Individual Entrepreneur in Georgia
What are the benefits?
- Tax regimes of 1% or even 0%
- No restrictions on citizenship or residency status
- Simple setup and administration
- Remote formation is an option
- Easier access to banking services
Sole proprietorship (SP), or Individual Entrepreneurship (IE) is the simplest and easiest form of business form available in Georgia. It is especially attractive for freelancers and expats, as tax benefits available for Small Business Status companies are solely granted to IEs, and no extra covenants are derived from this status.
Essentially, IE status is just allowing a person the opportunity to do business. IEs can engage in whatever type and quantity of operations they want, recruit workers, and even operate under a name different than the owner’s.
The one important downside of this business is that the personal assets of an individual entrepreneur are not separated from his or her business. Another drawback is that ownership of the business cannot be shared, and no formal directors can be appointed.
Furthermore, and crucially, IE can be from anywhere; citizenship and residence status are not a limitation in this welcoming country.
Simply put, registering IE in Georgia provides the following benefits:
- Procedures for registration that are even simpler and lighter (Compared to LLC)
- Reduced administrative, bureaucratic, and tax-reporting burden (Including bookkeeping and external reporting)
- No restrictions on the quantity or type of business operations (Except a couple of specific sectors, given below)
- Access to Micro Business Status (annual revenue of 30,000) – A 0% income tax rate (This status comes with limitations, such as the inability to recruit staff)
- Access to Small Business Status (annual revenue of 500,000 GEL) – A 1% tax rate (rather than 20%)
- A far more simply accessible Georgian bank account is another benefit of registering as an IE – While the chances of opening an account and successfully passing KYC questions are never 100%, for IEs, these chances are close to that. Fintech solutions that are available to LLCs are also available to IEs. More information about bank accounts may be found here.
- Easy liquidation – Even losing your IE status is simple. All you need to do is submit documentation for terminating IE status to the Public Service Hall, and if no creditors are present, the revenue service will conduct a swift tax audit, and the registration will be canceled within one working day.
Opening bank accounts for IEs, especially in case of non-residents is easier (Compared to LLCs, not on an absolute scale). Having a bank account is not mandatory for IE if he or she is not required to register as a VAT taxpayer (effectively meaning annual turnover over 100,000). In any regard, having a bank account is preferable for paying taxes and maintaining daily comfort.
With merely a Power of Attorney, we can create a company and a bank account within a week.
With our assistance, opening an individual entrepreneur (IE) remotely in Georgia has become incredibly easy and beneficial. You no longer need to ask yourself questions like “how to open an IE in Georgia for a non-resident” or “what is required for an IE in Georgia for foreigners.” We offer a complete support package for those who want to register an IE in Georgia.
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How to Register as an Individual Entrepreneur in Georgia?
The registration procedure is simple. It must be completed at Public Service Hall (available in Tbilisi, Batumi, and other cities) and normally takes one business day. The application must be filed in Georgian (with any translations being legally translated) and must include:
- Name
- A person’s identification number (Non-resident of Georgia will be assigned a nine digit number)
- Date
- Georgian phone number
- Email address
- A legal address (If the applicant does not own a property in Georgia, a notarial consent from an owner is required to register at a certain address)
The registration can be completed remotely using a power of attorney. In this situation, extra documents will be necessary, including a notarized copy of the passport and the power of attorney itself (Legally translated).
After registering as an IE, you have to apply for Small Business Status at the Revenue Service office or through their online portal.
If you are only visiting Georgia for registration purposes, you should plan on staying for 2-3 days.
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Small Business Status
According to our experience, the key advantage of registering an IE in Georgia is the low tax rate of 1% coming with the status of Small business (SBS). Before getting into the specifics of this regime, it should be emphasized that it is not available to certain businesses (Since they are either part of their own tax regimes or are not deemed commercial activity for Georgian tax purposes).
It has to be noted that in the absence of Small Business Status (SBS), the legal form of Individual Entrepreneur (IE) loses much of its appeal, as the so-called Estonian model of taxation, which defers profit taxes until they are distributed as dividends, is not applicable to IEs. Instead, IEs are required to pay 20% of their profits each year, along with any necessary advances. Consequently, if SBS is not available to a business, the benefits of the IE legal form are significantly diminished, with the exception of the convenience of opening a bank account. As a result, the Limited Liability Company (LLC) emerges as the clear winner for such businesses.
IEs can obtain SBS certificates for specific activities while also engaging in regular non-SBS activities. It is even possible for an IE to have two SBS certificates, although it should be noted that the turnover from both SBS activities is combined and counted against a single yearly limit of 500,000 GEL.
As a result, the following activities are not available for IE with SBS:
- Beauty salons
- Art
- Vehicle repair services
- Medical services
- Architectural services
- Legal assistance, advocacy
- Notary and auditory services
- Agricultural or forestry activity
- Financial services
- Tax and legal consulting
- FOREX transactions
- Gambling
- Activities requiring special license
- Manufacturing of excise goods
Small business status can be obtained on the same day as registration; however, the tax regime becomes effective on the first day of the month following registration.
