Georgia Small Business Status: 1% Tax for Individual Entrepreneurs

Quick facts

What Small Business Status is and what 1% actually means

The 1% is a tax on gross turnover, not on profit. This is the distinction that gets confused most often: the tax applies to all revenue received, with no deduction for expenses.

The standard Georgia IE regime is personal income tax at 20% on net income (revenue minus deductible expenses). When profit margins are thin the two regimes are not far apart. When margins are high, Small Business Status delivers substantial savings.

Illustrative calculation

This is an illustrative example. Actual margins and deductible expenses depend on the specific business.

When turnover exceeds 500,000 GEL, the amount above that threshold is taxed at 3%, up to 1,000,000 GEL. Above 1,000,000 GEL the status is revoked, and the IE returns to the standard regime from the next tax year.

Who qualifies for Small Business Status

Any individual registered in Georgia as an IE can apply. Citizenship is irrelevant. Foreign nationals qualify on the same terms as Georgian citizens, provided they have a registered IE.

Activities excluded from Small Business Status (main categories):

• Licensed activities: banking, insurance, medical (including pharmacy), notarial, architectural services
• Legal services and legal consulting
• Accounting services and audit
• Currency exchange and FOREX operations
• Employment and staffing agencies
• Gambling operations
• Leasing
• Residential real estate brokerage
• Construction services provided to Georgian companies and IEs (excluded from February 2025)

A note on legal services: Legalese, as a law firm, operates outside the Small Business Status regime: professional legal services are excluded. This is worth knowing when evaluating sources: a legal services provider claiming to operate on 1% is a red flag.

The full and authoritative list of exclusions is in Article 88 of the Tax Code of Georgia. Read it directly before selecting a tax regime.

How to register

Registration requires two steps.

1. Register as an IE at the House of Justice (or via the napr.gov.ge online portal). A tax identification number is assigned automatically at this stage.
2. Apply for Small Business Status through the taxpayer portal at rs.ge, or in person at a Revenue Service territorial office.

The status takes effect from the first day of the month following the month of application. If you apply on 20 July, the regime applies from 1 August.

Both steps combined take one to two business days and can be completed remotely through a representative holding a notarised power of attorney.

Documents and timeline

To register an IE:

• Valid passport (for non-residents: a notarised copy with a Georgian translation; apostille required for most countries)
• Power of attorney (if registering through a representative)

To apply for Small Business Status: no separate documents are required. The application is submitted electronically through the personal account on rs.ge.

Timeline: IE registration takes one business day. Status takes effect from the start of the following month.

VAT when clients are abroad

If your clients are non-residents and the services are performed outside Georgia, the place of supply rules under Articles 162 and 162¹ of the Tax Code place those transactions outside the scope of Georgian VAT.

This is not an "exemption": it means the transaction has no Georgian VAT object at all. The practical result: that revenue does not count toward the 100,000 GEL mandatory VAT registration threshold.

VAT registration becomes mandatory when turnover from transactions subject to Georgian VAT exceeds 100,000 GEL over any 12 consecutive months. The rate is 18%.

For IEs whose clients are exclusively abroad, the VAT threshold is generally not reached. If you also have Georgian clients, their revenue is summed separately when checking the threshold.

Filing obligations

Monthly declaration is filed from the 1st to the 15th of each month for the prior month, through rs.ge. Filing is mandatory even when the month's turnover is zero. The 1% tax payment is due at the same time.

Annual income declaration (Form N3) is due by 1 April of the following year.

Tracking revenue in detail is necessary for accurate monthly declarations. Income is recognised when received, meaning when money arrives in your Wise, Payoneer, or bank account, not when you invoice. There is no mandatory format for turnover records, but all receipts must be reflected in the monthly declaration.

IEs on Small Business Status are exempt from full IFRS financial reporting.

Pension contributions. For Georgian citizens and permanent residents: mandatory at 2% from the individual + 2% from the employer where employees are engaged. Foreign nationals without permanent residence status are exempt from mandatory pension contributions and may participate voluntarily.

Risks and edge cases

Is working for one client disguised employment?

Georgia's Revenue Service can reclassify an IE arrangement as an employment relationship if the substance is employment. Key indicators: sole client over an extended period, fixed working hours, client control over work process, integration into the client's internal structure.

Multiple clients, a free work schedule, and absence of direct process control significantly reduce this risk. Working predominantly for one large client is not prohibited, but it will require explanation if examined. Having a written services contract clearly specifying the independent contractor relationship helps.

