Why Georgia’s 1% Tax Rate is a Game-Changer for Freelancers and Digital Nomads
- Tinatin Tolordava
- Apr 30
- 13 min read
Table of contents
Introduction: The Allure of Georgia for Modern Professionals
If you asked 100 digital nomads where they plan to spend the following year, chances are a growing number would say one word: Georgia.
No, not the U.S. state, the small country tucked between Europe and Asia that's quickly becoming a haven for freelancers, entrepreneurs, and location-independent workers. And it’s not hard to see why.
Georgia offers a unique combination few countries can match: a laid-back lifestyle, fast internet, visa-free stays for most nationalities, and a government-backed 1 percent tax system that allows eligible small business owners to keep nearly all their income.
In a world where freelancers in Germany might surrender 40% of their earnings to taxes and entrepreneurs in the UK face hefty corporate fees, Georgia stands out. Here, if you qualify as an Individual Entrepreneur under the Small Business Status program, you legally pay just 1% of your turnover in tax, up to 500,000 GEL (~ $180,000) annually.
This isn’t a loophole or a workaround. It’s an official part of Georgia’s strategy to attract talented, mobile professionals who contribute to its growing economy.
For anyone tired of heavy tax burdens and complicated legal frameworks, Georgia offers a refreshing and profitable alternative.
Understanding Georgia’s Tax Landscape
Georgia’s tax system is often described as one of the most business-friendly frameworks in Europe, and for good reason.
Unlike many Western countries that apply worldwide taxation, Georgia operates under a territorial tax system. This means only income generated within Georgia is taxable. If you’re earning from clients abroad, Georgia largely leaves you and your earnings, alone.
Let’s break down the basics:
Personal Income Tax: Flat 20%
Corporate Income Tax: 15% (on distributed profits only)
Dividend Tax: 5%
VAT (Value-Added Tax): 18% (applies mainly to goods and some services)
For regular employees and companies, the tax rates are already relatively low by global standards. But for freelancers, solopreneurs, and digital nomads who register correctly, Georgia opens an even bigger door: Small Business Status (SBS).
With SBS, the traditional Georgia income tax of 20% doesn’t apply. Instead, you qualify to pay a turnover tax of just 1% - a groundbreaking option that can massively boost profitability for small service businesses.
Example Comparison: Suppose you earn $100,000 in revenue a year as a freelance developer.
Location | Effective Tax Rate | Taxes Owed |
Germany (freelance) | 35–40% | ~$35,000–40,000 |
UK (self-employed) | 30–40% | ~$30,000–40,000 |
Georgia (IE + SBS) | 1% turnover | $1,000 |
As you can see, the difference is dramatic. In Georgia, you keep roughly $99,000 out of your $100,000. That’s not just tax efficiency. That’s an entirely different way of running your life and business.
Beyond personal income, the corporate tax in Georgia also works differently. Unlike countries that tax corporate income at every step, Georgia’s 15% corporate tax applies only when profits are distributed. If your Georgian LLC reinvests its earnings rather than paying out dividends, no immediate corporate tax is due. This structure encourages business growth and entrepreneurship rather than penalizing it.
Key Insight for Entrepreneurs:
If your business is a solo operation or digital service-based company, operating as an Individual Entrepreneur with SBS is likely the most innovative and most efficient model.
If you plan to scale later (hire employees, open offices, attract investment), transitioning into an LLC (Limited Liability Company) still keeps you within one of the lowest tax systems in Europe.
Deep Dive: The 1 Percent Tax Georgia Offers
Georgia’s 1 percent tax regime is not just a marketing slogan. It is a real, government-supported system that helps freelancers, digital nomads, and entrepreneurs grow their businesses without being strangled by high tax rates.
Before diving deeper, it is essential to understand who qualifies and how the system works in real life.
What Does It Mean to Be a Digital Nomad or Freelancer in Georgia?
A digital nomad is someone who earns a living remotely, often by providing digital services like web development, consulting, graphic design, coaching, or marketing. A freelancer works independently, usually under contract with multiple clients. In Georgia, both groups fit perfectly into the Individual Entrepreneur (IE) framework.
This is crucial. Georgia does not require you to create a large company or employ full-time staff to benefit from the 1 percent tax in the Georgia system. You can register as an Individual Entrepreneur, apply for Small Business Status, and start operating legally almost immediately.
