Georgia's 1% Tax: How Small Business Status Really Works

The “1% tax” is the main reason freelancers and IT specialists choose Georgia. The number is real, but a lot of oversimplification has grown around it. Here’s how the regime actually works — without the marketing gloss.

What the regime is

Small business status is a special tax regime for individual entrepreneurs. Instead of the standard 20% on net profit you pay 1% of turnover (not profit — all incoming revenue). The status is granted free of charge through the tax office and takes effect from the 1st day of the month after you apply.

Key parameters:

• the limit — 500,000 GEL of turnover per calendar year (~$185,000);
• above the limit the rate becomes 3% — from the month you exceed it until the end of the year;
• if turnover exceeds 500,000 GEL two years in a row, the status is revoked;
• declarations — monthly, by the 15th, online via your rs.ge account.

For comparison: most European freelancers face 20–45% income tax plus social contributions. In Georgia there are no contributions at all — 1% really is the entire tax load on the Georgian side.

Who doesn’t qualify

The most common unpleasant surprise: small business status is not available for every activity. The exclusion list includes, among others:

• consulting services — yes, the word “consulting” in your invoices can cost you the reduced rate;
• legal, audit and notary services;
• medical and architectural activity;
• licensed activities, currency operations, gambling.

Programming, design, marketing services, copywriting, marketplace sales — these qualify. But the wording of your contracts and invoices matters: if your services can be read as “consulting”, the tax office may recalculate everything at 20%. This is the case where half an hour with a good accountant before you start saves thousands of dollars afterwards.

VAT: the part people forget

The 1% status does not cancel VAT. If your taxable turnover in Georgia exceeds 100,000 GEL over any 12 consecutive months, you must register for VAT (18%). Good news for those working with foreign clients: exported services are generally zero-rated — but the accounting still has to be done, and here too it’s worth asking a specialist once.

Pitfalls to check before you commit

1. Your home country’s taxes. Georgia has double taxation treaties with 50+ countries — but whether the Georgian 1% closes the matter depends on your tax residency. If you spend most of the year in your home country, calculate the combined burden in advance.
2. Bank compliance. Bank of Georgia and TBC review foreign applicants: source of funds, line of business. With prepared documents the pass rate is much higher.
3. The 2026 work permit. Since 1 March 2026 Georgia has a new labour migration law; for the self-employed and IEs the rules apply from 1 May 2026. Registering an IE now goes hand in hand with your migration status — details in the step-by-step IE guide.

Bottom line: who the regime is for

If you’re a freelancer or remote worker earning up to ~$185,000 a year, your activity isn’t on the exclusion list, and you can send one declaration a month — small business status gives you a tax burden that exists almost nowhere else: 1% and zero contributions. Over the years that’s thousands of dollars annually.

Not sure whether your activity qualifies for the 1% or what to do about the bank — let’s go through it on a consultation. And if you’re choosing between an IE and a company, start with the IE vs LLC comparison.