Georgia Small Business Status: 1% Turnover Tax Explained

The Georgian government introduced Small Business Status (SBS) to simplify taxation for individual entrepreneurs. The regime allows eligible sole traders to pay a flat 1% tax on turnover instead of the standard 20% personal income tax on net profit, provided they register as an individual entrepreneur and then apply for the status with the Revenue Service of Georgia. This guide covers the country of Georgia (capital: Tbilisi), not the US state. For freelancers, shop owners, and service providers, the 1% regime offers a predictable cost structure and one of the lowest effective tax rates available anywhere. Understanding the eligibility criteria and compliance rules is essential before you register, because the exclusion list is longer than most summaries admit.

Who Qualifies for Small Business Status in Georgia?

Small Business Status is available only to natural persons registered as Individual Entrepreneurs (IE). Companies cannot obtain it. The Revenue Service of Georgia grants the status on application, and the core condition is a turnover ceiling: your gross annual revenue should not exceed GEL 500,000 per calendar year. Exceeding the ceiling once does not end the regime — the portion above GEL 500,000 is simply taxed at 3% instead of 1% (the mechanics are explained below). The status is only revoked if you exceed the ceiling in two consecutive calendar years, or if you commit three cash-register violations within one year.

The nature of your activity matters just as much as the turnover figure. Government Decree No. 415, published on matsne.gov.ge (the Legislative Herald of Georgia), lists the activities that are barred from Small Business Status. The list includes:

• Consulting and advisory services of any kind
• Medical, architectural, legal, notary, and audit activities
• Currency exchange and other foreign-currency operations
• Gambling and games of chance
• Staffing services and the provision of personnel
• Production of excise goods (alcohol, tobacco, fuel, and similar)
• Any activity that requires a state licence or permit
• Since February 2025: construction services (activity codes 41.2, 42, and 43) supplied to Georgian companies or individual entrepreneurs — this income is taxed at 20% instead

The consulting exclusion catches many people by surprise. A developer who writes code qualifies; the same person selling "IT consulting" may not. How your activity is classified against Decree No. 415 decides your eligibility, so review the wording of your service contracts before you apply. Retail traders, craftsmen, drivers, developers, designers, translators, and most other service providers who sell a concrete deliverable rather than advice generally remain eligible.

What about companies? An LLC cannot hold Small Business Status. Georgian LLCs are taxed under the Estonian model instead: 15% corporate income tax that is only due when profit is distributed, not while it is retained and reinvested. Depending on the business, an LLC may also qualify for separate regimes such as Virtual Zone status or International Company Status. Our Georgia tax guide compares all of these options side by side.

One more distinction worth knowing: Georgia also offers Micro Business status, a separate regime with a 0% rate for individuals whose annual turnover stays below GEL 30,000 and who employ no staff. If you are testing a side project below that level, Micro Business status may be the better fit than SBS. A special higher SBS ceiling of GEL 700,000 applies to agritourism activities.

How the 1% Turnover Tax Works in Practice

The mechanics of the tax are deliberately simple, but they require precise habits. Unlike the standard income tax, which is levied on net profit after deducting expenses, the SBS tax is calculated on gross revenue. You pay 1% on every lari that enters your business, regardless of whether you made a profit. If you invoice GEL 100, your tax liability is GEL 1. If your costs for delivering that work were GEL 95, you still pay GEL 1 — and nothing is deductible.

Two worked examples show what this means in real numbers:

• Freelancer with GEL 120,000 turnover. Under SBS, the annual tax bill is GEL 1,200. Under the standard regime, the same person with, say, GEL 20,000 of deductible expenses would pay 20% on GEL 100,000 of net profit — GEL 20,000. The SBS saving in this scenario is GEL 18,800 per year.
• Business with GEL 550,000 turnover. The first GEL 500,000 is taxed at 1% (GEL 5,000) and the GEL 50,000 excess at 3% (GEL 1,500), for a total of GEL 6,500. The status itself survives — it is only revoked if the ceiling is exceeded again in the following calendar year.

This structure favours businesses with high margins and low overheads. For businesses with thin margins, the standard regime can actually be cheaper, because expenses are deductible there. If your costs approach your revenue, 1% of turnover can consume your entire profit. Model both scenarios before registering.

Declarations are monthly. You must submit your turnover declaration and pay the tax through the rs.ge portal by the 15th of the following month — January sales, for example, must be declared and paid by February 15. Late filings incur penalties that quickly erode the simplicity benefit of the regime. The system is integrated with Georgian banks, so card and transfer income is often already visible to the Revenue Service of Georgia. That transparency lowers audit risk but raises the bar for accuracy: underreporting is easy to detect.

A frequent misunderstanding concerns VAT. Small Business Status does not exempt you from value-added tax. VAT registration becomes mandatory once your taxable turnover exceeds GEL 100,000 in any continuous 12-month period — a threshold far below the GEL 500,000 SBS ceiling. Once registered, you charge 18% VAT on taxable supplies and file separate VAT returns alongside your 1% turnover declarations. There is an important nuance for exporters of services: services supplied to clients outside Georgia often fall outside the scope of Georgian VAT under the place-of-supply rules, which is why many remote freelancers with foreign clients never hit the registration trigger. Whether your specific services are in scope is a question worth confirming with an adviser before your turnover approaches GEL 100,000.

How to Register for Small Business Status on rs.ge

Registration is a two-stage process, and only the second stage happens on rs.ge.