In practice, this flexibility is why thousands of people have chosen Georgia as their new business base.
Eligibility for Small Business Status (SBS)
Not every profession qualifies for the 1 percent tax rate. To be eligible, you must:
Register as an Individual Entrepreneur (IE)
Operate in an approved industry, mainly services like IT, consulting, education, creative arts, and marketing
Maintain an annual turnover of less than 500,000 GEL (around $180,000)
Restricted professions include financial services, legal representation, gambling, and accounting. It is critical to classify your business properly when applying.
Once your Small Business Status is approved, you are taxed at 1 percent of your gross turnover, not on your net profit. That means you pay only based on the revenue you generate, regardless of expenses.
For many digital nomads and freelancers, this approach is far simpler than managing complicated accounting systems required in places like Germany, Canada, or Australia.
Application Process and Necessary Documentation
Registering for the 1 percent tax in the Georgia system is straightforward.
First, you must register as an Individual Entrepreneur. To do this, you visit the Public Service Hall or work with a legal representative who specializes in starting a business in Georgia. You need your passport and a Georgian address. You can often receive your registration on the same day.
Second, you apply for Small Business Status with the Georgia Revenue Service. You must describe your business activity accurately and estimate your annual income. If you are offering services to international clients, that fits perfectly within the allowed categories.
Once approved, your Small Business Status becomes effective starting from the first day of the following month. Timing matters. If you invoice or receive payments before SBS takes effect, those earnings could be taxed at the standard Georgia income tax rate of 20 percent instead of 1 percent.
Pro Tip: Always wait for official approval before invoicing your clients.
Benefits of the 1 Percent Tax Regime
The benefits of the 1 percent tax regime are enormous, especially compared to traditional tax systems elsewhere.
First, the simplicity. Instead of tracking endless deductible expenses or struggling with quarterly tax filings, you simply report your gross revenue each month and pay 1 percent.
Second, the savings. Paying only 1 percent tax on your income means that you keep more of what you earn. Freelancers and entrepreneurs who move to Georgia often double or triple their net savings without increasing their workload.
Third, the flexibility. Georgia does not require you to stay permanently. You can register your business, maintain your filings, and even spend part of the year traveling elsewhere under the right conditions. Understanding the tax residency rules is important here, which we will explore later.
Statistically, Georgia’s system is among the most favorable in Europe. According to the World Bank Doing Business Report, Georgia ranks 7th worldwide for ease of doing business, ahead of countries like the United Kingdom, Norway, and Sweden.
Potential Pitfalls and How to Avoid Them
Despite its advantages, there are risks if you do not manage your business correctly.
The biggest mistake newcomers make is misunderstanding the revenue cap. If you exceed 500,000 GEL in revenue during a calendar year, the excess is taxed at 3 percent, and if you exceed the cap two years in a row, you lose your Small Business Status altogether.
Another risk is misclassifying your business activity. If you claim to offer educational consulting but end up operating financial advisory services, you could lose your 1 percent tax rate and face penalties.
Late filings are another common pitfall. Even though Georgia’s tax system is digital and relatively simple, you must still submit monthly declarations and pay your tax on time; missing deadlines results in fines.
Finally, misunderstanding residency rules can create issues. If you spend more than 183 days in Georgia and do not correctly establish tax residency, you may have conflicting obligations in your home country.
The 1 percent tax Georgia offers is arguably the best legal tax option available for freelancers, digital nomads, and service entrepreneurs today. With the proper planning, careful registration, and consistent compliance, you can run a business simply and profitably, freeing you from the complexity and high cost that dominates so much of the traditional Georgia tax landscape.
Setting Up Shop: Starting a Business in Georgia Country
Starting a business in Georgia is one of the fastest and most affordable processes in the world. Whether you are a digital nomad, freelancer, or entrepreneur, the steps are straightforward, inexpensive, and can often be completed within a few days.
Georgia has intentionally positioned itself as a startup and freelancer-friendly economy. According to the World Bank, it consistently ranks in the top 10 globally for ease of doing business, and one major reason is how easy it is to register your company.
Step-by-Step Guide to Registering
1. Choose Your Business Structure
For most freelancers and digital nomads, registering as an Individual Entrepreneur (IE) is the smartest move. It is simple, inexpensive, and designed specifically for service providers who work independently.
You do not need to set up a complex company structure unless you are planning to hire staff or scale heavily.
