Who Qualifies for Small Business Status in Georgia (1% Tax)
The 1% is the rate most freelancers in Georgia arrive looking for, and the question underneath it is the same every time: does my own work qualify? Small Business Status turns on who you are, what you earn and what you do, and the last of those is a closed list of activities that can never use it. This page sets out the conditions, the excluded activities and where common trades land.
- Small Business Status is granted to an individual registered as an entrepreneur natural person, never to a company, and gross income from economic activity has to stay within GEL 500,000 in a calendar year.
- Annex 4 of Government Resolution No 415 shuts out 7 activities, and consulting, including tax consulting, is one of them.
- Hiring staff and registering for VAT do not end the status. Both belong to micro business, the separate GEL 30,000 regime taxed at 0%.
- Rent, dividends, interest, royalties and property gains are taxed outside the 1%, and earning them neither costs you the status nor counts toward the GEL 500,000.
- Carrying on an excluded activity cancels the status from the start of that calendar year, adds a GEL 500 fine and puts the income back under the general 20% rate.
Who can hold Small Business Status
The Tax Code opens the regime with a single sentence: the status may be granted to an entrepreneur natural person. That is the whole eligibility test in the Code, and it rules out every legal entity. A Georgian company is taxed at 15% on distributed profit instead, whatever its size.
The 1% that Small Business Status puts on Georgian-source business income attaches to that person, so what is left to check is the ceiling on their income and the list of activities that can never use the rate.
The ceiling is GEL 500,000 of gross income from economic activity, measured over the calendar year rather than over any rolling 12 months. Wine tourism and agro tourism operators have GEL 700,000.
A VAT-registered individual entrepreneur can hold the status, and a holder whose taxable supplies pass GEL 100,000 in any 12 consecutive calendar months has to register for VAT and keeps the 1% on the same income.
Hiring is not a bar either. The Code sets a rule for the salaries a holder pays, exempting up to GEL 6,000 a year from tax at source where the holder registered and obtained the status in the same year, or had gross income of up to GEL 50,000 the year before. Losing the status on a hire, or on a VAT registration, is a rule of micro business status, the 0% regime capped at GEL 30,000, which is closed to VAT-registered persons and ends the moment the holder uses hired labour.
Registration as an individual entrepreneur comes first and the application to the tax authority on the Annex 1 form comes second. The status runs from the day that application is filed.
The 7 activities that can never use the 1%
Annex 4 of Government Resolution No 415 carries the prohibited list, and it runs to exactly 7 numbered items.
| Item | What it shuts out |
|---|---|
| 1 | Activities that need a licence or permit, with one exception: the permit for carriage by light vehicle (taxi, category M1) in the capital |
| 2 | Activities whose performance requires significant investment, which the item defines in brackets as production of excise goods |
| 3 | Currency operations |
| 4 | Medical, architectural, advocacy or notary, audit and consulting activity, including tax consultants |
| 5 | Gambling business |
| 6 | Provision of personnel |
| 7 | Production of excise goods |
Excise goods production appears twice, once as the bracketed example inside item 2 and again on its own as item 7, so 2 of the 7 categories rest on the same trade.
The test is on what you actually do. Neither the resolution nor the instruction mentions a NACE code or a registered activity: the status is refused to a person who carries out an Annex 4 activity, and carrying one out is what revokes it. One recorded instance is enough.
Consulting is the item with the least definition behind it. Item 4 names medical, architectural, advocacy or notary, audit and consulting activity as one closed phrase, and the only gloss it gives on consulting is the bracketed inclusion of tax consultants. Software development, design, marketing, copywriting and coaching are not named in it.
Where the status is cancelled for a prohibited activity, it ends from the start of the calendar year in which the person began that activity, not from the month the tax authority notices. A GEL 500 fine comes with the cancellation, and every invoice raised since the start of that year is taxed under the general rules instead.
Trades that fall under fixed tax instead
A separate group of trades sits outside the 1% for a different reason. Neither the micro nor the small business regime applies to an activity subject to fixed tax, so turnover never enters the question. 5 activities are on that list at present.
| Activity | Fixed tax |
|---|---|
| Clay oven (tone) bakery | GEL 50 per oven per month |
| Hairdressing, make-up, non-medical massage and cosmetology | GEL 50 per workplace per month |
| Manicure and pedicure | GEL 30 per workplace per month |
| Solarium | GEL 70 per cabin per month |
| Car maintenance and repair | GEL 100 per workplace per month, or per 40 m2 where workplaces cannot be counted |
The individual still has to be registered as an individual entrepreneur, and fixed-tax income is left out of gross income and carries no advance payments.
