Georgia small business status: the 1% rate and its limits

Georgia small business status: who can get it

The Tax Code says the status "may be granted to an entrepreneur natural person" (Art. 88(1)). In plain terms: you first register as an individual entrepreneur, which makes you a business in your own name. Then you apply separately to the Revenue Service, the Georgian tax authority, which issues a certificate if it agrees (Art. 89(1)).

Two applications, not one. The registration is quick and near-automatic. The status is granted, and it is the one that carries the 1%.

It is not a residence permit, and since March 2026 it is not a right to work either

Registering a business in Georgia does not give you the right to live here. A residence permit is a separate application to the Public Service Development Agency, the state office that decides immigration cases. See Georgia residence permit for the permit types.

Something changed in 2026 that older guides miss. Government Resolution No. 70 brought in a rule on granting the right to work to labour immigrants and self-employed foreigners, in force from 1 March 2026. Registering as an individual entrepreneur is no longer enough on its own: a self-employed foreigner needs the right to work as a separate permission, applied for through the electronic labour migration portal. Processing runs about 30 calendar days, with a faster track for a higher fee, and working without it carries a fine reported at GEL 2,000 per violation (Andersen in Georgia, legal.ge).

People already self-employed on 1 March had until 1 May 2026 to apply without penalty. That window has closed. If you have been trading as an IE since before the spring and never applied, you are outside the transition. See Georgia work permit.

The rates, and the line at GEL 500,000

The rate is 1% of taxable income from the activity (Art. 90(1)). Once gross income from that activity passes GEL 500,000 in a calendar year, the rate becomes 3%. The higher rate applies from the start of the month in which you crossed the line, and runs to the end of that year (Art. 90(2)).

Operators in wine tourism and agro-tourism have a higher ceiling of GEL 700,000.

Crossing the limit does not take the status away. It changes the rate for the rest of that year.

The 1% is on turnover, not on profit

There is no deduction for costs in this regime. That is the trade: a very low rate on a gross base. For a consultant or developer with few expenses, 1% of everything is excellent. For a business that buys and resells goods on a thin margin, 1% of turnover can cost more than the ordinary rate on profit. Work out which one you are before you register.

What counts as Georgian income, and the trap in it

The 1% applies to Georgian-source income only, and excludes salary income and income types the Government has excluded (Art. 90(3)).

This is where people get it wrong. Georgia does not tax a resident's foreign-source income (Art. 82(1)(u)), so many assume that invoicing clients abroad puts that money outside the Georgian tax base entirely. It does not. Under Art. 104(1)(c.g), when a service provider and a service recipient are in different states and the provider is a Georgian resident, the service counts as delivered in Georgia. The fee is therefore Georgian-source income.

So a Georgian-resident freelancer billing a client in Berlin is earning Georgian-source income. That is not bad news here: it is precisely why the individual entrepreneur route exists. Those fees fall inside the 1% base rather than being taxed at the ordinary 20% personal rate.

The exception is a service delivered through your own permanent establishment abroad. More on how the exemption works on Georgia foreign income tax.

The VAT threshold sits underneath the 1% limit

VAT registration becomes compulsory within two business days of your VAT-taxable supplies passing GEL 100,000 in any twelve consecutive calendar months (Art. 165(1)). The rate is 18% (Art. 166).

That threshold is a fifth of the small business ceiling. A growing business therefore meets VAT long before it meets the 1% limit, which surprises people who were only watching the GEL 500,000 figure.

Two things soften it. First, for a business-to-business service the place of supply is where the recipient is established (Art. 162¹(3)(a)), and for a listed set of services to non-business customers abroad it is the customer's location (Art. 162¹(14)). When the place of supply is outside Georgia, the service is not supplied in Georgia, so no Georgian VAT applies. Many people invoicing only foreign clients never reach the threshold on VAT-taxable supplies at all.

Second, VAT registration does not take your small business status away. That is a common claim online and it is wrong: VAT registration revokes micro business status (Art. 85(2)(c)), a different regime. A small business that must register for VAT simply registers under Art. 165 and records its inventory (Art. 92).

Figures still repeated online that are out of date

You will still find "GEL 100,000 at 5%" quoted as the small business regime. That was the position before 2018. The 2018 text set the status at gross income not exceeding GEL 100,000 with a 5% rate, and 3% where documented costs reached 60% of gross income.

The current text has a GEL 500,000 limit and a 1% rate, with 3% on the excess. The change came with Law No 3591 of 30 May 2018, amended again by Law No 3922 of 13 December 2023. If a page quotes 5%, it has not been updated in seven years, and you should treat the rest of it with the same caution.

Three 2026 changes that older guides miss

Besides the right to work, three practical rules changed this year. Each is reported by Georgian advisers rather than taken from the Tax Code, so treat them as a reason to check rs.ge rather than as settled law.

• The status starts when the request arrives. Since spring 2026 small business status is reported to apply from the date your request reaches the Revenue Service, not from the start of your trading. Registering late therefore costs you the months before it (IBCCS).
• Monthly filings even in empty months. A change reported from March 2026 requires a return every month whether or not you invoiced anything. Missing them is the usual way people lose the status (Gegidze).
• Closing it is a separate act. The 1% status does not end when you stop trading. You file to close it in your rs.ge cabinet, otherwise the filing duty continues (GeoExperts).

The bank is the step nobody controls

Registering an IE does not mean a Georgian bank will open an account for you. Banks assess nationality, residence, the activity itself, source of funds, contracts and expected flows, and a refusal can come without a reason being given. Holding a residence permit or a rental contract is reported to improve the odds, and trying another branch or another bank sometimes works where the first did not (Sakhva). Any agency that promises you an account is promising something it does not decide.

What small business status does not do

• It does not make you a Georgian tax resident. That is a separate test, usually 183 days in any twelve-month period. See the 183-day rule.
• It does not give you a right to stay in Georgia, or a right to work here.
• It does not settle your position with your home country, which decides on its own rules whether it still treats you as resident.
• It does not cover salary income, or activities the Government has excluded from the regime.

For how the registration itself works, step by step, see individual entrepreneur Georgia.