Understanding Georgian Source Income How IEs Working for Foreign Clients Qualify for 1% Tax
- Tinatin Tolordava
- Nov 3
- 3 min read
Updated: 4 days ago
Table of contents
What “Georgian Source Income” Really Means
When you register as an Individual Entrepreneur (IE) in Georgia, the main reason is clear, the 1% Small Business Status. It’s simple, legal, and incredibly efficient. You report your turnover, pay 1%, and move on with your business.
But one key condition decides whether you actually qualify for that 1% rate: your income must be Georgian-sourced.
This is where many freelancers, consultants, and remote professionals get confused. What exactly counts as “Georgian source income”? And if your clients are abroad, do you still qualify for Georgia’s small business tax regime?
According to the Tax Code of Georgia, Georgian-sourced income is income earned from economic activity conducted in Georgia.
In simpler terms:
You perform the work or provide the service while physically in Georgia.
The income is linked to your activity inside the country, not where your client is located.
So if you’re a web developer, designer, or consultant living and working from Georgia, your income counts as Georgian-sourced, even if your client is in London, Berlin, or New York.
It’s not about where your client is. It’s about where you are when you earn the money.
Why This Matters for the 1% Small Business Tax
The 1% Small Business Status applies only to income that’s both Georgian-sourced and generated through permitted activities.
If you’re physically working from Georgia, even with international clients, your revenue is considered local income. That’s why thousands of foreigners register here as IEs and legally pay only 1% turnover tax on their global service income.
However, if you move abroad and start delivering work from another country, that income may lose its Georgian source status and foreign tax authorities might claim it as taxable income in their jurisdiction.
That’s why maintaining Georgian residency and substance (like a local address, bank account, and tax filings) is key to keeping your IE benefits.
Examples of Georgian-Source Income
Here are common cases where income qualifies for Georgia’s 1% tax regime:
Freelancers and remote workers in Georgia
A UX designer living in Tbilisi who works for clients in Germany. She performs the work from Georgia, Georgian-source.
IT consultants, developers, and marketers
A software engineer building products for U.S. startups while living in Batumi. The activity happens in Georgia, Georgian-source.
Online teachers, translators, and content creators
A translator offering English to Georgian or Georgian to English services from a home office in Kutaisi. The service is performed locally, Georgian-source.
Agencies with foreign clients
A small digital agency registered in Georgia managing social media for European brands. As long as the operations are managed from Georgia, it’s still Georgian-source income.
What Doesn’t Count as Georgian-Source Income
Work physically performed outside Georgia
If you travel abroad for months and work from another country, that income may become foreign-sourced.
Income from passive investments abroad
Dividends or capital gains from non-Georgian assets are not considered “Georgian source.” They may be exempt in Georgia but don’t fall under the 1% regime.
Activities restricted by law
Financial consulting, gambling, and real estate brokerage are prohibited under Small Business Status, even if performed locally.
How to Prove Georgian Source
The Revenue Service Georgia may ask for proof of where your income was generated.
The simplest way to demonstrate this is through:
Georgian residency or entry stamps.
Georgian bank statements showing client payments.
Contracts listing your Georgian business address.
Monthly tax filings submitted from your Georgian Revenue Service e-cabinet.
Together, these confirm that your work happens in Georgia, not abroad.
Why Gegidze Helps You Stay Eligible
At Gegidze, we help entrepreneurs structure their business correctly from day one.
We ensure your:
IE registration includes a compliant Georgian business address.
Contracts and invoices align with Georgian-source rules.
Monthly filings are handled properly with the Revenue Service Georgia.
Residency, translation (English to Georgian), and banking documents meet local requirements.
This way, you can keep your 1% tax rate legally and confidently, no surprises, no grey areas.
The Bottom Line
If you live and work from Georgia, your income is almost always Georgian-sourced, even if your clients are abroad.
As long as your business activity takes place within the country and your IE remains active and compliant, you fully qualify for Georgia’s 1% turnover tax.
The trick is to keep your structure clean: stay resident, keep your address valid, and file on time.
Book a free consultation with Gegidze to review your IE setup, confirm your Georgian-source eligibility, and protect your 1% Small Business Status with full confidence.
