The GEL 500,000 Small Business Status Limit and the 3% Rate
Your invoices are heading past GEL 500,000 for the year, and you want to know what that does to your tax bill. Small Business Status does not switch off at the limit. The rate changes, the month it changes in matters more than the amount you went over by, and it takes a second year over the line to end the status. This is what the limit counts, when the 3% starts and what a second year costs.
- The limit is GEL 500,000 of gross income from economic activity in a calendar year, and the count restarts on 1 January.
- Above it the rate is 3%, charged from the start of the month in which the excess is recorded until 31 December.
- Rent, dividends, interest, royalties, gains, gifts and inheritance are taxed under their own rules and never count toward the limit.
- One year over the limit does not end the status. 2 calendar years in a row do, from 1 January of the year after the second.
- Once the status is gone, income is taxed under the general rules at 20%, on an annual return due by 31 March.
What the GEL 500,000 limit measures
The limit is GEL 500,000 of gross income from economic activity, measured across the calendar year. It is the outer edge of Small Business Status and its 1% rate, which taxes the Georgian-source income an individual entrepreneur earns from the activity itself, leaving out salary and the income types the Government lists. The count restarts at zero every 1 January.
Gross means gross. Neither Article 90 of the Tax Code nor the Ministry of Finance order that applies it gives you any deduction against that figure, so office rent, contractor invoices and software subscriptions do not bring it down. Someone with GEL 520,000 of income and GEL 300,000 of costs has passed the limit.
Whether a payment falls in one month or the next follows the accounting method you use. On the cash method only money actually received in the month enters the figure; on the accrual method the value of what you supplied counts whether or not the client has paid. Income billed in a foreign currency is converted at the National Bank of Georgia rate for the day of the transaction.
One group has a higher ceiling. A person granted wine tourism or agro tourism activity subject status by Government resolution runs to GEL 700,000 instead, a limit in force since 1 January 2025.
Income that does not count toward the limit
The Government's list of excluded income does two jobs at once. Its 12 income types sit outside the 1%, and they are also left out of the GEL 500,000 count. Someone letting a flat who also sold a holding of shares can watch far more than GEL 500,000 pass through the bank and still be under the limit.
| Income | Counts toward the limit? | Taxed instead at |
|---|---|---|
| Business income from your activity | Yes | 1%, then 3% above the limit |
| Residential rent | No | 5% where you are on the landlord register, 20% withheld by a company tenant if you are not |
| Dividends from a Georgian company | No | 5% at source, final for you |
| Interest | No | 5% at source, 0% from a licensed financial institution |
| Royalties | No | 20% at source for a resident individual not registered for VAT |
| Gain on a home or a car | No | Exempt after more than 2 years or more than 6 months of ownership, otherwise 5% |
| Gifts and inheritance | No | Exempt from first and second line heirs, and up to GEL 1,000 from any individual |
| Construction services to a business | No | General rules, since 1 February 2025 |
| Salary | No | 20% |
Each of those follows its own rule, and where nobody withheld the tax at source, the income goes on your annual return by 31 March.
Construction is the newest entry on the list. Since 1 February 2025, income from construction services supplied to a company, an organisation or another entrepreneur has been taxed under the general rules, by Resolution No 436. The same work done for a private individual stays inside the regime.
The 3% rate starts at the beginning of the month
The 3% is not a rate on the excess. It is a rate on the month. From the first day of the month in which the excess is recorded, everything you receive under the regime is taxed at 3%, and it stays at 3% until 31 December.
That reaches backwards inside the month. Payments banked in the first week, before the invoice that took you over the line, are at 3% too.
Your return does the arithmetic. The cumulative line runs from 1 January and includes the reporting month, and the rate line on the monthly return reads 1% while that running total is at or below the limit and 3% once it has passed it, under the Ministry of Finance order on special regimes.
Say you invoice GEL 55,000 a month for a full year and are paid in the month you invoice. After 9 months the running total is GEL 495,000, still under the limit. Month 10 takes it to GEL 550,000, so the excess is recorded in month 10.
