1% Tax on Eligible Business Income: Georgia's Small Business Status

Most foreign freelancers, IT contractors, and consultants who explore Georgia for the first time hear the same headline number: 1% tax. Then they hear the qualifications, the activity restrictions, the turnover thresholds, the formal status applications — and many conclude that the headline must be too good to actually access.

That's the wrong conclusion. The 1% rate is real. It applies to genuine business turnover up to 500,000 GEL per calendar year for foreign nationals operating as Individual Entrepreneurs (IE) with the Small Business Status (SBS) designation. If turnover goes over that threshold, 3% applies from the start of the month in which it is exceeded until the end of the year — and the SBS designation is only lost after exceeding the threshold for two consecutive calendar years. Most foreign professionals operating internationally fit cleanly inside the eligible activities, well within the turnover ceiling, and access the regime without complication.

This article walks through what the 1% regime actually requires, what it doesn't, who genuinely qualifies, and the practical mechanics of operating under IE+SBS.

What the 1% rate actually is#

Georgia's tax framework for individual entrepreneurs operates through three distinct levels. Without a special status, an Individual Entrepreneur pays the standard 20% personal income tax on taxable income — business income minus deductible expenses. Small Business Status replaces that with 1% of turnover up to 500,000 GEL per calendar year, with no expense calculation needed. The Micro Business Status designation (a separate regime for very small operations with much lower turnover ceilings) sits below the SBS framework and isn't typically the right structure for foreign professionals operating at international rates.

The 1% rate applies to gross business turnover under SBS. There is no deduction for business expenses against the 1% calculation — the simplicity is the point. A freelance developer billing USD 100,000 annually pays 1% of that gross turnover converted to GEL, regardless of laptop costs, software subscriptions, or travel expenses. The rate is so low that the absence of expense deductions is structurally favorable rather than restrictive.

The 500,000 GEL threshold operates per calendar year. From January 1 to December 31, the IE accumulates turnover. While the running total stays at or below 500,000 GEL, taxable income is taxed at 1%. Once it exceeds 500,000 GEL, 3% applies to taxable income from the start of the month in which the limit was exceeded until December 31 — not only to the excess (Tax Code Art. 90(2)). Earlier months stay at 1%. From January 1 of the following year, the calculation resets and the IE returns to 1%.

The SBS designation itself is only at risk after exceeding the 500,000 GEL threshold for two consecutive calendar years. A single year of crossing the threshold doesn't lose the status. Two consecutive years of crossing does — the status ends from the start of the following year, and the IE is taxed under the standard regime (20% on taxable income) until it qualifies for and is granted SBS again. For most foreign professionals operating at international rates, structural awareness of the threshold is sufficient — the boundary doesn't require year-end revenue throttling for any practical purpose.

Tax declarations under SBS are filed monthly through the Revenue Service portal. Payment runs on a monthly cycle aligned with declaration submissions. Annual reconciliation occurs at year-end. The administrative burden is genuinely modest, and our monthly accounting service takes it off your hands: our team files the monthly declarations through delegated access to your Revenue Service account.

Who qualifies#

The eligibility framework for SBS is constructed around an exclusion list rather than an inclusion list. Most economic activities qualify; specific named activities are excluded. The exclusions cover financial services (such as currency exchange and financial intermediation), certain regulated professional services (legal, notarial, audit and tax-consulting, medical and architectural services) and most activities requiring a special licence, including gambling. We check your specific activity against the full list before you commit.

For the typical foreign professional reading this article — software developers, IT contractors, designers, marketers, consultants in non-regulated sectors, online business operators, content creators, e-commerce sellers — the work falls cleanly within the eligible categories. The regime was designed for exactly this kind of activity.

A few specific cases worth highlighting:

IT services, software development, technical consulting: Eligible. This is the core foreign-professional use case for IE+SBS. A freelance developer billing foreign clients for software work or an IT consulting practice serving international clients — both standard eligible structures. The regime is for independent businesses: where you work mainly for one former employer on an exclusive, salary-like basis, the arrangement can look like employment, and we check this before recommending the structure.

Marketing, design, content creation, copywriting: Eligible. Foreign agencies, freelance designers, content marketing professionals, video producers, and similar creative-services providers fit cleanly within SBS.

E-commerce, online sales, digital products: Eligible in most configurations. Operators selling digital products to international buyers, dropshipping operators, online course creators, and similar online business models qualify under SBS subject to the activity not falling into a regulated exclusion.

Coaching, training, professional consulting: Generally eligible. Specific consulting categories that intersect with regulated professions (legal advice, audit, tax consulting) face the regulated-services exclusions; general business consulting, executive coaching, and training delivery don't.

Trading, brokerage, financial advisory: Generally not eligible under SBS. Financial services activities are typically excluded; foreign professionals working in financial services typically need to use a regulated financial services structure rather than IE+SBS.

Legal practice, audit, medical practice: Excluded under SBS. These regulated professions require their own licensing frameworks; SBS is not the structure.

We check your activity against the exclusion list in a free consultation. Most assessments confirm eligibility quickly; borderline activities get an explicit review before you commit.

The VAT threshold#

The 1% turnover tax under SBS is independent of Value Added Tax. Two thresholds matter, and they're commonly confused:

The 500,000 GEL SBS turnover ceiling determines whether the 1% rate continues to apply on incremental turnover. Once turnover exceeds 500,000 GEL, 3% applies to taxable income from the start of that month until the end of the year (Tax Code Art. 90(2)), and after two consecutive years above the threshold the SBS designation is lost.

The 100,000 GEL VAT registration threshold is separate. Registration is required once an IE's VAT-taxable transactions exceed GEL 100,000 within 12 consecutive calendar months (Tax Code Art. 165(1)). VAT applies at 18% on taxable supplies (Art. 166); services to foreign business customers are often supplied outside Georgia for VAT purposes (Art. 162¹), depending on the customer and the service.

