGOs.

The Revenue Service Georgia monitors income sources closely. If your declared turnover comes primarily from one employer, it may be classified as employment income, not entrepreneurial income.

Common Mistakes That Lead to Losing Small Business Status

Even honest mistakes can lead to losing your Small Business Status. Here are the most common ones:

Mixing eligible and prohibited activities.

For instance, a marketing freelancer who also rents out property on the side may trigger disqualification if real estate becomes a significant income source.

Incorrect business registration.

Selecting the wrong business activity code (NACE code) during registration can automatically disqualify you. Always check the code matches your actual work.

Exceeding the 500,000 GEL limit.

Once you pass this threshold, you must re-register under a different tax regime. Continuing under the 1% system can lead to retroactive penalties.

Failure to issue invoices in Georgian.

The Revenue Service requires invoices in the Georgian language. Using an uncertified translator or English-only invoices may result in rejected filings. Proper translation English Georgian ensures compliance.

Not maintaining monthly reports.

Even if you have no income, you must file monthly declarations. Failing to do so can lead to automatic status suspension.

What Happens When Your Status Is Revoked

If you violate the conditions of Small Business Status, the Revenue Service Georgia can cancel it. When that happens:

Your past income is recalculated under the standard 20% income tax.
You may owe back taxes and fines.
You lose access to simplified accounting.
You must re-register under a different system, such as an LLC or standard IE.

For example, if you earned 400,000 GEL in eligible activities and 100,000 GEL from prohibited ones, the entire turnover may be reclassified and taxed at 20%. That’s an immediate loss of 76,000 GEL compared to staying compliant.

If you believe your status was revoked unfairly, you can appeal. The process involves filing a claim with the Revenue Service Georgia and providing supporting documents. Many entrepreneurs seek legal assistance or translation support during this process to ensure accuracy.

How to Stay Compliant and Protect Your 1% Status

The easiest way to protect your Small Business Status is to follow a few practical steps:

Register only eligible activities.
Keep your turnover below 500,000 GEL.
File monthly reports on time.
Use certified English to Georgian translators for documents and invoices.
Consult professionals before expanding into new services.
Keep a clear distinction between self-employed and employment income.

If you are unsure whether your work qualifies, it’s better to check before registering. Losing the 1% rate can be expensive and time-consuming to fix.

How to Correct Mistakes if You Lose Small Business Status

Losing your Small Business Status in Georgia is not the end of your business journey. Many entrepreneurs regain eligibility after correcting their mistakes.

The first step is to identify the cause of the issue. Was your activity prohibited? Did you exceed the 500,000 GEL turnover limit? Or did you fail to report on time? Once you understand what triggered the suspension, you can plan your next move.

1. Re-register under the correct activity code

If you accidentally registered the wrong business category, you can correct it by updating your activity with the Revenue Service Georgia. This often happens when freelancers choose a code that overlaps with regulated professions. Selecting the right code that reflects your services can restore your status.

2. File missed reports

Sometimes, status suspension happens because of simple administrative delays. Filing all outstanding monthly declarations and paying small penalties can reactivate your account. Georgia’s Revenue Service is efficient, and most cases can be resolved within days.

3. Transition to another structure

If your work genuinely falls under a prohibited category, switching structures might be smarter. You can register an LLCor apply for Virtual Zone status if your business is IT-related. This allows you to maintain low taxes while remaining fully compliant.

For example, if you were working as a crypto consultant and lost Small Business Status because your activity was classified as financial consulting, you could restructure your services under a Virtual Zone company. That shift would restore your tax efficiency legally.

4. Request reconsideration

If you believe your status was cancelled in error, you can appeal. File a written request with the Revenue Service Georgia, providing supporting documentation such as contracts, invoices, and translations. If your business clearly fits within the eligible scope, the decision may be reversed.

Correcting mistakes early prevents heavy financial losses. Once the authorities recalculate your income under standard tax rules, reversing it becomes much harder.

Examples of Businesses That Qualify for 1% Small Business Status

To make it clear which activities are allowed, here are examples of eligible business categories. These are activities where entrepreneurs regularly succeed in maintaining 1% Small Business Status.

Freelancers and Digital Professionals

Software developers and IT specialists.
Web designers and app developers.
Graphic designers and animators.
Copywriters, translators, and editors.
Marketing and advertising freelancers.

Creative and Educational Services

Online coaches and course creators.
Photographers, videographers, and content creators.
Language tutors, including those offering English or German lessons online.

Administrative and Support Services

Virtual assistants, project managers, and remote support staff.
HR recruiters or administrative consultants working with international firms.

Other permitted services

Social media managers and influencers who invoice foreign clients directly.
Technical specialists offering IT maintenance or online troubleshooting.

These industries work well within Georgia’s 1% framework because they are service-based, low-risk, and not part of regulated professions.

Industries That Commonly Cause Confusion

Some activities fall into a grey zone and cause confusion among applicants. Here’s how to understand the difference.

Tech Consulting vs. Financial Consulting

If you consult on technology or software use, you’re eligible. If you advise on investments or financial products, you’re not.

Coaching vs. Education

If you offer personal coaching sessions, you’re fine. But if your business requires state-approved accreditation (like a private school), it becomes a regulated educational service.

Translation and Localization

Translators and interpreters are fully eligible under the 1% regime, provided they work independently. Official English to Georgian translation for legal documents, however, requires certification, and certified translators may fall under professional licensing rules. Gegidze helps navigate this distinction.