The first 9 months are taxed at 1%: GEL 4,950. Months 10, 11 and 12 add GEL 165,000 at 3%: another GEL 4,950. The year costs GEL 9,900 on GEL 660,000 received, an effective rate of 1.5%.
The filing cycle itself does not change. The return and the payment are due by the 15th of the month after the reporting month at whichever rate applies, and a month with no income is still a month you file, because an unfiled return does not count as a zero one. No advance payments fall due at all while the status lasts.
On 1 January the rate is 1% again. The 3% is bounded by the calendar year in which the excess happened, so a year that finishes at GEL 900,000 starts the next one back at the bottom rate.
One year over the limit does not end the status
Passing the limit changes your rate. On its own it does not take the status away. The Code revokes Small Business Status on income grounds only where the limit is exceeded in each of 2 calendar years, and then from the start of the year after the second of them.
During that following year the status cannot be granted back. From the tax year after that, you may apply for it again.
| Year | What happens |
|---|---|
| Year 1, over the limit | 3% from the month of the excess to 31 December; the status continues |
| Year 2, from 1 January | Back to 1% |
| Year 2, over the limit again | 3% from the month of the excess; the second year is now on record |
| Year 3 | Status revoked from 1 January and not regrantable this year; general rules apply |
| Year 4 | You may apply for the status again |
The 2 years have to run consecutively. A year back under GEL 500,000 in between breaks the run, and the count starts from scratch.
The other 4 ways the status ends
Income is 1 of 5 revocation grounds in the Code, and the only one that needs 2 years. The other 4 can end the status inside a single year.
- Your own request, made to the tax authority before the end of the calendar year. The status ends on the first day of the month after the application.
- A prohibited activity, from the start of the calendar year in which you began it. A GEL 500 fine comes with it.
- At least 3 cash register fines in one calendar year, from the start of that year, with the same GEL 500 fine. Cash taken from customers has to go through a register, and each breach of the cash register rules is GEL 200.
- Ceasing to be a registered entrepreneur natural person, from the date that happens.
Registering for VAT is not among them. An individual entrepreneur registered for VAT can hold Small Business Status, and crossing the VAT threshold leaves it alone.
A prohibited activity and a third cash register fine do not end the status from the day the Revenue Service notices. They end it from 1 January of the year in which they happened.
The monthly assessments already made on that year's returns are cancelled, and the income you received from the start of that year is taxed under the general rules instead. A single recorded instance of a prohibited activity is enough to trigger it.
What you pay once the status ends
Income moves to the general rules, which tax an individual at 20% on the difference between the calendar year's gross income and the deductions the Code allows. Those deductions are the expenses connected with earning the income, and every one has to be documented. Stock you are holding on the day the status ends can be brought into account at its documented cost.
Losses do not travel with you. They are not carried forward while you are inside the regime, so a bad year under the status leaves nothing to set against a good year after it.
The monthly small business returns stop and the annual income tax return takes over, due by 31 March with the tax paid the same day. Advance payments start too: an entrepreneur on an annual accounting period pays 25% of last year's tax on 15 May, 15 July, 15 September and 15 December, where the status carried none at all. The annual return and the first instalment then land within weeks of each other, in the first year outside the status.
The alternative structure for a business past the limit is a company. The difference is the timing as much as the rate: an individual entrepreneur is taxed as income arrives, while a Georgian LLC pays 15% on the profit it distributes and nothing on the profit it keeps, with the taxable amount worked out as the payment divided by 0.85. Dividends then reaching an individual are taxed at 5% at source.
VAT is a different threshold
VAT has nothing to do with GEL 500,000. Registration for Georgian VAT is triggered by GEL 100,000 of taxable supplies in any 12 consecutive calendar months, a rolling test rather than a calendar-year one, so it can be crossed in a year when the income limit is not.
You apply within 2 business days, and VAT is due from the transaction that takes you over the threshold, that transaction included. The rate is 18%.
