Published by Bookkeeping.ge — Assio Lex and Associates LLC
Updated
The 1% rate is one of Georgia’s advantages for freelancers and small business owners. But registering as a small business is not the same as qualifying for 1% on all of your income.
Before we register a client, we check seven things that can change the answer. The first three are where people get caught most often.
The short answer
Small Business Status can allow an eligible entrepreneur natural person to pay 1% on qualifying Georgian-source business income. Your actual activity, income type and effective status date matter. VAT is a separate test.
Request a free first consultation before you start receiving income.
1. Is your activity allowed under the regime?
Excluded activities include consulting, legal and notarial services, medical services, auditing, architecture and staffing. Licensed or permit-based activities are also restricted, subject to statutory exceptions. The exact activity must be checked against Annex 4 of Government Resolution No. 415.
If prohibited activity leads to revocation, the status can be cancelled from the beginning of that calendar year, and the year’s tax treatment must be reassessed.
What matters is what your business actually does. Changing a contract label does not make an excluded activity eligible. With accounting and legal expertise under one roof, we review your work and your contract together.
2. Is your income really foreign?
Tax residency and the source of your income are separate questions. The general residency test is 183 or more days in any continuous 12-calendar-month period ending in the relevant tax year, with statutory counting rules and exceptions.
Having clients abroad does not automatically make your service income foreign-source. For a Georgian-resident service provider, cross-border services generally produce Georgian-source income, subject to the Tax Code’s exceptions, including the rule for services supplied through a foreign permanent establishment.
Qualifying business income can therefore fall within the 1% regime even when the customer is abroad. We check residency, source and any relevant treaty before reaching a conclusion.
3. When do you start earning?
Under the general rule, Small Business Status takes effect from the date you apply to the tax authority. Income received before the effective date is not automatically covered by 1%.
A specific exception applies when a person with Micro Business Status exceeds the relevant GEL 30,000 threshold or starts using hired labour and applies for Small Business Status within 15 days. The status can then start from the threshold-exceeding date or the date hired labour begins. A late application instead brings status from the application date and can require the earlier part of the year to be taxed under the general rules.
We check your effective date and earlier receipts before filing. Where the general regime applies, taxable business income is assessed under its own rules, including available deductions; it is not automatically 20% of gross receipts.
4. Are you paid as a contractor, employee or licensor?
The 1% regime applies to qualifying business income. It does not apply to salary. Royalties, interest, dividends and rental income also fall outside the small-business special regime and need their own tax analysis.
If the substance of your arrangement is employment, or you are paid for licensing rather than eligible services, holding Small Business Status does not by itself bring that income into the 1% regime.
5. Could your VAT-taxable transactions exceed GEL 100,000?
Small Business Status does not exempt you from VAT. Under the general registration rule, exceeding GEL 100,000 of transactions counted for the VAT threshold during any 12 consecutive calendar months requires an application within two business days. The transaction that takes you over the threshold is included in the VAT obligation.
This is not simply a test of all worldwide receipts. Place-of-supply rules and the transactions included in the threshold need to be checked. Paying for foreign services, such as advertising or software, may also create reverse-charge VAT obligations even without ordinary VAT registration.
We monitor the relevant turnover and review cross-border purchases before they create an unexpected filing obligation.
6. Do you have other income?
Rent, interest, dividends, royalties and gains from selling property, vehicles or shares require separate classification. Depending on the income and circumstances, exemptions, withholding at source, annual returns or transaction-specific filing rules may apply.
There is no universal rule that every such receipt must be declared by 1 April. That annual deadline applies where an annual income tax return is required. Some property-sale gains have a monthly filing deadline, while income already finally taxed at source may be treated differently.
We map each income stream and its filing deadline so that nothing is assumed to be covered by your monthly 1% declaration.
7. Where is your business heading?
- For the general small-business threshold, exceeding GEL 500,000 during a calendar year brings a 3% rate from the beginning of the month in which the threshold is exceeded through the end of that year.
- If the relevant gross income exceeds the applicable threshold in each of two consecutive calendar years, status is revoked from the beginning of the following year.
- A special GEL 700,000 threshold applies to qualifying wine-tourism and agro-tourism operators.
- Hiring staff brings payroll and withholding obligations. The limited exemption for up to GEL 6,000 of total annual salary payments is conditional: individual-entrepreneur registration and Small Business Status must occur in the calendar year of those payments, or the previous year’s gross income must not exceed GEL 50,000. This is not a general tax-free allowance for each employee.
If you are growing, we can compare an individual entrepreneur with an LLC and explain the tax and practical consequences of a transition.
We check all of this for you
Each point depends on your activity, contracts, residence and payment arrangements. A general guide explains the rules; your documents show how they apply to you.
After a free first consultation, we can identify the next checks needed to establish:
- Whether Small Business Status is available for your actual activity.
- Which income can fall within the 1% regime.
- Whether VAT registration or reverse-charge reporting may be relevant.
- Whether an individual entrepreneur or an LLC suits your circumstances.
- What needs to be done before you start receiving income.
We review contracts from both a legal and a tax perspective. Our team can also assist with registration, a compliance calendar, monthly filings, VAT monitoring and payroll in English.
See the current monthly small-business accounting package or explore our monthly accounting service.
Planning to start earning in Georgia?
Before you receive your first payment, let us check whether the 1% regime applies to your activity. Your first consultation is free.
Prepare for a Small Business Status review
Before applying for Small Business Status in Georgia, describe the actual work you will perform and provide a sample client contract or service description. Include where you work, who buys the service, whether employees or subcontractors are involved, expected turnover and any existing VAT registration. A general label such as IT, consulting or e-commerce may cover activities with different tax treatment.
For an existing individual entrepreneur, include the registration date, tax-status certificate, effective date shown in the taxpayer account, previous monthly declarations and records of other income. Separate salary, rental income, asset sales and business turnover so that each is assessed under the correct tax rules.
Our team reviews these details to recommend the right accounting service. Your first consultation about Small Business Status is free. Monthly bookkeeping and tax reporting for an eligible entrepreneur are then agreed separately, using the dedicated individual-entrepreneur service rather than the company-package calculator.
Foreign entrepreneurs: an additional 2026 check
Small Business Status and permission to work are separate questions. The current labour migration framework includes an exception for specified services supplied to a non-resident in connection with its activities outside Georgia. Check the actual client arrangement, especially where you also serve local customers.
That exception does not determine whether the income is Georgian-source. Read the 2026 foreign entrepreneur rules together with the residency and foreign-income guide.
Monthly declarations and construction-service income
A person with Small Business Status normally submits the monthly small-business income tax declaration and pays the tax by the 15th day of the following month. Under the 2026 reporting amendments, failing to submit this monthly declaration is not treated as filing a zero-tax declaration. Keep the required records and submit the appropriate monthly return, including where no tax is payable, rather than assuming that no receipt means no filing obligation.
From 1 February 2025, specified residential and non-residential building construction, civil engineering and specialised construction-service income is excluded from the small-business special regime where the customer is an enterprise, organisation or entrepreneur natural person. This is an income exclusion tied to the service classification and customer; it should not be confused with a blanket ban on every construction-related activity.