Individual Entrepreneur in Georgia
If you search for “Individual Entrepreneur in Georgia” in a search engine, you will come across a huge number of articles that tell almost the same story. Our task now is to create a unique and informative text and include everything that is needed.
Let’s start with theory – “Individual Entrepreneur in Georgia”
In recent years, Georgia has become one of the most attractive places to register as an individual entrepreneur. This is due to a number of advantages that the state provides to its entrepreneurs. In this article, we will look at five main reasons why it is worth registering as an individual entrepreneur in Georgia.
- Simple and fast registration procedure. Registering as an individual entrepreneur in Georgia takes only a few days and does not require a large number of documents.
- Low taxes. Georgia has one of the lowest tax rates in the world – only 1% on gross income.
- No restrictions on currency operations. Entrepreneurs can freely carry out currency operations without any limitations.
- Convenient geographical location. Georgia is located at the intersection of important transportation routes, which facilitates the export and import of goods.
- Favorable business climate. Georgia ranks high in Doing Business and Economic Freedom ratings, indicating a favourable business climate in the country.
- The ability to work from anywhere in the world. You can have an individual entrepreneur in Georgia, receive payment for services rendered, and be located on another continent, working under Balinese palms or in the Swiss mountains.
Let’s delve deeper into what an individual entrepreneur is and how the different regimes differ from each other.
Firstly, there is a “standard individual entrepreneur,” “individual entrepreneur at 20%,” and “individual entrepreneur without small business status.” These are all about the standard tax regime at 20%, where no additional applications need to be submitted.
Secondly, there is “individual entrepreneur at 1%,” “small status individual entrepreneur”, and “individual entrepreneur with a small business status”. These are about the preferential regime at 1% for many types of activities, which implies a separate submission for its receipt.
Now let’s move on and talk about taxes, payment schedules, and income limits.
As we mentioned earlier, taxation in Georgia for an individual entrepreneur is divided into two rates: 20% and 1%.
Businesses with an individual entrepreneur under 20% submit declarations once a year, by March 31st. That is, incomes starting from April 1, 2022, will be submitted by March 31, 2023.
Businesses with an individual entrepreneur under 1% submit declarations once a month, from the 1st to the 15th of the month. For example, for January, the declaration is submitted from February 1st to February 15th.
If the annual income of an individual entrepreneur with small business status exceeds 500,000 lari (up to 1 million lari), then the tax on the excess will be 3%. Thus, an individual entrepreneur can exceed the income limit for two executive years. If the excess takes place again in the third year, the individual entrepreneur must switch to the standard tax regime at 20% on their own, without waiting for the limit of 500,000 lari to be exceeded, to avoid penalties from the tax authorities.
Important note: if you plan to work under the 1% regime and intend to exceed the income limit, it is better to calculate the risks in advance.
Let’s talk about VAT separately.
However, if an individual entrepreneur (regardless of the percentage) provides services in Georgia and exceeds the limit of an annual turnover of 100,000 lari, then they must also pay 18% VAT on the amount above the 100,000 mark. The VAT declaration is submitted monthly, regardless of the individual entrepreneur’s tax regime.
Individual entrepreneurs also have an obligation to submit monthly declarations on their employees, if any, and pay 20% personal income tax on their salaries. Of course, here we should not forget about the pension tax, which is also submitted once a month, separately.
Next, let’s figure out which tax regime is suitable for whom.
The 20% regime is suitable for all entrepreneurs and has no income limit. You can conduct any business permitted by Georgian legislation, paying 20% of your income annually.
To have the 1% regime, on the other hand, you need to correspond to the designated list of activities but don’t worry, it’s not as difficult as it seems.
“Small business” is a tax regime that can be applied to certain categories of entrepreneurs who are registered as taxpayers in Georgia and have obtained “small business” status from the Tax Portal Office.
Let’s focus on the types of activities.
The list of activities for individual entrepreneurs is wide enough to find one that suits your specific business. Of course, there are also activities outside the list that are commonly used, such as consulting, real estate, law, or recruiting. But, be sure, if you, for example, are engaged in design, IT, selling goods online, education in the field of culture or sports, logistics in Georgia or advertising, then you definitely fall under 1%.
What we forgot to mention, but is also worth mentioning: accounts and banks.
