Small Business Status in Georgia: 1% Tax and the 3% Switch

What small business status is in Georgia

Small business status is a special tax regime for individual entrepreneurs. Only an individual entrepreneur can hold it, under Article 88(1) of the Tax Code, so a limited liability company cannot. A holder’s taxable income is taxed at 1% under Article 90(1), rising to 3% under Article 90(2) only after gross income passes GEL 500,000 in the calendar year.

The status is not automatic. An individual entrepreneur applies to the Georgian Revenue Service, which grants a small business certificate under Article 89(1).

Who cannot use small business status

Four groups cannot use or keep the status:

• Companies. An LLC or any other company cannot hold it (Article 88(1)).
• Anyone in a barred activity. Seven activities rule it out, listed below.
• Holders who outgrow it. Gross income above GEL 500,000 in each of 2 calendar years ends the status (Article 89(2)(a)).
• Holders with 3 cash register fines. At least 3 in one calendar year are grounds for revocation (Article 89(2)).

Annex 4 of Government Resolution No 415 lists the seven barred activities:

1. Activities that need a licence or permit, except the Tbilisi taxi (M1) permit
2. Activities that need significant investment (excise goods production)
3. Currency operations
4. Medical, architectural, advocacy or notary, audit and consulting activity, including tax consultants
5. Gambling business
6. Provision of personnel
7. Excise goods production

Item 4 includes consulting and names tax consultants outright, so a freelancer whose work is consulting cannot use the status.

What income the 1% rate covers

The 1% applies to Georgian-source income, except salary and the income types the Government lists (Article 90(3)). A salary you earn as someone’s employee is not part of it.

Annex 5 of Resolution No 415 names twelve income types that are not taxed at 1% and do not count towards the GEL 500,000 limit:

• Rent from leasing property
• Lending income
• Gambling winnings
• Gifts
• Gains on real estate, vehicles and securities
• Inheritance
• Dividends
• Interest
• Royalties
• Debt forgiveness
• Gain on selling a partner’s share
• Construction services (NACE 41.2, 42, 43) supplied to an enterprise, an organisation or an individual entrepreneur

The construction item covers only those three kinds of customer, so building work for a private individual is not caught by it (Annex 5, item 12).

How to apply for small business status

You apply to the Revenue Service as an individual entrepreneur, and it grants the small business certificate (Article 89(1)). The status applies from the day the application is filed (Ministry of Finance Order No 999), not from the day it is granted.

Filing the monthly small business return

The return is filed and the tax paid every month, by the 15th of the month after the one you report (Article 93(1.1)). That is the same day as the other monthly filing deadlines, such as the VAT return and the return on salaries paid (Articles 153(5) and 168(1)). There are no advance payments on top, because under the Georgian text of Article 94 small business holders make no current tax payments.

A month with no income still needs a return. Since Order No 38 of 2026, not filing is not treated as filing a zero return (Order No 999, Annex 1), so the late filing rules apply. If you would rather hand the return to someone, the Tbilisi accountants compared by who they serve and what they charge include Register in Georgia, which runs monthly filings for freelancers on the 1% regime, and BFA Accounting, which handles small business status for individual entrepreneurs.

A late return costs a flat 5% of the tax due on it if it is up to 2 months late, under the Georgian text of Article 274(1), and 10% after that under Article 274(2). On a month with GEL 20,000 of income and GEL 200 of tax, that is a GEL 10 fine, or GEL 20 once the return is more than 2 months late. Unpaid tax also carries interest of 0.05% for each overdue day (Article 272(4)).

When the 1% rate becomes 3%

Once gross income from the activity passes GEL 500,000 in a calendar year (GEL 700,000 for wine tourism and agro tourism operators), Article 90(2) moves the rate to 3%, from the start of the month in which the limit is passed until the end of that year.

So that month’s income is taxed at 3% in full, not only the part above GEL 500,000, and every later month of the year stays at 3%. The months before keep their 1%.

Take an individual entrepreneur in Tbilisi invoicing GEL 55,000 every month.

Month	Income so far this year	Rate	Tax, due by the 15th of the next month
September	GEL 495,000	1%	GEL 550
October	GEL 550,000	3%	GEL 1,650
November	GEL 605,000	3%	GEL 1,650
December	GEL 660,000	3%	GEL 1,650

October is the month the year passes GEL 500,000, so all GEL 55,000 of it is taxed at 3%, although only GEL 50,000 sits above the limit.

Small business status does not exempt you from VAT (Article 92(1)). Once VAT-taxable supplies pass GEL 100,000 in any 12 consecutive calendar months, registering for VAT is mandatory within 2 business days (Article 165(1)), a point GEL 55,000 a month of taxable supplies reaches in the second month.

When small business status is revoked

Five things end the status under Article 89 of the Tax Code, and two of them reach back to January.

Reason	Status ends
Gross income over GEL 500,000 in each of 2 calendar years	From the start of the following year
You ask the Revenue Service to remove it, before the end of the calendar year	From the 1st of the month after you apply
You carry on one of the seven barred activities	Backdated to the start of the calendar year
3 or more cash register fines in a calendar year	Backdated to the start of the calendar year
You are no longer an individual entrepreneur	From the date that happens

The cash register row matters most to a business that takes cash from customers. The last row is the one that catches people who stop trading as individual entrepreneurs, for example by moving the business into a company.

Giving the status up yourself is the controlled exit. Under Article 89 it ends on the 1st of the next month, with nothing backdated.