2. Visit the Public Service Hall
You can either visit a Public Service Hall in Tbilisi, Batumi, or any other city, or appoint a legal representative if you are not physically present in Georgia.
To open a company in Georgia as an IE, you only need:
A valid passport
A Georgian address (this can be your residence or a legal address service)
A description of your business activity
The registration fee is approximately 20 to 60 GEL, which is around $7 to $20. The registration is often completed on the same day.
3. Apply for a Tax ID and Small Business Status
Immediately after registering, you must apply for a Georgian Tax Identification Number (TIN). Then, you apply for Small Business Status (SBS) to qualify for the 1 percent tax Georgia provides.
The Georgia Revenue Service handles these applications.Approval for SBS typically takes between 2 and 5 working days, after which you can legally invoice clients and pay only 1 percent tax on your turnover.
Resources for Company Formation in Georgia
If you prefer a smoother process, several professional agencies specialize in company formation services. Agencies like Gegidze can help you:
Secure a legal Georgian address
Handle your paperwork
Manage translations if necessary
Guide you through applying for Small Business Status and the Georgia tax system
This is especially helpful for those who want to avoid misunderstandings or errors during the early stages of setting up.
Legal Considerations During Georgia Business Formation
While setting up an Individual Entrepreneur business is straightforward, there are a few legal nuances you must respect:
Your registered address must remain valid for the duration of your business operations
You must submit monthly tax declarations, even if you earn zero income in a given month
If your business grows beyond the 500,000 GEL turnover limit, you will need to either adjust your tax status or register a different business entity, such as a Limited Liability Company (LLC)
The government expects accuracy and compliance, but the Georgia tax system is not overly bureaucratic. As long as you fulfill your basic obligations, you will find that Georgia offers much less red tape than almost any Western country.
Georgia’s approach to small businesses is refreshingly modern. Whether you want to start fresh or relocate an existing remote operation, the ability to open a company in Georgia quickly and start benefiting from the 1 percent tax system can be a significant turning point for your financial independence.
Residency and Visas: Navigating the Bureaucracy
One of Georgia’s biggest attractions for digital nomads, freelancers, and entrepreneurs is how simple it is to stay legally in the country. Unlike many European destinations that require complex visa applications or sponsorships, Georgia welcomes remote workers with open arms.
For citizens of over 95 countries, including the United States, Canada, most of Europe, Australia, and many parts of Asia, no visa is required for stays of up to 365 days. You simply arrive, show your passport, and you are free to stay, work remotely, and explore.
If you are wondering, do I need a visa for Georgia? The answer for most people is no.
Georgia offers one of the most liberal entry policies worldwide. You can even extend your stay by leaving the country for a short period and re-entering, effectively resetting the 365-day clock.
However, if you prefer a more formal solution, there are options such as the Georgia digital nomad visa, known as the Remotely from Georgia program. This initiative was launched to help remote workers live legally in Georgia during the COVID-19 pandemic and has remained a flexible option.
The Georgia digital nomad visa requires proof of remote employment or business ownership, a monthly income of at least $2,000, and health insurance coverage.
If you need a faster visa solution, applying online for a Georgia e visa is also possible. This short-term visa allows for business and travel purposes, ideal for freelancers planning shorter research trips before committing to a complete relocation.
Understanding the tax residency rules is also critical if you plan to stay long term.
If you spend more than 183 days in Georgia within 12 months, you are automatically considered a tax resident. As a tax resident, your worldwide income could be subject to Georgia income tax, but if you operate under Small Business Status, you continue paying only the 1 percent tax rate on your Georgian-registered revenue.
This flexibility makes Georgia very attractive for entrepreneurs who want both physical presence and tax clarity without complicated paperwork or unpredictable immigration rules.
Key Tip:
If you plan to spend the whole year in Georgia, it is wise to apply for a Tax Residency Certificate. This document proves your residency status and can help avoid taxation obligations in your home country under double taxation treaties.
The Georgia visa and Georgia travel visa systems are designed for easy navigation, making the country one of the simplest relocation choices for modern professionals.
Compared to most European nations, where visa applications can take months and cost thousands in legal fees, Georgia offers a smoother, faster path for setting up life and business legally.
Living in Georgia: Beyond the Business
Moving your business to Georgia is just the beginning. For digital nomads, freelancers, and entrepreneurs, Georgia offers more than low taxes and easy company formation. It offers a lifestyle many only dream about.
