Individual Entrepreneur with Small Business Status — the complete guide.

Why this page exists#

The IE service page tells you what you get and how Happy Georgia handles the setup. This page is for the reader who wants the full picture before committing to a jurisdiction.

Forming a business in a country you have no prior link to is a real decision. The questions worth answering before you commit aren't "is the rate really 1%" — they're "how does the rate actually work, what could go wrong, what does this look like in year three." This page covers those.

If you arrived here directly from a search, you can also skip ahead to the IE service page for the short version and pricing.

The 1% offer in detail#

A Georgian Individual Entrepreneur with Small Business Status pays 1% tax on turnover up to 500,000 GEL per calendar year — roughly €159,000 at current rates. The rate is calculated on gross turnover, not net profit. There are no deductions, no expense calculations, no depreciation schedules. You invoice 100,000 GEL in a month, you pay 1,000 GEL in tax. That's it.

The structure has three other clean properties:

No personal income tax on top. Income earned through your IE is taxed at the IE level. There's no separate personal income tax on the same money flowing back to you — it's already yours.

No VAT on services exported to foreign clients. Georgia treats B2B services to non-Georgian businesses as zero-rated for VAT purposes. If your clients are companies based outside Georgia, you have no VAT obligation regardless of turnover. The 100,000 GEL VAT registration threshold applies to domestic-supply revenue only.

No corporate overhead. No shareholders, no board, no audit, no minimum capital, no annual returns to file beyond your monthly tax declarations. The structure is administrative-light by design.

The combined effect: a Berlin freelancer billing €120,000 a year to clients in Germany, France, and the UK pays roughly €1,200 in Georgian tax annually. No VAT. No additional personal income tax in Georgia. The home-country tax position depends on residency and treaty rules, which we cover later.

The 500,000 GEL ceiling — what actually happens#

The 1% rate applies on the first 500,000 GEL of turnover each calendar year. Above that, two things can happen depending on whether you cross the ceiling once or repeatedly.

Crossing once. If your turnover crosses 500,000 GEL mid-year — say in October — January through September stays at 1%. From the month you cross, the rate on amounts above the ceiling moves to 3%. Everything earned below 500,000 GEL is still taxed at 1%; only the marginal amount above the ceiling sees 3%. The following January, you reset to 1% on the new year's first 500,000 GEL. Crossing once is not a structural problem. The regime is designed to absorb a single year above the threshold.

Crossing two consecutive years. If you exceed 500,000 GEL in two calendar years in a row, Small Business Status is cancelled and you must restructure. This is the actual risk to the structure — not the single-year overage. If you're trending toward this, the conversation about converting to a Virtual Zone LLC or International Company should start well before you cross the second time. Forced restructuring under deadline pressure is harder than planned restructuring.

In practice: the 500,000 GEL threshold is a soft ceiling. Most foreign solo professionals operate well below it (the Berlin freelancer billing €120,000 is at roughly €120k against the ~€159k ceiling — comfortable). The reader who needs to think hard about the ceiling is the one who's been growing fast and is on track for €200k+ years sustained.

Who Small Business Status is for#

The 1% rate is designed for solo professional services delivered to foreign clients. If you check all three of these, the structure almost certainly fits:

• You bill your own clients directly under your name (or your IE name)
• Your clients are mostly outside Georgia
• You work alone or with subcontractors, not employees

If any of these doesn't fit, the structure may still work but the eligibility test gets harder. Specifically: if you have a single Georgian-domestic client paying you a steady monthly amount under what looks like an exclusive ongoing engagement, the Revenue Service may classify the activity as disguised employment rather than independent business. We cover this in detail under "Eligibility" below.

The three eligibility conditions#

Anyone can register an IE in Georgia. Small Business Status — the layer that gets you to 1% — has three conditions. We confirm all three before recommending the structure.

Eligible activity#

Most professional services qualify. Software development, IT consulting, design, marketing, writing, translation, training, advisory work — all eligible. The Georgian tax code excludes a defined list of activities from Small Business Status. The exclusions cluster in three groups:

Financial services. Currency exchange, financial intermediation, investment advisory in regulated forms, lending — these don't qualify.

Regulated professional services. Legal services, notarial services, audit and tax consulting (including independent tax advisory), medical and architectural services. The reasoning is that these have separate professional regulation; the small business regime is not the right tax framework for them.

