Tax Rates
| Income for the calendar year | What happens |
|---|---|
| Up to 500,000 GEL | 1% tax |
| Above 500,000 GEL | 3% tax from the month in which income passed the limit until the end of the year |
| Above 500,000 GEL in each of two calendar years | status revoked from the start of the following year |
A standard IE (without Small Business Status) has no upper turnover limit.
Permitted Activities
Up to two main activity codes can be selected (preferably related), plus a separate code for activities in science, art, or literary work.
Tax Filing
Returns are filed monthly — between the 1st and 15th of each month through the Revenue Service portal (rs.ge). A nil return must be filed even when there are no transactions. A standard IE (without the status) files annually.
Employment and Service Agreements
An IE with Small Business Status may only receive income under service agreements. The services in the agreement must match the IE's registered activity code. It is advisable to have multiple clients and varied income sources to avoid the revenue authority reclassifying the arrangement as an employment relationship.
In addition to IE activity, working as an employee under a separate employment contract is permitted — in that case, salary income is subject to 20% withholding tax.
VAT
VAT registration is mandatory once turnover exceeds 100,000 GEL over 12 months — if services are provided within Georgia. Electronic services to non-resident legal entities and services outside Georgian jurisdiction are VAT-exempt.
Physical Presence in Georgia
Small Business Status permits working from any country. It is advisable to cross the Georgian border at least twice a year to maintain a connection with the jurisdiction.
Who can get the status and how it is granted
Small Business Status is granted only to an individual entrepreneur (Article 88 of the Tax Code). An LLC or another legal entity cannot obtain it. If you do not have an IE yet, start with individual entrepreneur registration in Georgia.
The status is granted on an application to the tax authority, which issues a small business certificate (Article 89). The Government of Georgia sets the activities for which the status is not granted, so the activity code is worth checking before you apply.
Record keeping the status requires
Reporting under Small Business Status is simple, but not zero:
- The IE keeps a special record book of income and expenses (Article 91).
- Source documents issued and received by the IE are retained.
- A loss incurred during the year is not carried forward to the next year.
- The return is filed and the tax paid by the 15th of the month following the reporting month (Article 93).
Filing late triggers a fine, and unpaid tax accrues penalty interest of 0.05% per day. The amounts are covered in our article on late filing tax penalties in Georgia.
Micro business: an alternative for small incomes
The Tax Code provides one more regime for natural persons, Micro Business Status (Articles 84–87):
| Condition | Micro business |
|---|---|
| Who can get it | a natural person working independently, without hired employees |
| Income limit | up to GEL 30,000 per calendar year |
| Income tax | not paid |
| Return | one, by 1 April of the following year |
Micro Business Status is revoked if you apply for its revocation or for Small Business Status, if an inventory shows stock above GEL 45,000, or if you register as a VAT payer. If income exceeds GEL 30,000, you must apply for Small Business Status within 15 days, otherwise the micro business status is revoked.
What cash register breaches can cost
If an IE is fined at least three times within a calendar year for breaching cash register rules, Small Business Status is revoked from the start of that year (Article 89). An additional fine of GEL 500 applies (Article 288). The same fine applies when the status is revoked for an activity for which it is not granted.
How to fill in the monthly return is covered in our guide to the tax declaration for an individual entrepreneur, and the wider tax picture is in our guide to taxes in Georgia.
Voluntary Cancellation
Since April 2023 (amendment to Article 89 of the Tax Code), an IE may apply to the tax authority to cancel Small Business Status before the end of the year — the status ceases to apply from the first day of the following month. Previously, cancellation was only effective from the beginning of the next calendar year.
Mandatory Cancellation
Small Business Status must be cancelled in the following cases:
- Income exceeded 500,000 GEL in each of two calendar years. The status is revoked from the start of the following year.
- The IE carries out an activity for which Small Business Status is not granted. The status is revoked from the start of the calendar year.
- The IE was fined at least three times within a calendar year for breaching cash register rules. The status is revoked from the start of the calendar year.
If projected revenue exceeds the stated thresholds, registering as a standard IE or LLC from the outset is advisable.
Closing an IE
Cancellation of Small Business Status and closure of the IE are two separate procedures. Both can be done remotely:
- Status cancellation: electronic application.
- IE closure: by power of attorney; takes 1 business day after submitting the application.
Before closure, a tax audit is recommended — to confirm that all prior returns were filed correctly, all taxes were paid, and there are no outstanding fines.
Frequently asked questions
Can an LLC get Small Business Status?
No. Under Article 88 of the Tax Code, Small Business Status is granted only to an individual entrepreneur. Companies have other regimes, such as the Estonian model of profit tax or special statuses for IT and export businesses.
How does micro business differ from small business?
Micro business fully exempts you from income tax, but only with income up to GEL 30,000 a year and no hired employees. One return is filed, by 1 April of the following year. Small business allows income up to GEL 500,000 taxed at 1%, with a monthly return.
Do I need to keep records with Small Business Status?
Yes. The IE keeps a special record book of income and expenses and retains source documents. A loss for the year is not carried forward to the next year. The return is filed and the tax paid by the 15th of the month following the reporting month.
What happens if I file the return late?
The fine is 5% of the tax under the return for each month of delay, if the delay is two months or less, and 10% after that. If the tax under the return is zero, there is no late filing fine. Unpaid tax separately accrues penalty interest of 0.05% per day.