Georgia travel is rich, accessible, and affordable. You can explore ancient towns like Mtskheta, hike the breathtaking Caucasus Mountains, or relax on the Black Sea beaches. Domestic flights are cheap, intercity travel is easy, and public transportation within cities is reliable and inexpensive.
The cost of travel is another major advantage. A meal in a local restaurant costs between $5 and $10. A metro ticket in Tbilisi costs less than $0.50. You can live comfortably with a budget that would barely cover rent alone in Western Europe.
Culturally, Georgia is welcoming, safe, and deeply proud of its traditions. The country’s unique language and alphabet might seem intimidating at first, but English is increasingly common, especially in Tbilisi, Batumi, and among the younger population.
For digital nomads, understanding basic legal aspects of life in Georgia is crucial. When renting apartments, many landlords accept cash, but securing a written rental agreement is smart for proof of address, which you might need for business or visa purposes.
Georgia is also extremely safe. The Global Peace Index consistently ranks it among the safest countries in Europe. Street crime is rare, and violent crime even rarer.
Why Legal Awareness Matters:
While Georgia welcomes foreigners, laws around registration, tax reporting, and visa status must be respected. Missing a tax filing deadline, overstaying visa-free periods without proper residency, or ignoring Georgia tax residency rules can cause problems.
Staying informed ensures your experience remains positive.
Georgia Business and Residential Law
Understanding how business and residential law work in Georgia is essential to maintain your freedom and benefits.
First, the Georgia business formation laws are straightforward. Suppose you register as an Individual Entrepreneur or open a company in Georgia through an LLC structure. In that case, you must fulfill basic obligations like maintaining a registered address, submitting monthly revenue declarations, and paying your minimum taxes on time.
Freelancers under the Small Business Status must report turnover monthly, even if they had no income during the month. Missing deadlines results in late fees, which can accumulate quickly if ignored.
If your business scales beyond the Small Business Status turnover limit, transitioning to a Limited Liability Company (LLC) structure becomes necessary. The corporate tax in Georgia for LLCs is 15 percent on distributed profits, but profits that are reinvested stay untaxed until distributed. This gives ambitious entrepreneurs room to grow without immediate heavy taxation.
On the residential side, Georgia offers more simplicity. Foreigners can legally rent or buy property without restrictions. Owning property does not grant Georgia citizenship automatically, but it can strengthen your visa and residency options if you decide to stay long term.
If you stay more than 183 days in 12 months, you become a Georgian tax resident automatically. Applying for a Tax Residency Certificate is smart if you want official recognition of your tax status. It can help you prove to your home country that you are not liable for taxes there, especially if double taxation treaties exist between Georgia and your origin country.
Unlike complicated European systems, Georgia does not burden residents with excessive local regulations. Still, having proper contracts, clear tax filings, and legal assistance when needed ensures you protect your residency rights and tax benefits.
Conclusion: Is Georgia the Right Move for You?
Let’s be honest. If you are a freelancer, consultant, remote founder, or solo entrepreneur earning internationally, staying in a high-tax, high-cost country no longer makes much sense.
Georgia offers a clean, legal, and simple alternative.
You can live comfortably, pay the 1 percent tax Georgia provides under the Small Business Status, open a company in Georgia within days, and enjoy a rich, dynamic lifestyle without bureaucratic obstacles.
You do not need to ask "Do I need a visa for Georgia?" unless you plan to stay beyond the visa-free year. You do not need to fight complicated tax structures. You can simply focus on growing your income, keeping your profits, and living better.
And the best part? Setting it all up is easier than you think, especially with expert help.
Need Help Setting Up Your Business in Georgia?
At Gegidze, we specialize in helping digital nomads, freelancers, and entrepreneurs:
Register as Individual Entrepreneurs
Apply for Small Business Status
File monthly tax declarations
Navigate Georgia travel and business law
Obtain Tax Residency Certificates
Scale businesses legally and sustainably
We make starting a business in Georgia fast, smooth, and stress-free.
Book your free consultation today. Your new life of freedom, low taxes, and better living is waiting.
Frequently asked questions (FAQ)
What is the 1 percent tax system in Georgia?
It’s a government-backed program where registered Individual Entrepreneurs with Small Business Status pay only 1% tax on their gross turnover, up to 500,000 GEL annually.