SBS can be terminated if an entrepreneur requests it, or if yearly income surpasses 500,000 in two consecutive years functioning with SBS status.
The taxes procedure is simple: the company submits monthly statements until the 15th of the month and pays a 1% rate on turnover (Not on profits). If yearly turnover surpasses 500,000, the tax rate rises to 3% from the month the limit was surpassed until the end of the year. From the next year (if the condition of not exceeding the 500,000 limit for two consecutive years is not broken) – the tax rate returns to 1%.
IE with SBS still pays additional taxes, such as 20% income tax on employee salary and 18% VAT. To be more specific, VAT will be paid if:
- The company is VAT Registered (either willingly or mandatorily by surpassing VATable turnover of 100,000 GEL per year)
- And the company has VATable revenue – typically sales derived on Georgian territory (Excluding Free Zones). More information on VAT may be found here. * Please keep in mind that exports and services to overseas firms are not VATable turnover, whereas services to foreign persons are (with limited exclusions).
It is important to remember that a person’s specific types of income are not regarded a tax base for IE/SBS purposes (as they are taxed on their own), and they neither give rise to the 1% rate, and nor alter the 500,000-turnover limit. These are the types:
- Salary
- Income from property leasing
- Interest or income from loans
- Royalties
- Dividends
- Gifts
- Profit from gambling
- Earnings from selling capital assets, such as property, vehicles, securities or partner shares.
- Inheritance
- Debt forgiveness
Frequently Asked Questions About IE in Georgia
What are the benefits of registering as an IE in Georgia?
Registering as an IE in Georgia allows you to legally conduct business, open a business bank account, obtain Small Business Status with a preferential 1% tax rate, and serves as a basis for obtaining a Georgian residence permit. An IE can issue invoices, receive international payments, and work with clients worldwide.
How long does it take to register an IE in Georgia?
IE registration in Georgia takes 1 business day under the standard procedure. Same-day expedited registration is also available. The process includes filing an application at the Public Service Hall, obtaining an identification number, tax registration, and applying for Small Business Status (1%). Small Business Status takes effect from the first day of the following month.
What documents are needed to register an IE in Georgia?
For in-person IE registration in Georgia:
- Passport
- Georgian SIM card
- Consent from the address owner
For remote registration:
- Notarized (sometimes apostilled) copy of passport
- Power of attorney granting the right to act on your behalf
- Passport
- SIM card
How much does it cost to open an IE in Georgia remotely?
The cost of remotely opening an IE in Georgia also varies depending on specific services and requirements. Remote registration incurs additional expenses, such as notarization and translation of documents. For detailed cost information, it’s recommended to seek an individual consultation.
How much tax does an IE pay in Georgia?
An Individual Entrepreneur with Small Business Status in Georgia pays just 1% of turnover on income up to 500,000 GEL per year. If this threshold is exceeded, the rate increases to 3% for the remainder of the current year. Without Small Business Status, the standard income tax rate of 20% applies. VAT (18%) is mandatory when turnover from sales in Georgia exceeds 100,000 GEL. If the IE hires employees, a 20% income tax applies to salaries.
What is the VAT rate for an IE in Georgia?
The standard VAT rate in Georgia is 18%. VAT registration is mandatory if the IE’s annual turnover from sales in Georgia exceeds 100,000 GEL. Below this threshold, registration is voluntary. Export of services abroad is subject to 0% VAT.
What is the turnover limit for an IE in Georgia?
For an IE with Small Business Status, the turnover limit is 500,000 GEL per year. If this threshold is exceeded, the rate increases to 3% for the remainder of the current year. The following year, the status is retained and the rate returns to 1%. A separate threshold of 100,000 GEL from sales in Georgia applies for mandatory VAT registration.
Do I need a business bank account for an IE in Georgia?
No, a separate business account is not required. An IE in Georgia does not create a separate legal entity, so you can use a personal bank account for business activities. However, many entrepreneurs prefer to open a separate account for easier tracking of income and expenses.
Do I need a residence permit to register an IE in Georgia?
No, a residence permit is not required to register an IE in Georgia. Foreign citizens can register an IE while in the country under a visa-free regime or with a visa. In fact, a registered IE serves as a basis for obtaining a residence permit.
Can I register an IE in Georgia and live in another country?
Yes, you can. An IE in Georgia does not require you to live in the country — you can even register remotely without ever visiting Georgia. You can manage your business, file declarations, and conduct all activities entirely from abroad.
Can I use a personal account for IE in Georgia?
Yes, in Georgia you can use personal bank accounts for IE activities. This is because registering an IE doesn’t create a separate legal entity; instead, an individual gets the right to do business. Thus, you can use personal accounts, including accounts in PayPal and other neobanks.
How to get small business status in Georgia?
To obtain small business status in Georgia, follow these steps:
Usually, the status is granted on the day of application but takes effect from the first day of the month following its granting.
- Register as an individual entrepreneur
- Register with the tax service
- Apply for small business status
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