The 1% Route for Freelancers in Georgia: How It Really Works
Small Business status explained for the people who actually use it - freelancers and consultants: registration, the excluded-activity list, the cap and what happens when you cross it, and the monthly obligations nobody mentions.
The 1% figure is the single most repeated fact about Georgia, and the most frequently misapplied. It is not a company rate, it is not automatic, and it is not unconditional. It belongs to a natural person registered as an Individual Entrepreneur who has been granted Small Business status, whose activity is not on the excluded list, and whose turnover stays inside the statutory cap.
Next step
Update for foreign founders: the 2026 right-to-work rule
From 1 March 2026 a foreign national carrying out activity in Georgia, including as an individual entrepreneur, needs a right-to-work authorisation before invoicing, unless one of the exemptions in the Law on Labour Migration applies. The tax rules in this article are unchanged; the setup sequence is not.
Read what changed1%
Of turnover
While the conditions hold
Cap
Annual turnover ceiling
Crossing it changes the rate
Monthly
Declaration cycle
Turnover declared and tax paid monthly
Two statuses that are easy to confuse
The Individual Entrepreneur is a legal form under the Law of Georgia on Entrepreneurs (2021): a natural person carrying on business in their own name, registered at the Public Registry. Small Business status is a separate tax status under the Tax Code of Georgia, granted by the Revenue Service, that applies the preferential turnover rate. You need both, in that order - the form first, then the tax status - and each has its own conditions.
Getting it
- 1
Register as an Individual Entrepreneur - the business is registered in your own name, with no company name and no shareholders.
- 2
Apply for Small Business status at the Revenue Service, stating the activity accurately.
- 3
Receive the status; it applies from the period the legislation specifies, not retroactively at will.
- 4
Declare turnover monthly and pay the tax on that turnover - even in months with no income, the declaration is still due.
- 5
Keep the records the regime requires, including the turnover documentation behind every declaration.
A natural person carrying out economic activity may be granted the status of small business, in which case taxable turnover is taxed at the preferential rate, provided the annual turnover does not exceed the established threshold and the activity is not among those excluded from the regime.
The exclusions that catch people
- Activities requiring a licence or permit.
- Currency exchange and defined financial operations.
- Gambling and related activity.
- Certain consultancy and professional services - this is the one that surprises consultants, and it turns on how the activity is classified rather than on what you call yourself.
- Employment dressed as entrepreneurship: one client, fixed hours, their equipment and their direction is an employment relationship whatever the invoice says.
Classify your activity honestly at registration. A status granted on an inaccurate description is not a status you can rely on, and the correction is retrospective.
The ongoing conditions, not just the entry ones
- Turnover must stay within the cap across the year; the ceiling is measured on turnover, not profit, so costs do not help you stay under it.
- The declaration and payment cycle is monthly and continues even in nil months - a missed nil declaration is still a missed filing.
- Turnover must be documented; the 1% is charged on documented turnover, and undocumented receipts can be reassessed at a higher rate.
- The activity must stay within the granted description - drifting into an excluded activity can cost the status.
The freelancer who crossed the cap in November
A designer registers as an IE with Small Business status in January, invoices steadily, and lands an unusually large project in the autumn that pushes annual turnover past the cap in November.
- 1Once the threshold is passed, turnover does not continue at 1%: as the Tax Code reads at the time of writing, the 3% rate applies from the start of the month in which it was passed until the end of the year, on that month's whole turnover and not only on the excess.
- 2If the cap is passed again the following year, the Code cancels the status from the start of the year after, and the structure needs rethinking.
- 3An LLC becomes the sensible comparison at that scale: 15% on distributed profit, with reinvested profit untaxed until it leaves.
- 4The decision is made in advance, on a forecast, rather than discovered in a December declaration.
Crossing the cap is not a penalty, it is a signal. The mistake is finding out afterwards instead of forecasting it in the autumn.
Illustrative. Confirm the current threshold and the rate applying above it.
Next step
Setting it up correctly the first time
The registration and the status application are two separate steps, and the second one turns on the activity you declare. Trustlex checks the activity against the excluded list in writing, then registers and files.
See the 1% routeIE with Small Business status versus an LLC
One client, fixed hours, and a status that could not survive it
A developer registers as an IE with Small Business status and works exclusively for one company: agreed hours, their systems, their project manager, for two years.
- 1The arrangement has every indicator of employment except the paperwork: a single payer, direction, integration into their team, no other clients.
- 2Substance decides classification, and an arrangement of this shape is exposed to being treated as employment regardless of the IE registration.
- 3Reclassification puts the payroll obligations on the client company, which is a problem the developer has now created for their only customer.
- 4The 1% treatment falls away for the periods concerned, and the correction is retrospective.
The 1% is designed for people running a business, not for a single employment relationship invoiced differently. If there is one client, their hours and their equipment, the structure is the wrong question - the relationship is.
Illustrative. Employment classification is assessed on the facts and the outcome affects both parties.
| Feature | IE + Small Business status | LLC (შპს) |
|---|---|---|
| Headline tax | 1% on turnover within the cap | 15% on distributed profit; reinvested profit untaxed until distributed |
| Liability | Unlimited personal liability | Limited to the company's assets |
| Owners | One natural person, no partners | One or more partners, shares transferable |
| Suits | Solo freelancers within the cap | Partners, investors, or turnover above the cap |
What it does not do
Small Business status is a Georgian tax regime for a Georgian-registered individual. It does not change your residence, it does not answer your home country's claim on your income, and it does not give limited liability - as an IE you are personally liable for the obligations of the business. Those are three separate questions and each needs its own answer.
General information, not legal or tax advice. Thresholds, rates and the excluded-activity list change; confirm the current position for your activity before you rely on it.