Small Business Status is no shelter here: a holder above the threshold has to register. Most services supplied to business customers abroad fall outside Georgian VAT altogether, because the place of supply is where the customer is established, which is why an agency billing only foreign companies can reach GEL 500,000 without ever registering.
Watching the number through the year
The figure to watch is the running total of income taxed under the regime, not what the bank account shows. Rent, dividends and a share sale can lift the balance without moving that total at all.
Your property tax band changes before the limit does. Only 25% of income taxed at 1% counts toward the family income test, so GEL 400,000 of it already reaches the GEL 100,000 line, where the rate moves from 0.05% to 0.2% of market value into 0.8% to 1%. The property tax return is due by 1 November and the payment by 15 November.
Restructuring late in the year is not a way out of the 3%. The tax authority may disregard an operation that has no substantial economic effect, and may re-qualify one whose form does not match its content, which is precisely what invoices moved to a second entity in November look like.
Getting the number wrong is expensive. Understating tax on a return costs 50% of the understatement, a return up to 2 months late costs 5% of the tax due and 10% after that, and unpaid tax carries 0.05% a day. A year stays open to a Revenue Service audit for 3 years from the 31 December that ends it, so the arithmetic on a year spent near the limit has to hold up that long.
If your own figure is close to the line, send us the months and the amounts and we will tell you which ones fall at 3% and what the following year looks like, in a written opinion David Sisvadze signs.
Frequently asked questions
What happens if I exceed GEL 500,000 with Small Business Status?
Your rate rises from 1% to 3%, starting at the beginning of the month in which the excess is recorded and running to 31 December. The status itself continues, and on 1 January you are back at 1%. Only a second calendar year over the limit revokes it.
Is the 3% charged only on the amount above GEL 500,000?
No. It is charged on everything you receive under the regime from the first day of the month in which you passed the limit, including money banked earlier in that same month. Income received before that month stays at 1%.
Do I lose Small Business Status the first time I go over the limit?
No. Income revokes the status only when the limit is exceeded in each of 2 calendar years, and the revocation then takes effect from 1 January of the year after the second one. A single big year costs you the 3% and nothing else.
When does the rate go back to 1%?
On 1 January of the following year. The 3% is tied to the calendar year in which the excess was recorded, so it expires with that year regardless of how far past GEL 500,000 you went.
Which income counts toward the GEL 500,000 limit?
Georgian-source income from the economic activity the status covers, gross, with no deduction for expenses. Salary is excluded, and so are the 12 income types the Government lists, which are taxed under their own rules instead.
Does rent or a property sale count toward the limit?
Neither one. Rent from immovable property and the gain on selling real estate are both on the excluded list, so they are outside the 1% and outside the GEL 500,000 count. They follow their own rates: 5% on residential rent where you are on the landlord register, and a gain exempt after more than 2 years of ownership.
What tax do I pay after Small Business Status is revoked?
The general rules, which means 20% on gross income for the calendar year less the deductions the Code allows. You file an annual return by 31 March and pay the tax by the same day, and advance payments of 25% of the previous year's tax begin on 15 May, 15 July, 15 September and 15 December.
Can I get Small Business Status back after it is revoked?
Yes, from the following tax year. The status cannot be regranted during the year in which the revocation takes effect, so a revocation running from 1 January of one year means the earliest new application covers the year after it.
Is the limit higher for wine tourism or agro tourism?
Yes. A person granted wine tourism or agro tourism activity subject status by Government resolution has a limit of GEL 700,000 rather than GEL 500,000, in force since 1 January 2025. The 3% from the month of the excess and the 2-year revocation rule then run against GEL 700,000 instead.
Does crossing GEL 500,000 mean I have to register for VAT?
Not by itself. VAT registration turns on GEL 100,000 of taxable supplies in any 12 consecutive calendar months, which is a separate test on a rolling period. Services supplied to business customers established abroad usually fall outside Georgian VAT and outside that count, so the two thresholds often move independently.