Activities requiring special licences. Most licensed activities are out of scope, with narrow exceptions (taxi operations in Tbilisi being the well-known case). Gambling, excise-goods production, and similar are excluded.

We check your specific activity against the full list before recommending the structure. If your activity falls in an excluded category, the IE registration itself is still possible at the standard rate — but we wouldn't recommend the structure for that situation. There are usually better options.

Independent business, not disguised employment#

This is the condition most people underestimate. The Revenue Service looks at the substance of how you actually work, not just the legal form on paper.

The clearest pass: multiple clients, project-based engagements, real autonomy in how and when you work, your own equipment, your own infrastructure, invoicing each client separately. This is what "independent business" looks like. Most foreign IT contractors, designers, consultants, and freelancers fit cleanly.

The clearest fail: one client paying you a regular monthly amount on an exclusive basis for years, with the client controlling your hours, supplying your equipment, and treating you operationally as a member of staff. This looks like employment with a tax-optimisation wrapper, and the Revenue Service may reclassify it.

The grey area: one main client during a project's duration, while you build other relationships. This is acceptable as a transitional state. It becomes a problem only if it ossifies into the indefinite-exclusivity pattern above.

In practice, the substance test is rarely a barrier for genuine foreign freelancers. The pattern that flags is the consultant who's effectively a remote employee of one company, structured as an IE for tax purposes. We assess the substance honestly in your consultation. If your situation is in the grey area, we say so and discuss whether adjustments are needed.

Turnover within the regime#

1% applies on turnover up to 500,000 GEL per calendar year. The mechanics — what happens if you cross once, what happens if you cross twice — are covered above. For most foreign solo professionals this condition is comfortable; for high-billing professionals approaching the ceiling, the conversation about converting to Virtual Zone LLC or International Company should start before forced restructuring becomes the only option.

VAT for IE with Small Business Status#

The Georgian VAT system is one of the cleaner aspects of the regime for foreign-client professionals.

The threshold. VAT registration is mandatory once your annual turnover from VAT-able transactions exceeds 100,000 GEL in any rolling 12-month period. Below that, no registration is required.

The B2B foreign-client exception. Services delivered to non-Georgian businesses are zero-rated under standard B2B rules — they don't count toward the 100,000 GEL threshold and aren't subject to VAT even after registration. For most foreign IE clients, this means VAT is simply not in scope. You can be billing €200,000 a year, all to clients outside Georgia, and have no VAT obligation.

The B2C and digital-services nuance. Services delivered to non-Georgian individual consumers may also be VAT-exempt depending on the delivery channel. Digital services rendered electronically to consumers outside Georgia are generally exempt; in-person services to foreign individuals visiting Georgia are usually not.

The Georgian-domestic case. If you have Georgian-domestic clients (whether businesses or consumers), those revenues count toward the 100,000 GEL threshold. Crossing it triggers VAT registration and 18% VAT on Georgian-domestic supplies. Foreign-client revenues continue to be zero-rated alongside.

For the typical foreign IE — a freelancer or contractor billing foreign clients — VAT is a non-issue. We cover the registration mechanics in your setup briefing if your specific situation needs it.

How Happy Georgia handles the setup#

Setup runs in two parallel tracks: IE registration with the National Agency of Public Registry, and Small Business Status application with the Revenue Service. We handle both end-to-end remotely.

Week 1. You send us a passport scan and any supporting documentation about your work. We send you a Power of Attorney template tailored to your jurisdiction and the specific filing instructions for your country's notary system.

Week 1–2. You get the Power of Attorney notarised and apostilled (where apostille is required) at a notary in your country. Most clients turn this around in 3–7 working days. The PoA is what enables us to file everything on your behalf without you traveling to Georgia.

Week 2. You ship the original documents to us. While the documents are in transit, we prepare your Georgian legal address registration, the IE filing package, and the Small Business Status application.

Week 2–3. Documents arrive. We file the IE registration at the National Agency of Public Registry. Standard processing: 3–5 business days. Once your IE is registered, we file the Small Business Status application with the Revenue Service.

Week 3. Small Business Status approval typically arrives within a few business days of the IE registration completing. The 1% rate becomes effective from the first day of the month following SBS approval. If you're set up in mid-March, you pay at the standard IE rate through March 31 and switch to 1% from April 1. We time the application to minimise this gap.