Crypto Trading vs. Crypto Exchange

Trading crypto as an individual is tax-free and doesn’t affect your status. Running an exchange or custodial wallet for clients, on the other hand, requires VASP registration Georgia and disqualifies you from Small Business Status.

Penalties for Non-Compliance

Failing to follow the rules can lead to penalties that quickly outweigh your tax savings. The Revenue Service Georgiacan retroactively recalculate taxes and apply fines for up to three years.

What happens next

Your total turnover is reclassified under the 20% personal income tax regime.
Late fees and penalties are added to your account.
In some cases, additional charges are applied for underreported income.

Real example

If you made 400,000 GEL as a freelancer and incorrectly included 100,000 GEL from a restricted activity like real estate or crypto exchange services, you would lose your 1% rate. The entire 500,000 GEL might then be taxed at 20%, costing you 100,000 GEL in back taxes and fines.

This is why many entrepreneurs work with tax advisors to ensure every invoice and activity fits within the eligible categories. A short consultation can save you from years of financial loss.

How to Avoid Losing Small Business Status

Prevention is easier than correction. Here are proven ways to stay compliant:

Register with the correct business activity. Always double-check your business code before applying for Small Business Status.
Keep monthly reports clean and consistent. Even if you earn nothing, file a zero-income report to the Revenue Service Georgia.
Maintain separate bank accounts for business and personal use. Mixing finances raises red flags.
Use certified translations. Invoices, contracts, and registration documents must be in Georgian. Gegidze provides official translation English Georgian services accepted by authorities and banks.
Monitor your turnover. Once you approach 500,000 GEL, plan your transition to an LLC or Virtual Zone structure to maintain tax efficiency.
Avoid dual income confusion. Do not mix salaried employment and self-employment under the same name.

Following these steps protects your business and ensures your Georgian setup remains legal and tax-efficient.

When to Transition from Individual Entrepreneur to LLC

Many small businesses eventually outgrow the Individual Entrepreneur model. If you reach your turnover limit or begin hiring staff, switching to an LLC in Georgia might make sense.

An LLC provides:

Limited liability protection.
The ability to hire employees legally.
Access to Virtual Zone or International Company benefits.
Easier scaling for international clients.

For tech, Web3, or IT-related work, applying for Virtual Zone status lets you continue benefiting from 0% corporate income tax on foreign revenue. If your operations expand to multiple employees or include crypto payments, this model becomes ideal.

How Gegidze Helps You Stay Compliant

Navigating Georgia’s tax system is simple with the right support. Gegidze ensures that your registration, reporting, and compliance stay accurate from day one.

Our services include:

Checking your business activity for eligibility under the 1% Small Business regime.
Registering your Individual Entrepreneur with the Revenue Service Georgia.
Managing monthly declarations and turnover tracking.
Providing English to Georgian translation for contracts, licenses, and invoices.
Advising on transitions to LLC, Virtual Zone, or International Company structures.
Helping you apply for Georgian tax residency if you spend more than 183 days in the country.

We also offer consultations for foreigners who want to combine Small Business Status with residency by investment, such as buying apartments in Tbilisi Georgia or apartments in Batumi Georgia.

With proper setup, you can work internationally, pay 1% in taxes, and enjoy full compliance without unnecessary risks.

The Bottom Line

Georgia’s 1% Small Business Status is one of the most efficient tax systems available to freelancers and entrepreneurs. But it only works if you follow the rules. Financial, legal, real estate, gambling, and licensed professional services are all excluded. Violating those restrictions can result in back taxes and lost benefits.

The good news is that staying compliant is easy when you understand the limits. By choosing eligible activities, filing regularly, and getting professional help for translations and accounting, you can keep your status for years.

If your business is growing or you’re unsure whether your activity qualifies, consult before you register. Georgia rewards transparency and consistency, not guesswork.

Protect your 1% tax rate and your Small Business Status in Georgia.

Book a free consultation with Gegidze to review your activity, registration, and compliance. We help entrepreneurs file correctly, translate documents professionally, and stay eligible for Georgia’s most powerful tax advantage.

Frequently asked questions (FAQs)

What is Georgia’s Small Business Status and who qualifies?

Georgia’s Small Business Status allows individuals registered as Individual Entrepreneurs (IE) to pay only 1% tax on turnover up to 500,000 GEL per year. It is ideal for freelancers, consultants, and remote workers who provide services rather than trade in physical goods.

Which activities are prohibited under Georgia’s Small Business Status?

Prohibited activities include banking, finance, legal services, accounting, gambling, iGaming, insurance, real estate brokerage, and professional consulting that requires a license. Businesses involved in crypto exchange or VASP registration Georgia are also excluded.

Can real estate or construction companies use the 1% small business tax in Georgia?

No. Real estate and construction activities do not qualify. Buying, selling, or renting apartments in Tbilisi Georgia, apartments in Batumi Georgia, or land for sale in Georgia for profit is considered a regulated business and not eligible for the small business regime.

What happens if I lose my Small Business Status in Georgia?

If you violate the conditions, the Revenue Service Georgia can revoke your status. Your past income will be reclassified under the 20% income tax regime, and penalties or back taxes may apply. You can reapply after correcting the issue or switch to an LLC with Virtual Zone status.

How can I protect my Small Business Status in Georgia?

Keep your turnover under 500,000 GEL, file monthly reports, and ensure your activity is eligible. Always use certified English to Georgian translations for contracts and invoices, and consult compliance experts like Gegidze to review your registration before submitting to the Revenue Service.