Receiving payment via Wise or Payoneer

Income is recognised when it arrives in your possession, meaning in your Wise or Payoneer account, not when you transfer it to a Georgian bank. If a client pays your Wise account in January and you withdraw to Georgia in February, the income is declared in the January monthly filing.

The monthly declaration form has a line for such receipts (income from other sources). Whether a registered cash device is required depends on the activity. For most remote service work to foreign clients, it is not.

Construction services to Georgian companies

Since February 2025, providing construction services to Georgian legal entities and IEs is excluded from Small Business Status. This was a targeted measure against the practice of reclassifying construction workers as IEs to reduce tax and avoid labour law obligations.

Changes from 1 March 2026

This section reflects information as of July 2026. The rules are in active application with transitional periods. Certain interpretations are still being formed. Verify with a Legalese specialist immediately before publishing, as regulatory guidance continues to evolve.

From 1 March 2026, foreign nationals conducting economic activity "connected to Georgia" are required to hold a work permit. The requirement covers both employees of foreign companies working in Georgia and self-employed individuals, including IEs.

What counts as "connected to Georgia": having Georgian clients, a registered IE or LLC in Georgia, or receiving income from Georgian sources. The exact scope for specific situations is still being clarified.

Key exception (status as of May 2026: "proposed / being clarified"): foreign nationals working entirely remotely for foreign clients where the activity has no connection to Georgia are reportedly outside the work permit requirement. This is critical for the main Legalese client profile (expat freelancers with exclusively foreign clients), but the exact formulation is not yet finalised. Treat this as a working interpretation, not a confirmed exemption.

Transitional periods:

• For self-employed individuals and IEs already operating in Georgia before March 2026: until 1 May 2026.
• For employees of companies registered before 1 March 2026: until 1 January 2027.

Applications are filed through the Ministry of Labour system. Review takes up to 30 days (expedited procedure: up to 10 working days).

If you are uncertain whether your specific situation requires a work permit, this is the right time to get a professional assessment before the transitional deadline passes.

When 1% is not the best option

Choosing the right regime is a once-and-done decision that affects your tax exposure for years. If your situation involves several income sources, potential salary income, or rapid turnover growth, a single consultation before registering saves considerably more than it costs.

What counts as "turnover" for the 1% calculation?

Turnover means all revenue received by the IE (every inflow) without deducting any expenses. If you receive 100,000 GEL and spent 70,000, the 1% tax applies to 100,000 GEL. This is the fundamental difference from the standard 20% PIT, where tax is assessed on net income after expenses.

Can I receive payments via Wise or Payoneer?

Yes. Revenue is recognised in the month it arrives in your Wise or Payoneer account, not when you withdraw to a Georgian bank. That income is reported in the monthly declaration filed by the 15th of the following month.

Does a Georgian IE serving only foreign clients need to register for VAT?

If all clients are non-residents and the services are outside Georgia, that revenue falls outside the scope of Georgian VAT under the place of supply rules. It does not count toward the 100,000 GEL registration threshold. VAT registration is only triggered by Georgian-source taxable turnover.

Do foreign IEs need a work permit from 2026?

From 1 March 2026, foreign IEs conducting activity connected to Georgia need a work permit. If you work exclusively for foreign clients remotely, whether the requirement applies to your specific situation is not yet definitively settled as of this article. A specialist consultation is the practical next step.

What happens if turnover exceeds 500,000 GEL?

Turnover from 500,000 to 1,000,000 GEL is taxed at 3%. Above 1,000,000 GEL, Small Business Status is cancelled and the IE switches to the standard 20% PIT regime from the next tax year.

Can I be employed and have an IE with Small Business Status at the same time?

Yes. Combining IE status with employment under a separate labour contract is permitted. Salary is taxed separately at 20% (withheld at source by the employer). IE turnover is taxed at 1%.

Can I register an IE and get Small Business Status remotely?

Yes. Both the IE registration at the House of Justice and the status application through rs.ge can be completed through a representative with a notarised power of attorney. Most countries require an apostille on the POA. For some CIS countries, notarisation alone is sufficient.

When does the VAT registration obligation arise?

The obligation arises when Georgian-source taxable turnover exceeds 100,000 GEL in any consecutive 12-month period, not at the beginning of a calendar year. You must apply for registration within 2 business days of crossing the threshold.

Do IEs pay pension contributions?

Foreign nationals without Georgian permanent residence are exempt from mandatory pension contributions. Georgian citizens and permanent residents must contribute 2% of income. Where the IE employs staff, additional employer-side contributions apply.