Small Business Status: How the 1% Regime Works
Updated: May 2026
Georgia is one of the easiest and cheapest places in the region to run a small business, largely thanks to Small Business Status (SBS) for individual entrepreneurs (IEs) — the main reason freelancers, consultants and small traders relocate here.
An IE with Small Business Status pays just 1% of turnover on annual turnover up to 500,000 GEL. Above that the rate rises to 3% for the rest of the year, and the status can be revoked if turnover exceeds the limit in two consecutive years. It takes effect from the first day of the month after it is granted. A separate Micro Business Status gives 0% on turnover up to 30,000 GEL. Since February 2025, construction services supplied to Georgian businesses are excluded from the 1% regime.
What the 1% Replaces — and What It Doesn’t
The 1% replaces the income tax an IE would otherwise pay. Without Small Business Status, an individual entrepreneur pays 20% personal income tax on net taxable profit — business income minus deductible costs — not 20% of turnover, and not the 15% corporate (distribution) tax that applies to LLCs.
What the 1% does not remove: you may still owe VAT (see below), property tax, and payroll taxes if you employ staff.
| Without SBS | With SBS (1%) | |
|---|---|---|
| Turnover | 100,000 GEL | 100,000 GEL |
| Deductible costs | 60,000 GEL | — |
| Taxable base | 40,000 GEL (net profit) | 100,000 GEL (turnover) |
| Tax due | 20% = 8,000 GEL | 1% = 1,000 GEL |
Illustrative only — the real comparison depends on your margin and activity.
Activities That Can’t Use the 1% Regime
Small Business Status is not available for certain regulated or higher-margin activities, including:
- Activities requiring a licence or permit
- Production of excise goods
- Currency exchange / FOREX operations
- Medical, architectural, legal, notarial, audit and consulting services
- Gambling and games of chance
- Staffing / labour provision
Construction services supplied to Georgian companies were also removed from the regime in February 2025. If your activity is on this list, an LLC is usually the better structure.
VAT When Your Clients Are Abroad
A common misconception is that exporting services makes you simply “VAT-exempt.” In fact it is the place-of-supply rule (Tax Code Art. 162 / 162¹): a service supplied to a foreign business is treated as taking place where that client is based — abroad — so it falls outside the scope of Georgian VAT rather than being a domestic exemption. Electronically supplied services to individuals abroad generally follow the customer’s location too and likewise fall outside Georgian VAT.
VAT registration becomes mandatory only once your VATable (typically Georgian-market) turnover exceeds 100,000 GEL over any continuous 12 months; the standard rate is 18%.
Filing, Record-Keeping and Pensions
An IE with Small Business Status files a monthly turnover declaration and pays the 1% by the 15th of the following month, and submits an annual return by 1 April. You are exempt from full (double-entry / IFRS) financial statements, but must keep a turnover journal and supporting records.
The funded pension scheme (2% contributions) is voluntary for self-employed individual entrepreneurs, and foreign nationals without a permanent residence permit fall outside it.
Registering Your IE Remotely
You do not need to be in Georgia to register. With a notarised (and, where required, apostilled) copy of your passport and a legally translated power of attorney, we can register your IE and apply for Small Business Status on your behalf, typically within one to two working days. See how to register an IE in Georgia.
Small Business Status vs Other Structures
Small Business Status suits solo and small service businesses, but it is not always the best fit. A quick comparison:
| Structure | Headline tax | Best for |
|---|---|---|
| IE + Small Business Status | 1% of turnover (≤500k GEL; 3% above) | Freelancers, consultants, small traders |
| LLC (standard) | 15% on distributed profit + 5% dividend (Estonian model) | Partners, firms reinvesting profit |
| Virtual Zone company | 0% profit tax on IT services exported abroad | IT / software firms serving foreign clients |
| International Company Status | 5% profit tax, 5% salary tax, 0% dividend | Larger IT / maritime firms with local substance |
Conclusion
For most freelancers and small service businesses, Georgia’s 1% Small Business Status is one of the most attractive regimes anywhere — provided your activity qualifies and you keep up the simple monthly filings. We can confirm whether you’re eligible and handle the registration end to end.
Want to know if you qualify for the 1% regime? Ask us.
See also: register an IE in Georgia, Georgia tax residency, IE taxes in Georgia, LLC in Georgia.