For many foreign professionals serving foreign business clients, those services are supplied outside Georgia for VAT purposes and carry no Georgian VAT. How they count toward the GEL 100,000 test depends on the service, so we check it before you rely on it. The 1% turnover tax under SBS applies separately.

For IEs whose VAT-taxable transactions, which can include services to Georgian clients, exceed GEL 100,000 within 12 consecutive calendar months, VAT registration becomes mandatory. The 1% rate under SBS still applies to the income tax side; VAT operates as a separate compliance regime alongside.

The structural result for the typical foreign-professional reader of this article: 1% on eligible turnover, and services to foreign business clients often fall outside Georgian VAT — we confirm both for your activity. The Georgian tax on that income is 1%; your home country's position is covered below.

Path to registration#

IE registration in Georgia runs through the National Agency of Public Registry, and Happy Georgia handles it for you remotely under Power of Attorney — see how remote setup works — so you don't need to be in Georgia.

First, IE registration itself: your passport documentation and a Georgian legal address, which we arrange if you don't have one. Registration completes within one business day in standard processing or same-day in expedited processing. You are registered as an Individual Entrepreneur — a registration of you as an individual, not a separate company.

Second, the Small Business Status application: a separate application to the Revenue Service straight after IE registration. Happy Georgia prepares and files your Small Business Status application and coordinates any required online interview, briefing you beforehand.

Third, ongoing operations: monthly tax declarations and payments through the Revenue Service portal, annual reconciliation, accounting and bookkeeping — the filing side handled by our monthly accounting service through delegated portal access.

For most foreign professionals, the registration step itself is short once the complete file is lodged; most of the lead time before that is your Power of Attorney being notarised, apostilled and couriered to Georgia, and we give you a timeline for your case at scoping. After that, monthly compliance becomes routine. The structure does not require the foreign IE owner to be physically present in Georgia, to spend any specific number of days in Georgia, or to maintain a Georgian residence for the IE+SBS framework to remain valid.

What IE+SBS doesn't do#

The regime is genuinely advantageous on its terms but does not solve every cross-border tax question, and overstating its scope can lead to misalignment elsewhere.

IE+SBS does not by itself create Georgian tax residency. Georgian tax residency is established separately — through 183 or more qualifying days in Georgia within a continuous 12-month period ending in the relevant tax year, or through the High Net Worth Tax Residency Programme. A foreign professional can register as IE+SBS in Georgia, operate the structure, pay 1% Georgian turnover tax, and remain a tax resident of their home jurisdiction under that jurisdiction's domestic rules. The IE+SBS regime addresses the Georgian taxation of business activity registered to a Georgian IE; it doesn't unilaterally exit the foreign professional from their original tax jurisdiction.

The interaction with the home jurisdiction's tax framework depends on the specifics. Some jurisdictions (the United States most notably, due to citizenship-based taxation) tax their citizens on worldwide income regardless of where the IE is registered or where the activity is performed. Other jurisdictions (most of Europe and many residence-based-taxation countries) apply tax based on where the individual is tax resident, with rules around what constitutes residency and what triggers loss of residency. Foreign professionals considering IE+SBS as part of a broader international structure should check the home-country position before relying on it — Georgia's 1% rate is genuinely 1% in Georgia, but the total cross-border position depends on what the home country does with it. Our cross-border planning review looks at how the two fit.

IE+SBS doesn't replace the work permit framework where it applies. Law №1509 of April 2026 added an exemption for work or services for non-resident clients connected with their activities outside Georgia (Article 1(4)(k) of the Law on Labour Migration). Government Ordinance No. 70, as amended in July 2026, excludes from it an IE who needs a residence permit to stay in Georgia lawfully, so the assessment of the specific activity and residence position is its own analysis — we check it for you. The IE+SBS structure addresses Georgian taxation; the labour migration framework operates in parallel.

IE+SBS doesn't apply to LLC structures. A foreign professional running a Georgian LLC — ordinary, or with Virtual Zone or International Company status — or a Free Industrial Zone company operates under that company's tax framework, not under SBS. The 1% rate is specifically a feature of the IE designation; LLCs have their own (often also favorable) tax structures, but those are different regimes addressed through different applications.

Who IE+SBS is genuinely for#

For a foreign professional evaluating Georgia, the IE+SBS framework is the right structure when:

• The activity falls within eligible categories under the Tax Code (most non-regulated services, IT, marketing, consulting, e-commerce, content)
• Annual turnover is at or below 500,000 GEL (or expected to remain so for the foreseeable future)
• Clients are primarily outside Georgia
• You work alone or with subcontractors, not employees
• The structure is needed for billing, compliance, and tax efficiency rather than for limited-liability protection
• The foreign professional's home-jurisdiction tax position is compatible with Georgian-source business income

For a foreign professional whose situation differs in material ways — multiple employees, substantial domestic Georgian business, regulated activities, turnover well above 500,000 GEL annually, complex limited-liability requirements — the appropriate structure is typically an LLC — ordinary, or with Virtual Zone or International Company status — or a Free Industrial Zone company, rather than IE+SBS. Each LLC framework has its own tax profile and registration mechanics; the right choice depends on the specific activity and turnover scale.

Most foreign-professional readers of this article fit the IE+SBS profile cleanly. A free consultation confirms the right structure before registration; once confirmed, we set out the timeline for your case — most of it is the Power of Attorney chain before registration — after which 1% Georgian turnover tax becomes the operating reality.

Read more about Individual Entrepreneur registration on the Company Setup pillar, or see the full IE guide.

See monthly accounting service tiers for IE structures.

Have a specific question about your case? Send us a message.