Week 3 onward. You're operational. You can begin invoicing clients immediately. We deliver your bank account file to your chosen bank — opening an account remotely takes another 1–3 weeks depending on bank and apostille timelines, but you can invoice and collect to your existing accounts during that period.

If you'd rather come to Tbilisi for the setup, we adjust the timeline. PoA notarisation in Georgia is faster and cheaper than the foreign-apostille route, and you also get the practical benefit of meeting our team and visiting the bank in person. Either way, the result is the same — IE registered, Small Business Status active, Georgian banking ready.

What you'll need from your side#

The full document checklist depends on your jurisdiction and your activity, but the core list is short:

• Passport (we use a high-resolution scan; original sent later for the PoA)
• Power of Attorney signed at a notary in your country, apostilled where required
• A short description of your business activity
• Information about your typical clients (geography, type of business, contract structure)
• Your home-country tax residency situation (we use this to flag any treaty considerations)

For most foreign clients in EU member states, the apostille process takes 3–5 working days. For non-EU clients, it varies — some jurisdictions issue same-day; others take several weeks. We check your specific country's process and give you a realistic timeline before you commit.

Common mistakes and how we prevent them#

A few patterns we see repeatedly in clients arriving from other firms:

Treating SBS as automatic. It isn't. Some setups we see were registered as IE without SBS being applied for separately, or with SBS denied because the application didn't address eligibility cleanly. The result is an IE paying the standard rate while believing it's at 1%. We check your situation before recommending SBS, and if approved we confirm the rate is active before considering setup complete.

The single-client substance problem. The most common eligibility failure. Clients who've structured themselves as a sole contractor for one previous employer don't always realise the structure looks like disguised employment to the Revenue Service. We assess this honestly. If the situation needs adjusting before SBS is viable, we say so before any money is spent on filing.

Mixing personal and business funds in one account. Legally permitted for IE, but operationally messy and a frequent source of bank questions later. We recommend a separate account from day one and prepare the bank file accordingly.

Ignoring the home-country tax position. The Georgian 1% rate doesn't override your home-country tax residency rules. If you remain tax-resident in your home country, that country's authorities may still consider your worldwide income (including Georgian-source income) taxable. Treaty provisions usually mitigate this but rarely eliminate it. We flag the question in every consultation; clients who need a clean answer typically combine the IE setup with Georgian tax residency or the HNW programme.

Falling into the prohibited-activity trap on a sub-activity. Some clients have a primary activity that qualifies (say, software development) but provide a secondary service that doesn't (say, regulated tax consulting). The mixed-activity pattern can complicate the SBS file. We check the full activity scope before recommending the structure.

IE with SBS or Virtual Zone LLC?#

The two structures most foreign solo professionals consider, and the comparison is worth being clear about.

IE with Small Business Status is right for solo work. Lowest tax, simplest setup, no corporate overhead, no Georgian team requirement. If you're a freelancer, consultant, or contractor billing clients yourself, this is almost always the right answer. The 1% rate is the lowest tax Georgia offers; you can't beat it elsewhere in the regime.

Virtual Zone LLC is right for software product companies with a real Georgian team. 0% corporate income tax on qualifying IT income from foreign clients, but the VZ status approval since 2022 effectively requires Georgian-based IT employees. Solo operators applying for VZ without local staff face high probability of rejection. The structure is designed for software businesses building product, not for individual contractors.

The decision usually maps cleanly: solo professional → IE with SBS; software product company with team → Virtual Zone LLC. The grey case is the solo developer who plans to build a Georgian team in year two or three. For that reader, we usually recommend starting with IE + SBS for year one (lowest tax, simplest setup, no Georgian-employee burden) and converting to a VZ LLC structure once the team is real. We handle the conversion when the time comes.

For a deeper comparison across all four structures (IE+SBS, Virtual Zone LLC, International Company, FIZ), see Compare structures.

Banking, residency, and tax residency#

The three adjacent topics that come up in nearly every IE consultation.

Banking#

A Georgian personal bank account in your own name is legally permitted for IE income — there's no requirement to open a separate business account. Most foreign IE clients use their personal account for IE turnover, which keeps the setup clean. If you prefer separation for record-keeping, we can open a second personal account or a dedicated business account at the bank. See Personal account for the banking offer.

