Georgia's 1% Small Business Status in 2026: The Complete Guide

Short answer: Small Business Status lets an Individual Entrepreneur (IE) registered in Georgia pay 1% tax on gross turnover instead of 20% income tax on profit, as long as annual turnover stays within 500,000 GEL and the activity is not on the government's excluded list. Foreigners can use it without being Georgian tax residents. Since March 2026 the status starts on the day you apply, and you must file a declaration every month, even when you earned nothing.

This guide reflects the Tax Code of Georgia and Government Decree No. 415 as they stand in October 2026. It is general information, not tax or legal advice. Rules change, so check your own case before you rely on it.

What Small Business Status Is

Small Business Status (SBS) is a special tax regime in the Tax Code of Georgia. The Revenue Service grants it to an Individual Entrepreneur on application. Once granted, your business income is no longer taxed under the general rule of 20% on net profit. Instead, you pay a flat 1% on your gross turnover, meaning the money you receive from your qualifying activity, without subtracting any costs.

Two things make it attractive. The rate is among the lowest anywhere for active income, and the administration is light: you do not need to prove business expenses for income tax, and the monthly return is short. The trade-off is that the regime is narrow. It applies only to individuals registered as IEs, only to certain activities, and only up to a turnover limit.

The status is not a company and not a residence permit. It does not make you a Georgian tax resident, it does not give you the right to work in Georgia, and it does not replace VAT rules. Each of those is covered below.

Who Can Get It

You can apply if all of the following are true:

• You are registered as an Individual Entrepreneur with the National Agency of Public Registry. Registration usually takes two to three business days, and we handle it from €350 (see IE registration).
• Your activity is not on the excluded list in Government Decree No. 415 (next section).
• Your turnover fits the limit: up to 500,000 GEL per calendar year. A higher 700,000 GEL limit applies to certain agritourism activities.

Nationality does not matter. A foreigner can register an IE and receive the status without a residence permit and without being a Georgian tax resident. You also do not need to be in Georgia to apply: we can file for you under a Power of Attorney that you sign at a notary in your country, have apostilled and send to us in the original.

Only individuals qualify. A Limited Liability Company (LLC) cannot hold Small Business Status, whatever its size. If you work with partners or want to separate your personal assets from the business, compare the options in the table below.

Activities That Cannot Use the 1% Rate

Government Decree No. 415 of 29 December 2010 (Annex 4) lists the activities that cannot be carried out under Small Business Status. If your activity falls into one of these groups, the income from it is taxed under the general rules, at 20% on profit.

Activities that typically qualify include software development and IT services, web and graphic design, digital marketing, content creation, copywriting and translation, photography and video production, online trading of goods, e-commerce, tutoring that needs no license, and many trades and crafts. When in doubt, ask before you register: our Small Business Status service starts with a check of your activity.

Which Income the 1% Covers, and Which It Does Not

The 1% applies to turnover from your entrepreneurial activity. Several kinds of income stay outside the regime even when you hold the status. They are taxed under their own rules and do not count toward the 500,000 GEL limit:

• rent from property you lease out;
• interest, dividends and royalties;
• income from lending money;
• gifts, inheritance and gambling winnings;
• debts written off in your favor;
• proceeds from selling real estate, vehicles, securities or a share in a company;
• salary from an employer. You can be an employee and hold Small Business Status at the same time, but your salary is taxed separately through payroll.

Income received in a foreign currency is counted in Georgian lari at the official National Bank of Georgia exchange rate on the day you receive it. Turnover is counted when the money arrives, so plan large invoices around the calendar year if you are close to the limit.

Rates, the 500,000 GEL Limit and the 3% Rule

The limit works per calendar year, from 1 January to 31 December, and resets every January.

• Up to 500,000 GEL: 1% of turnover.
• Above 500,000 GEL in the same year: the excess is taxed at 3%. You keep the status until the end of the year.
• Above 500,000 GEL two years in a row: the status is cancelled from 1 January of the third year, and your income is then taxed under the general rules (20% on profit), unless you restructure.

