The Georgian 1% turnover tax regime

What is Small Business Status, exactly?

Small Business Status is an elective tax regime for Georgian Individual Entrepreneurs introduced under Chapter XII of the Tax Code^[1]. An IE who elects SBS pays a flat 1% tax on gross turnover instead of the standard 20% Personal Income Tax on net income. Some specific service categories pay 3% within the SBS regime; activities entirely excluded from SBS pay the standard PIT.

The regime exists to encourage formalisation of Georgia’s historically large informal small-business economy, but its effective consequence has been to attract foreign solo founders who can structure their work as Individual Entrepreneur activity.

Georgia is one of very few jurisdictions worldwide with a turnover-based regime applying at this revenue scale. Romania historically had a comparable regime but tightened it significantly in 2024; Georgia’s remained intact through 2026.

Who is eligible for Small Business Status?

To be eligible:

1. You must be registered as an Individual Entrepreneur. LLCs cannot elect SBS.
2. Your expected annual turnover must be under 500,000 GEL^[1].
3. Your activity must not fall into the SBS-excluded categories.
4. You must not be a VAT-registered person at the time of election (although VAT registration becomes mandatory above 100,000 GEL turnover regardless of SBS — the regimes coexist).

Foreign nationality is not a barrier. A foreign founder registered as a Georgian IE is fully eligible for SBS provided the four points above are met. Tax residency is similarly not a strict requirement for SBS itself (though most SBS recipients are Georgian tax residents in practice).

Which activities are excluded from SBS?

The Tax Code lists several categories of activity that cannot benefit from SBS at the 1% rate^[1]. The full list is published by the Revenue Service^[4], but the categories foreign founders most often encounter:

• Income from financial transactions, securities, derivatives — trading and investing income are not SBS-eligible.
• Income from gambling and certain regulated activities — casinos, lotteries, betting.
• Activities requiring a special permit or licence — medical practice, legal practice (i.e., a Georgian Bar–admitted lawyer cannot use SBS), audit, certain construction.
• Imports and customs-clearance activities.
• Income from rental of real estate — though this is sometimes ambiguously characterised; consult a Georgian accountant case-by-case.

A separate intra-SBS category applies to certain “personal services” — these stay inside SBS but are taxed at 3% instead of 1%. The Revenue Service has issued multiple clarifications over the years on what counts as “personal services”; verify the current characterisation of your specific activity before electing.

The 500,000 GEL threshold trap

The most consequential rule in the SBS regime is the threshold. Crossing 500,000 GEL of turnover in a calendar year while in SBS does not just disqualify you going forward — it retroactively recharacterises the entire year’s income at the standard PIT rate^[1].

Worked example: An IE with SBS earns 480,000 GEL through November and 30,000 GEL in December — total 510,000 GEL. The consequence is NOT that the December 10,000 GEL excess is taxed at 20%. The consequence is that ALL 510,000 GEL is recharacterised at 20% PIT (10% on net income with whatever deductions are admissible), with the SBS 1% payments treated as advance payments against that liability. The retroactive tax bill can be on the order of 80,000–100,000 GEL.

Best practice for founders approaching the threshold:

• Track turnover monthly. RS.ge dashboards make this easy.
• If approaching the threshold mid-year, defer late-year invoices into the following calendar year (legitimate business reasons only).
• Alternatively, incorporate an LLC and migrate the active business effective from a chosen date — the LLC’s revenue does not count toward the IE’s SBS turnover.
• If a single large invoice would cross the threshold, consider an LLC route specifically for that contract.

How does SBS interact with VAT?

SBS replaces income tax. VAT is a separate tax. The 100,000 GEL VAT registration threshold applies to SBS-status IEs identically to non-SBS IEs^[1]. An SBS IE crossing 100,000 GEL of rolling 12-month turnover must register for VAT and charge 18% on Georgian supplies.

For most foreign-founder SBS IEs, this matters less than it might seem because:

1. Cross-border B2B services use reverse charge.Selling SaaS or consulting to foreign B2B clients typically puts the VAT obligation on the client’s side under their domestic reverse-charge rules. The Georgian invoice is issued without Georgian VAT.
2. Cross-border B2C services may face foreign-MOSS rules.B2C sales to EU consumers can trigger EU VAT obligations via the EU’s MOSS-style framework, depending on volumes.
3. Domestic Georgian sales attract Georgian VAT.Selling to Georgian-resident clients triggers 18% Georgian VAT once registered.

A Georgian accountant should verify the VAT consequences before taking on a contract that significantly changes the mix of domestic-vs-cross-border revenue.

How do I actually apply for SBS?

The application process is short:

1. Be a registered Georgian Individual Entrepreneur (the IE registration must be complete before SBS can be elected).
2. Log into RS.ge with the IE’s credentials.
3. File the SBS election form. The form asks for the activity classification (which determines the 1% vs 3% rate or any exclusion).
4. Wait for Revenue Service confirmation. Usually issued within a few business days.

SBS is granted prospectively. The election takes effect from the date filed (or the start of the following month, depending on filing timing) — not retroactively. File on day one of IE registration to maximise the period under SBS treatment.