The bank file is part of every IE setup. The clarity of your operating narrative (what you do, who your clients are, where the money comes from) directly affects the smoothness of the account opening. We prepare the file alongside the IE registration so the account is ready when the company is.

Residency#

An active Georgian IE with real activity supports certain residency permit applications. The IE itself is not designed primarily as a residency vehicle, but it is a relevant component for readers planning a longer-term setup in Georgia. The most common path: IE established → tax residence after 183 days → eventual permanent residence track.

Foreign founders and IE operators with foreign clients are categorically exempt from the 2026 work-permit rules under Law №1509 of April 2026. See Residency & Permit and Work Permit for the detail.

Tax residency#

This is the question many foreign clients underestimate. Your Georgian IE pays 1% in Georgia. What you owe in your country of residence depends on that country's rules and its tax treaty with Georgia.

Two clean paths exist for foreign clients who want clarity:

Spend 183+ days in Georgia in a calendar year. Automatic Georgian tax residency. Combined with the 1% IE rate, this can produce a very clean overall position depending on your home-country exit rules.

Apply through the HNW programme. Georgian tax residency without the 183-day requirement, available to readers meeting the asset and Georgian-income conditions. Often the cleaner path for readers who want Georgian tax-residency status while continuing to live across multiple countries.

The right path depends on your specific situation. We discuss it in your consultation alongside the IE setup.

Frequently asked questions#

Can I run an IE while living outside Georgia?#

Yes. The IE is set up remotely, monthly tax filings are digital, and there's no minimum stay in Georgia required to maintain the structure. Most of our IE clients live in Western Europe, Israel, the UK, or Asia and visit Georgia occasionally or not at all.

How long until I can invoice?#

Two weeks from the moment we have your documents. IE registration is 3–5 business days; Small Business Status approval runs in parallel.

Can I have employees as an IE?#

No. The IE structure is for solo work. If you need to hire, the cleanest path is a Virtual Zone LLC if you qualify, or an International Company structure. We handle the conversion when your situation requires it.

What if I cross 500,000 GEL?#

Crossing once mid-year: 1% on amounts below the ceiling, 3% on amounts above, reset to 1% the following January. Crossing in two consecutive years: SBS is cancelled, you must restructure. We monitor turnover with you and start the restructure conversation before forced timing.

Can I have Georgian-domestic clients?#

Yes. There's no rule against Georgian-domestic clients for IE with SBS. The eligibility test is on activity type and substance, not on client geography. If you take Georgian clients, the 100,000 GEL VAT threshold becomes relevant for those revenues — foreign-client revenues remain zero-rated and don't count toward the threshold.

What about my home-country tax?#

Your Georgian IE pays 1% in Georgia. What you owe in your country of residence depends on your country's rules and its tax treaty with Georgia. Most foreign clients structure their lives so their main tax residence is somewhere with clean treatment of foreign business income — sometimes Georgia itself, via tax residency or the HNW programme.

Does my IE help with Georgian residency?#

It can. An active Georgian IE supports certain residency applications. Foreign founders and IE operators with foreign clients are exempt from the 2026 work-permit rules. See Residency & Permit.

What activities are excluded from Small Business Status?#

Financial services (currency exchange, financial intermediation, regulated investment advisory), regulated professional services (legal, notarial, medical, architectural, audit, tax consulting), and most licensed activities. We check your specific activity against the full list before recommending the structure.

Can I apply for SBS later if I don't qualify now?#

Possibly. If your situation today doesn't pass the substance test (e.g. one main client looking like employment), the structure may become viable later as your client base diversifies. We assess your current position and tell you honestly when the structure becomes a fit.

How does monthly tax filing work?#

Filed electronically each month by the 15th of the following month, through the Revenue Service portal. Manageable from anywhere with internet. As of January 1, 2025, the declaration form changed — if you're managing your own filings, confirm you're using the current format. Most foreign clients use a Georgian accountant for the monthly filing; we can recommend one as part of the setup.

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Ready to set up?#

A free consultation tells us whether IE with Small Business Status is the right structure for your situation. If it is, we move to setup. If something else fits better — Virtual Zone LLC, International Company, or a different jurisdiction entirely — we tell you.

Book a free consultation · Back to the IE service page