Income taxed outside the 1% that does not cost you the status
Annex 5 of the same resolution does something different from Annex 4. It does not decide whether you may hold the status, it decides which income the 1% does not reach. That income is taxed under its own rules and is not counted toward the GEL 500,000 limit.
The list runs to 12 items: leasing or renting property, lending, gambling winnings, gifts, gains on real estate, vehicles and securities, inheritance, dividends, interest, royalties, debt forgiveness, the gain on the sale of a partner's share, and construction services supplied to a business.
| Income | How it is taxed instead |
|---|---|
| Residential rent | 5% with no deductions where the landlord is on the Revenue Service register, and 20% withheld by a legal person tenant when the landlord is not |
| Dividends from a Georgian company | 5% at source, and final for the individual |
| Interest | 5% at source and final, or nothing at all where it comes from a licensed financial institution such as a bank |
| Royalties | 20% at source for a resident individual who is not registered for VAT |
| Gain on a home | Exempt after more than 2 years of ownership, otherwise 5% |
| Gain on a car | Exempt after more than 6 months of ownership, otherwise 5% |
| Construction services to a business | Under the general rules, since 1 February 2025 |
A flat sold inside the 2-year window that decides whether a property sale is taxed at all is a 5% event rather than a 1% one, and the same logic runs on a car sold in its first 6 months. Income that no payer has withheld tax on goes on the annual income tax return, due by 31 March of the following year.
Resolution No 436 added construction services in NACE 41.2, 42 and 43 to Annex 5 from 1 February 2025, but only where they are supplied to an enterprise, organisation or entrepreneur. The same work invoiced to a private individual stays inside the 1%, and that is the only place in the special regimes where the customer changes the answer.
Say you invoice GEL 120,000 in a year for design work, rent a flat to a private tenant for GEL 9,600 and receive GEL 2,000 of dividends from a Georgian company. The design work is 1% income, so GEL 1,200. The rent is 5%, so GEL 480, declared on the annual return by 31 March if you are on the landlords' register. The dividends are withheld at 5%, so GEL 100, and that is final. Only the GEL 120,000 counts toward the GEL 500,000 limit.
Salary, employment and the single-client question
Two things are carved out of the 1% base: salary, and the income types the Government lists separately. What is left is the business income you earn from a Georgian source. Salary is taxed at 20%, and the employer, not you, files the withholding return by the 15th of the following month.
Pay for work you do from Georgia for a foreign employer or client is Georgian-source income either way. What changes is whether it arrives as salary or as business income, and that decides which rate reaches it.
A job and the status can therefore run alongside each other: the employment taxed at source at 20%, the business income at 1%, on separate returns.
The Code draws the line with a definition rather than a test. Hired work has 3 limbs in Article 12: performing an obligation within relations regulated by labour legislation, service in the defence forces or law enforcement bodies, and being or acting as the head of an enterprise or organisation. No multi-factor test of control, integration or substitution appears in the text.
The reclassification power sits elsewhere. For the purpose of determining a tax liability the tax authority may disregard business operations that have no substantial economic effect, and may change the qualification of a business operation where its form does not correspond to its content. A single-client service contract that is in substance an employment relationship is reachable on that wording.
Residency, citizenship and where your income comes from
The Code's eligibility sentence names no tax residency, no citizenship, no residence permit and no minimum presence. The one thing the instruction adds is that the person is on tax registration, which is a registration with the tax authority rather than a residency test.
What does matter is where the income comes from. Services actually rendered in Georgia are Georgian-source, and so are services supplied by a Georgian resident to a recipient abroad, unless a foreign permanent establishment supplies them. Where the money is received makes no difference.
A non-resident is taxed in Georgia only on Georgian-source income, and a resident's income from outside Georgia is exempt. Because the 1% attaches to Georgian-source income, holding the status while living somewhere else raises a different set of questions from running it from Tbilisi.
Losing Georgian tax residency is not one of the grounds for revoking the status. Ceasing to be an entrepreneur natural person is.
Where common professions land
The exclusion list is the authority, not the job title. Articles 88 to 90 of the Tax Code create the regime and leave the prohibited list to the Government, so an activity is inside the 1% unless it is named in Annex 4 or already sits under fixed tax.
| Work | Where it lands | Why |
|---|---|---|
| Software development, design, copywriting, translation, video and photography | Inside the regime | Not named in Annex 4 |
| Digital marketing and social media management | Inside the regime on the list as written | Not named in Annex 4; item 4 gives consulting no definition |
| Tax, audit, legal, notarial, medical and architectural work, and consulting | Excluded | Named in Annex 4 item 4 |
| Anything needing a licence or permit, apart from the Tbilisi taxi permit | Excluded | Annex 4 item 1 |
| Reselling goods, including on marketplaces | Inside the regime | Trade is a micro business exclusion, not a small business one |
| Building and renovation work | Depends on the customer | Outside the 1% when supplied to an enterprise, organisation or entrepreneur since 1 February 2025 |
| Renting out a flat | Outside the regime | Annex 5 item 1, taxed at 5% |
| Hairdressing, manicure, car repair, solarium and tone bakery | Neither small nor micro business | Fixed tax activities |
Only 2 rows in that table are Annex 4 exclusions. Item 4 shuts out a named group of professions, and item 1 shuts out everything a licence or permit is needed for. Everything else is a question of who the customer is, or of which regime the trade already belongs to.