Because the tax is on turnover, expenses do not reduce it. If your business has high costs, such as reselling goods with thin margins, 1% of turnover can be more expensive than 20% of a small profit. Run the numbers for your case.

VAT: the 100,000 GEL Threshold and Foreign Clients

VAT is a separate tax from the 1% income tax, and Small Business Status does not exempt you from it. The standard rate is 18%. You must register as a VAT payer within two working days once your VAT-taxable turnover exceeds 100,000 GEL in any continuous 12-month period. The threshold is a rolling period, not a calendar year.

The word that matters is "taxable". Only supplies that are subject to Georgian VAT count toward the threshold. For services, Georgian VAT follows the place of supply rules, and the result for most freelancers with foreign clients is good news.

In practice, a developer or designer who works only for foreign companies can earn well above 100,000 GEL a year without a VAT obligation, while paying 1% income tax on all of it. Keep the contracts, invoices showing the client's foreign address and the bank records of payments from abroad: they are your evidence if the Revenue Service asks. If you also sell to Georgian clients, track that part separately, because it counts toward the threshold.

How to Get the Status: Step by Step

We handle steps 1 to 4 for €150 on top of IE registration from €350, and bank accounts from €300. The IE + 1% Tax package starts at €500.

Monthly Obligations and Record-Keeping

• File a declaration every month on the Revenue Service portal by the 15th of the following month, showing the turnover you received.
• Pay the 1% by the same date. January's tax is due by 15 February.
• File zero declarations in months without income. Since March 2026 a missing return is a fined offense, not an automatic zero.
• Keep your documents: contracts, invoices, bank statements and proof of where your clients are established. You do not need to prove expenses for the 1% income tax, but you must be able to show your turnover and, for VAT, where your services were supplied.
• Use your IE bank account for business payments. Mixing personal and business money makes your turnover harder to prove.
• Watch two numbers: the 500,000 GEL calendar-year limit for the 1% rate, and the 100,000 GEL rolling 12-month threshold for VAT on Georgian-taxable supplies.

You can hire employees while holding the status. Salaries are taxed under the normal payroll rules, so you withhold income tax for your staff and report it separately.

If you stop working, either keep filing zero declarations or ask the Revenue Service to cancel the status. Remember that after a cancellation you can apply again only from the next tax year.

Micro Business, Small Business, General Regime or LLC?

Many clients start with an IE and Small Business Status, then add an LLC once turnover approaches the limit or partners join. Our tax optimization guide compares the structures in more depth.

Tax Residency, Work Permits and Your Home Country

• Tax residency is separate. Registering an IE and getting Small Business Status does not make you a Georgian tax resident. Residency generally depends on spending more than 183 days in Georgia within any 12-month period, or on the high-net-worth individual route.
• Your home country may still tax you. Countries that tax their residents on worldwide income can tax your IE income too, with or without a credit for the Georgian 1%. Check the rules of the country where you are tax resident and any double tax treaty with Georgia.
• The right to work is separate. Since 1 March 2026 a foreigner running an IE in Georgia needs the right to engage in labor activity. Read our work permit guide or see our labor permit service.
• Residence permits can build on it. A work residence permit can be based on your IE, and the IT residence permit is designed for self-employed IT professionals with Small Business Status.

Common Mistakes That Cost the 1% Rate

• Calling advisory work something else. If the substance is consulting, the label on the invoice will not save the status.
• Registering a licensed activity. If your work needs a license or permit, it is excluded, however small the business.
• Skipping zero declarations. Since March 2026 a missing return is fined.
• Ignoring the second year over 500,000 GEL. Two consecutive years above the limit cancel the status. Plan an LLC before it happens.
• Treating 1% as a VAT exemption. Sales to Georgian clients count toward the 100,000 GEL VAT threshold.
• Not keeping proof of foreign clients. Without contracts and invoices showing where your client is established, you cannot show that a service was supplied outside Georgia.
• Forgetting the right to work. The tax status does not let a foreigner work in Georgia on its own.
• Cancelling and re-applying in the same year. Since 2026 you must wait until the next tax year.