Pay 1% Tax. Keep 99% of Your Business Income.

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 (approximately USD 180,000 at current exchange rates) for foreign nationals operating as Individual Entrepreneurs (IE) with the Small Business Status (SBS) designation. Above that threshold, only the excess is taxed at 3% — 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. Standard IE registration without SBS designation taxes business turnover at the regular 20% personal income tax rate. The Small Business Status designation reduces that to 1% on turnover up to 500,000 GEL per calendar year. 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 running total stays at or below 500,000 GEL, all turnover is taxed at 1%. The moment running total exceeds 500,000 GEL, only the excess above that threshold is taxed at the higher 3% rate — not the full year's turnover. The portion at or below 500,000 GEL remains taxed at 1%. From January 1 of the following year, the calculation resets and the IE returns to 1% on the first 500,000 GEL of new-year turnover.

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 — and at that point the IE moves to standard IE rates (20%) until SBS is reapplied for and granted. 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: a registered local accountant typically manages monthly compliance for IE+SBS structures at routine fixed monthly fees.

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 exclusion categories under the Tax Code cover regulated and licensed activities where the SBS regime would create misalignment with the regulatory framework — financial services, legal practice, audit and accounting services rendered to third parties, medical practice, gambling and lottery operations, currency exchange, certain consulting categories, and other activities specifically named in the Tax Code's SBS provisions.

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, foreign-employer remote workers structuring as IE — 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, a foreign-employer remote worker structuring their relationship as IE+contractor rather than employee, an IT consulting practice serving international clients — all standard eligible structures.

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, formal audit, certified financial planning) 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.

A pre-engagement assessment of the specific activity against the SBS exclusion list is standard practice — most assessments confirm eligibility quickly, but borderline activities warrant explicit review before commitment.

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. Above 500,000 GEL, the excess is taxed at 3% (under SBS rules), and after two consecutive years above the threshold the SBS designation is lost.

The 100,000 GEL VAT registration threshold is separate. Under Georgian VAT law, an IE whose annual turnover exceeds 100,000 GEL on domestic-supply transactions becomes obligated to register as a VAT payer. VAT applies at 18% on domestic transactions; foreign-services exports are typically zero-rated and don't count toward the registration threshold.

For most foreign professionals serving foreign clients (software development for international clients, marketing services exported abroad, consulting for non-Georgian companies), the VAT threshold is not triggered because the relevant turnover is foreign-services export turnover — which is zero-rated for VAT purposes and doesn't accumulate against the 100,000 GEL domestic-supply threshold. The IE retains 1% turnover tax under SBS without VAT registration obligations.

For IEs serving Georgian-domestic clients above 100,000 GEL annually, 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 income tax, no VAT obligations on foreign-services exports. Total tax burden on international business income operates at approximately 1% before annual filing administration costs.

Path to registration#

IE registration in Georgia operates through the National Agency of Public Registry. The process is straightforward and can be executed remotely through Power of Attorney without physical presence in Georgia.

First, IE registration itself: documentation including passport, address proof, and a Georgian legal address (typically provided through a service provider for foreign nationals without an existing Georgian address). Registration completes within one business day in standard processing or same-day in expedited processing. The IE structure is established as a legal entity with the foreign national as the IE owner-operator.

Second, Small Business Status application: a separate application following IE registration, submitted through the Revenue Service. The application confirms the activity falls within eligible categories and requests the SBS designation. SBS is typically granted within standard processing timelines provided the activity assessment confirms eligibility.

Third, ongoing operations: monthly tax declarations and payments through the Revenue Service portal, annual reconciliation, accounting and bookkeeping (typically outsourced to a Georgian accountant at routine monthly fees).

For most foreign professionals, the entire IE+SBS engagement from initial documentation to active operating status completes within two to three weeks remotely, after which 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 the 183-day physical presence test 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 verify the home-jurisdiction implications independently — Georgia's 1% rate is genuinely 1% in Georgia, but the total cross-border position depends on what the home country does with it.

IE+SBS doesn't replace the work permit framework where it applies. Most foreign IE owners operating internationally fall under one of the work permit exemption sub-clauses introduced by Law №1509 in April 2026 (sub-clause L for non-resident-client services being the most common), but the assessment of the specific activity against the exemption framework is its own analysis. 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 (Virtual Zone, International Company, FIZ) operates under the relevant LLC 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 foreign (avoiding the 100,000 GEL VAT registration threshold)
• The foreign professional is the operator (no employees, or very small operational footprint)
• 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 (Virtual Zone, International Company, FIZ) 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 clear pre-engagement scoping conversation confirms the right structure before registration; once confirmed, the IE+SBS engagement runs to completion in two to three weeks remotely, after which 1% Georgian turnover tax becomes the operating reality.

Read more about Individual Entrepreneur registration on the Company Setup pillar.

See monthly accounting service tiers for IE structures.

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