Step 1: Register as an Individual Entrepreneur

Individual entrepreneurs are registered by the National Agency of Public Registry (napr.gov.ge), with applications filed in person at any Public Service Hall (House of Justice) branch. You will need your passport or Georgian ID and a registered address in Georgia. A state fee applies; standard and expedited processing are available, and registration is typically completed within one business day for the expedited option. Verify the current fee amounts and processing times on the spot or on the NAPR website, as they are adjusted periodically. Foreign citizens can register as IEs without holding Georgian residency. If you would rather not handle the paperwork yourself, our individual entrepreneur registration service covers both stages.

Step 2: Apply for Small Business Status

Once your IE registration exists, you apply for Small Business Status with the Revenue Service of Georgia — either through your taxpayer account on the rs.ge portal or at a Revenue Service office. The application asks for your economic activity codes, and eligibility is assessed against the Decree No. 415 exclusion list, so choose your activity classification carefully. As a rule, the status takes effect from the first day of the month following your application; confirm the exact effective date in your rs.ge account before you rely on the 1% rate for invoicing, because income earned before the status is active falls under the standard 20% regime. The SBS application itself is free of charge. Keep the confirmation from your taxpayer account — banks sometimes ask for proof of tax status when you open a business account.

Common Pitfalls and Compliance Requirements

The most persistent myth about the GEL 500,000 ceiling is that crossing it triggers an immediate loss of status. It does not. In the year you exceed the ceiling, the excess above GEL 500,000 is taxed at 3% and your status continues. Revocation only follows if your turnover exceeds GEL 500,000 in two consecutive calendar years — in that case the Revenue Service of Georgia cancels the status from 1 January of the following year, and you move to the standard regime. Separately, the status can be revoked if you are fined three times within a calendar year for cash-register violations. Artificially splitting one business into several IEs to stay under the ceiling is a known scheme, and the tax authority checks related-party structures for exactly that pattern.

Cash handling is the second compliance front. If you accept cash payments — in a shop, a workshop, or a taxi — you must operate a fiscal cash register that transmits data electronically to the Revenue Service of Georgia. Missing or non-compliant registers draw fines, and as noted above, three such fines in a year cost you the status itself. The requirement does not bite if you only accept card payments or bank transfers, since those flows are tracked through the banking system, but many small businesses in Georgia still deal in cash daily.

Bookkeeping does not disappear under SBS either. You need accurate income records to monitor two thresholds at once: the GEL 500,000 SBS ceiling and the GEL 100,000 VAT registration trigger. Retain invoices and contracts for your expenses even though they are not deductible — if you later switch to the standard regime, those records determine your net profit for the transition period, and disorganized files are a common source of disputes during audits.

Watch the exclusion list over time as well. The February 2025 change that removed construction services to Georgian businesses from the regime shows that the list is not static. An activity that qualified when you registered can be excluded later, and income from a newly excluded activity is taxed at the standard rate, not at 1%.

Frequently Asked Questions

Can a foreign citizen register for Small Business Status in Georgia?

Yes. Foreign citizens can register as individual entrepreneurs at any Public Service Hall and then apply for Small Business Status, provided their activity is not on the Decree No. 415 exclusion list. A valid passport and a Georgian address are required; Georgian residency is not. This makes the regime accessible to relocated freelancers and remote workers, though tax residency in your home country may still affect where you owe tax overall.

What happens if I exceed the GEL 500,000 turnover limit?

In the first year, nothing dramatic: the portion of turnover above GEL 500,000 is taxed at 3% instead of 1%, and you keep the status. If you exceed the ceiling again in the following calendar year, the Revenue Service of Georgia revokes the status from 1 January of the next year, and you move to the standard 20% income tax on net profit. Note that VAT registration is a separate question — it becomes mandatory at GEL 100,000 of taxable turnover in any 12-month period, regardless of your SBS position.

Do I need to hire an accountant for SBS?

It is not legally required, but it is a sensible investment for most. The monthly declaration itself is simple, yet you are tracking a turnover ceiling, a VAT trigger, cash-register duties, and a filing deadline on the 15th of every month. Professional help costs far less than the penalties for late or incorrect declarations, especially if you have several income streams or foreign clients.

Is Small Business Status available for all types of businesses?

No. Consulting of any kind, medical, architectural, legal, notary, and audit services, currency operations, gambling, staffing services, production of excise goods, and licensed activities are all excluded under Decree No. 415, as are construction services to Georgian businesses since February 2025. Companies such as LLCs cannot hold the status at all — it is reserved for individual entrepreneurs. Most product-based and hands-on service businesses remain eligible, but verify your specific activity code before applying.

Conclusion

Small Business Status is a simple, low-compliance tax regime for eligible individual entrepreneurs in Georgia. A flat 1% on turnover, a 3% rate on any excess above GEL 500,000, and a monthly declaration by the 15th — that is the whole system, as long as your activity stays off the exclusion list and you keep an eye on the GEL 100,000 VAT threshold. Compare the regime against the standard 20% rate for your actual margin structure, verify your activity code against Decree No. 415, and confirm the effective date of your status on rs.ge before invoicing at 1%. If you want the registration handled end to end, our IE registration service and the Georgia tax guide are the places to start.

Last updated: July 2026. This article is general information, not tax or legal advice. Georgian tax rules, fees, and thresholds change; verify current figures with the Revenue Service of Georgia or a qualified Georgian tax adviser before acting.

Author: GeorgiaRegister editorial team.