The 1% rate is not unconditional. It applies while annual turnover stays within ₾500,000. Above that line the rate changes, and if the overrun repeats, the status itself is withdrawn.
What counts toward the limit
Turnover means gross receipts from business activity in a calendar year — money actually received, converted to GEL at the NBG rate on each receipt date. Not invoiced amounts, not profit, not net of expenses.
Two clarifications that trip people up:
- The window is the calendar year, January to December. It resets on 1 January. This is different from the VAT threshold, which uses a rolling 12-month window — see VAT registration.
- Refunds and chargebacks reduce turnover; bank fees deducted from an incoming payment do not — the gross amount before fees is what counts.
What happens above ₾500,000
Crossing the threshold does not void the regime immediately. The rate rises to 3% on the portion of income above ₾500,000. The first ₾500,000 stays at 1%.
| Annual turnover | Tax |
|---|---|
| ₾400,000 | ₾4,000 (all at 1%) |
| ₾500,000 | ₾5,000 (all at 1%) |
| ₾600,000 | ₾5,000 + ₾3,000 = ₾8,000 |
| ₾800,000 | ₾5,000 + ₾9,000 = ₾14,000 |
The calculator flags the threshold as your year-to-date total approaches it, so the overrun is visible before it happens rather than in January.
Losing the status
The serious consequence is not the 3%. It is that exceeding ₾500,000 in two consecutive calendar years causes small business status to be withdrawn. You then move to the standard regime at 20% on taxable income.
A single year over the line is survivable. Two in a row is a twenty-fold rate change, and it is the scenario worth planning around well before it arrives.
Planning around the threshold
If you can see the year ending above ₾500,000, there are a few legitimate levers. All of them are worth discussing with a Georgian accountant before acting, because the boundary between planning and avoidance is not always where it looks.
- Timing of receipts. Turnover is recognised when money arrives. Work delivered in December and paid in January falls into the following year. This is normal commercial practice, not a scheme — but backdating or holding invoices purely to shift the year is not.
- Restructuring. Above roughly this scale, a Georgian LLC under a different regime may be more efficient than an IE. Georgia's distributed-profit corporate model taxes profit when it is distributed, not when it is earned, which suits a business reinvesting heavily.
- Splitting genuinely separate businesses. If you truly run two unrelated operations, they may sit in separate entities. Artificially fragmenting one business across several IEs to stay under the threshold is a recognised avoidance pattern and is treated as such.
The interaction you cannot forget
Anyone approaching ₾500,000 crossed the ₾100,000 VAT threshold long ago. VAT registration at 18% is mandatory, separate from the turnover tax, and carries its own monthly return. If you are near the small business ceiling and not VAT-registered, that is a more urgent problem than the 3% — see the VAT guide.
Next steps
- The ₾100,000 VAT threshold — the one that arrives first.
- Small business vs micro business vs the general regime.
- Track your year-to-date turnover in the calculator.