Georgia's small business status (მცირე ბიზნესი) is the reason so many freelancers, consultants and small trading firms relocate their tax residency here. Instead of the standard 20% personal income tax, a qualifying individual entrepreneur pays 1% of gross turnover — with no deduction of expenses, and no separate profit calculation.

This guide explains what the status actually is, who can hold it, what it costs you in obligations, and the traps that catch people in their first year.

What the status changes

Small business status is not a company type. It is a tax regime granted by the Georgia Revenue Service to a person who is already registered as an Individual Entrepreneur (IE). Registering the IE and obtaining the status are two separate steps, and doing only the first leaves you on the standard 20% regime.

Once granted, the arithmetic becomes trivial:

  • Gross receipts for the month, converted to GEL → multiply by 1%.
  • No expense deductions. No depreciation. No profit-and-loss statement.
  • Turnover means money received, not invoiced.

A month with ₾8,400 of receipts produces ₾84 of tax. You can check any month against the calculator, which converts foreign-currency receipts at the correct daily rate before applying the 1%.

Who qualifies

Three conditions have to hold at the same time:

  1. You are registered as an Individual Entrepreneur in Georgia. See how to register an IE.
  2. Annual turnover stays at or below ₾500,000. Crossing that line has consequences covered in the ₾500,000 limit.
  3. Your activity is not on the excluded list. This is the condition people misjudge most often — several common professional services are barred outright. See excluded activities.

Tax residency is a separate question from the status. You can hold small business status as a foreign national, and many people do; whether your home country also taxes the same income depends on its own rules and any double taxation treaty in force.

When the status starts

The status is not retroactive. It takes effect from the beginning of the month following your application, which means income received before that date is taxed under the standard regime. If you register an IE on the 20th of a month and apply for the status the same day, that month's receipts are still on the old regime.

The practical consequence: apply for the status before you invoice your first client, not after the money lands.

What the status does not exempt you from

This is where the 1% headline misleads people. Small business status covers turnover tax only. It leaves several obligations fully intact:

  • VAT. If turnover passes ₾100,000 over any rolling 12 months, you must register for VAT at 18% in addition to the 1%. Details in the VAT threshold guide.
  • Monthly declarations. A return is due every month, including months with zero income. See how to file on rs.ge.
  • Payroll taxes. If you hire employees, you withhold income tax and pension contributions on their salaries at the normal rates.
  • Record keeping. You must be able to substantiate declared turnover. Bank statements are the usual evidence.

Losing the status

The status can be withdrawn, and the two common causes are both avoidable:

  • Exceeding ₾500,000 in turnover for two consecutive calendar years.
  • Starting an excluded activity. Adding a barred service line to an otherwise fine business can cost you the status for the whole business.

Withdrawal moves you to the standard regime — 20% on taxable income — from the point the Revenue Service determines. That is a twenty-fold change in rate, so it is worth checking the excluded list before taking on unusual work.

Is it worth it?

For a service business with low costs — software development, design, writing, most remote consulting that is not classified as advisory — the 1% regime is close to unbeatable. Expenses are irrelevant to the calculation, so a business with 90% margins pays the same rate as one with 10% margins.

For a business with thin margins and high turnover — trading, resale, anything where cost of goods is most of the revenue — 1% of turnover can exceed 20% of profit. A reseller with a 4% net margin pays an effective 25% of profit under the 1% regime. Run both numbers before choosing.

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