What happens when your activity is on the wrong list
The same list decides refusal when you apply and revocation afterwards.
| Ground | When the status ends |
|---|---|
| A prohibited activity | From the start of the calendar year the activity began, with a GEL 500 fine |
| 3 cash register fines in a calendar year | From the start of that year, with each breach costing GEL 200 and the same GEL 500 fine |
| Your own request | From the 1st day of the following month |
| Ceasing to be an entrepreneur | From that date |
| Gross income over the limit in each of 2 calendar years | From the start of the following year, with no regrant that year |
Turnover is the slowest of those 5 grounds. Passing the GEL 500,000 limit once moves the rate to 3% from the start of the month of the excess until the end of that year, and the status itself survives until the limit has been passed in 2 calendar years.
Backdating the first of those grounds has a second effect. The Minister of Finance order on special tax regimes cancels the assessments made on the monthly returns for those periods rather than crediting them, and the income received from the start of that year becomes subject to income tax under the general rules: 20% on gross income less the deductions the Code allows for the period. Stock on hand at the moment of revocation can be brought into that account at its documented cost.
Where the answer decides whether a whole year of invoices was taxed at 1% or at 20%, it belongs in writing, and a written opinion on your own activity, signed by David Sisvadze and set against the resolution's own wording, is what settles it.
An audit can reach back 3 years, counted from the end of the calendar year that is being audited, and unpaid tax carries interest of 0.05% for each overdue day. After a revocation you may apply for the status again from the following tax year.
Frequently asked questions
Can a consultant get the 1% tax in Georgia?
No. Consulting activity, with tax consultants named in brackets, is item 4 of Annex 4 to Resolution No 415, so the status is not granted for it and carrying it on under the status revokes it. That income is taxed at the general 20% rate instead.
Do software developers qualify for Small Business Status?
Software development is not named in Annex 4, so nothing on the prohibited list shuts it out. The item to read carefully is consulting, which appears there with no definition beyond the bracketed inclusion of tax consultants. Where the work is sold as advice rather than as a build, that is the question to settle before applying.
Does a company qualify for the 1% rate?
No. The status is granted to an entrepreneur natural person, which means an individual registered as an individual entrepreneur, and no legal entity can hold it. A Georgian company is taxed at 15% on distributed profit instead.
Can I keep my job and hold Small Business Status at the same time?
Yes. Taxable income under the regime is Georgian-source income other than salary, so employment income stays outside the 1% and is taxed at 20% at source by your employer, who files the withholding return by the 15th of the following month. The business income is taxed at 1% under the regime.
Do I lose the status if I hire an employee?
No. The Code assumes a holder pays salaries, and exempts up to GEL 6,000 of them a year from tax at source where the holder registered and obtained the status in the same year, or had gross income of up to GEL 50,000 in the previous year. Losing the status on hiring is a micro business rule.
Does registering for VAT cancel Small Business Status?
No. The status is open to a VAT-registered individual entrepreneur, and a holder whose taxable supplies pass GEL 100,000 in any 12 consecutive calendar months has to register for VAT and carries on paying 1% on the same income. VAT registration is what closes micro business, not small business.
Can I sell physical products on marketplaces under the 1%?
Nothing in Annex 4 excludes trade, so reselling goods is not a prohibited activity for small business status. Resale is a micro business exclusion: item 6 of that separate list shuts it out unless the purchased goods are processed before they are supplied.
Can a non-resident hold Small Business Status?
Nothing in the eligibility test turns on residency. The sentence in the Code names no tax residency, citizenship, residence permit or minimum day count, and the instruction adds only that the person is on tax registration. Losing Georgian tax residency is not one of the grounds for revoking the status either, and what the 1% still needs is Georgian-source income.
What happens if I apply and my activity turns out to be excluded?
The status is not granted. If it was granted and you then carried on the activity, it is cancelled from the start of that calendar year with a GEL 500 fine, the monthly assessments for those periods are cancelled rather than credited, and the income is taxed under the general rules at 20%.
Can I get the status back after it is revoked?
Yes, from the following tax year. Where the revocation followed gross income over GEL 500,000 in each of 2 calendar years, the status cannot be granted again during the year the revocation takes effect.