Georgia's 1% Tax: Small Business Status for Individual Entrepreneurs (2026 Guide)

Georgia's 1% tax on small-business turnover is the single most searched reason founders and freelancers look at the country — and also the most misunderstood. The regime is real and it works, but it applies to a specific legal form, excludes a long list of activities, and has thresholds that change your rate if you cross them. Here is how it actually works in 2026.

What Small Business Status is — and what it is not

Small Business Status (SBS) is a special tax regime available to a registered Individual Entrepreneur (IE) — a natural person doing business in their own name. It is not available to an LLC. With SBS, your Georgian business turnover is taxed at 1% instead of the standard 20% personal income tax on profit. You do not need to be a Georgian citizen or resident to register as an IE and apply.

The headline numbers

• 1% tax on gross turnover while annual turnover stays under 500,000 GEL (commonly cited threshold — confirm current).
• 3% tax on the portion of turnover in a year where you exceed the 500,000 GEL cap.
• Exceed the cap two calendar years in a row and the status is revoked from January 1 of the third year.
• VAT registration becomes mandatory once taxable turnover passes 100,000 GEL in any rolling 12-month period — VAT is separate from the 1% regime.

New for 2026: the effective-date rule

Under updated rules taking effect in 2026, Small Business Status becomes effective from the date the request is submitted to the Revenue Service, rather than the first day of the following month. Practically, this removes the old dead period between applying and benefiting — but it also makes the timing of your first invoices worth planning.

Excluded activities — the trap most people miss

A list of activities cannot use the 1% regime at all. The most important exclusion for online professionals: consulting. Also excluded, among others, are medical, architectural, legal and notarial services, gambling, currency exchange, and activities requiring licensing. Whether your work counts as 'consulting' or as a service delivered as a product (for example, software development) is exactly the kind of classification question to resolve before you register — getting it wrong risks reassessment at 20%.

What counts as turnover — and what does not

• Taxed: your gross business receipts under the IE — not profit; expenses are irrelevant to the 1%.
• Not counted as SBS turnover: property rental income, dividends, interest, royalties, capital gains from real estate or securities, loans received, inheritance — these are taxed under their own rules.
• Salaries you pay employees are allowed, but payroll withholding applies to them normally.

IE + SBS vs LLC: how to choose

• Choose IE + Small Business Status when you are genuinely self-employed, your activity is not excluded, your clients accept invoices from an individual entrepreneur, and turnover fits the cap.
• Choose an LLC when you need limited liability, a corporate counterparty (many platforms and enterprise clients require it), multiple owners, or a path to Virtual Zone / International Company status — those regimes are for companies, not IEs.
• Remember the IE is personally liable for business obligations — the 1% is a tax benefit, not a liability shield.

A note for foreign nationals

Non-residents can register as Georgian IEs, but recent practice adds requirements for foreign nationals operating as individual entrepreneurs — including labour-permit expectations that banks may check when opening the related business account. Plan the compliance file, not just the tax rate.

How to get it (the practical sequence)

1. Register as an Individual Entrepreneur at the Public Registry (this is the legal form).
2. Confirm your activity is not on the excluded list — in writing, before you rely on the rate.
3. Apply for Small Business Status with the Revenue Service; from 2026 it takes effect on the day of submission.
4. Set up monthly declarations — SBS filers declare and pay monthly, not annually.
5. Watch the 100,000 GEL rolling VAT threshold separately from the 500,000 GEL SBS cap.