Registering as an Individual Entrepreneur not only means going to the Justice House, but also opening a bank account where you will receive all your income. However, there is also a simplified scenario: you can use an electronic wallet (PayPal, Payoneer, Wise, Paysera etc.) to receive your income. Of course, you will have to open a Georgian account because taxes in Georgia are only paid from a Georgian account.
If you want to use an electronic wallet, you just need to declare it to the tax authorities, as this is an obligation of the taxpayer when using third-party sources to receive income.
However, few choose this scenario because the Georgian banking system is very welcoming to foreign deposits, and it is not necessary to use external resources for this.
Conclusion
Overall, registering as an individual entrepreneur in Georgia is a popular solution for many entrepreneurs. This is due not only to the fast and simple registration procedure, but also to low taxes, no restrictions on currency operations, convenient geographical location, and a favorable business climate in the country.
Moreover, understanding taxes, payment schedules, and other nuances is very easy. All these advantages make Georgia an attractive place for business and investment, contributing to the development of the country’s economy and the creation of new jobs.
If you have any questions on the topic, we will be happy to provide you with qualified assistance.
FAQ's About Individual Entrepreneur in Georgia
If you have registered as an Individual Entrepreneur (IE) and acquired Small Business Status (SBS), you can only work based on service agreement provisions. In the service agreement with your client, offered services should be clearly defined and identical to the code of activity that was granted to you as an IE with a SBS. To avoid inspection and further investigation from the Revenue Service Inspectors, so they do not consider that you are employed in this company, it is advised to have several customers and different sources of income. But this does not exclude the possibility of being employed as an individual and taxing your income at 20% withholding Tax.
You have an opportunity to choose up to 2 forms of activity ( preferably related). It also has a special line for the third code of activity. For instance, if you are engaged in industries like science, art, or writing.
If you provide services while being in Georgia, you have an obligation to register for VAT from the moment you exceed the gross turnover threshold of 100 000 Georgian Lari. If you provide services electronically to non-resident legal entities, you are exempt from VAT. Additionally, services provided outside Georgian jurisdiction are also exempt from VAT charge. For more details read article on VAT Regulations in Georgia.
Individual Entrepreneur (IE) with Small Business Status (SBS) do not have to pay a withholding tax of 20%, but since you have a preferential tax regime, you are required to pay 1% of your total gross turnover.
Tax Residency and Taxpayer status are two separate notions and obtained with completely different procedures. While registering any form of enterprise in Georgia you may only obtain a taxpayer’s special number, however, to become a Tax Residence you have to either stay in Georgia for more than 183 days during a calendar year, or through High Net Worth Individual(HNWI) program, when the value of your confirmer property is more than 3 000 000 Georgian lari ( ≈ 1 100 000 euros), and/or when your annual income for each of the last three years is more than 200,000 Georgian lari ( ≈ 60,000 euros) plus annual income from sources in Georgia is at least 25,000 Georgian lari (≈ 8,000 euros), for more details read article about Tax Residency In Georgia.
The advantages of registering as an Individual Entrepreneur (IE), especially if you have submitted to the preferential taxation regime of a Small Business Status (SBS), gives you freedom of movement within the countries and get paid for provided services In Georgia. But, nevertheless, it is advisable to have some connection with Georgia, namely crossing the border and entering Georgian Jurisdiction at least two times per year.
Closing an Individual Entrepreneur is quite a straightforward and easy process and can be completed within 10 working days from the day of submission. What is more, the procedures of Individual Entrepreneur closure can be processed both with your personal presence and remotely by proxy.
An Individual Entrepreneur with small business status has a turnover threshold of 500 000 Georgian lari per calendar year. You have the possibility to exceed this amount for two years up to 1 000 000 Georgian lari. In this case, you will pay 3% of the exceeded amount. However, when the total income from economic activities exceeds 500,000 Georgian lari for more than two executive years during each calendar year, the status of a small business will be revoked. The good news is that the Standard Individual Entrepreneur does not have such a limitation.
If you have the status of a IE Small Business, the filing of tax returns is conducted on the portal of the Internal Revenue Service (IRS) from the 1st to the 15th of every month. Although, there is an absence of transactions, a zero declaration should be submitted. As for the standard form of the individual entrepreneur, the amount is declared once a year. Our experts will be happy to offer you accounting training or accounting support to facilitate this task. The good news is that the Standard Individual Entrepreneur does not have such a limitation.