The Georgia 1% tax is one of the lowest regular tax rates available to self-employed professionals anywhere — not a special deal or loophole, but codified tax law. Freelancers register as an Individual Entrepreneur (I/E) and apply for Small Business Status (SBS): 1% income tax on turnover up to 500,000 GEL per year. New procedural rules apply as of July 2026 — know them before you file.
How the 1% model works
Small Business Status is a special regime for natural persons registered as Individual Entrepreneurs:
| Micro Business | Small Business Status | Standard | |
|---|---|---|---|
| Tax rate | 0% | 1% of turnover | 20% |
| Turnover limit | 30,000 GEL/year | 500,000 GEL/year | — |
| Employees allowed | |||
| Key condition | 15-day switch deadline when exceeded | monthly declaration required | also applies on reclassification |
Important: the tax base is turnover, not profit. For businesses with high cost ratios the standard regime can occasionally be cheaper; for typical freelancers with low operating expenses, the 1% model almost always wins. Above 500,000 GEL, 3% applies to the excess from the month the threshold is crossed; the status itself is only lost if the threshold is exceeded in two consecutive years. For Micro Business Status: once 30,000 GEL is exceeded, you must switch to SBS within 15 calendar days — otherwise 20% applies to the entire turnover.
SBS is available regardless of tax residency — non-residents can use it too. If you remain tax-resident in another country, assess the double-taxation exposure there. On residency itself, see Georgia tax residency.
New since 7 March 2026: three rule changes
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Immediate activation
The status takes effect on the day of application — previously from the following month. Your obligations also begin immediately.
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Monthly declaration even at zero revenue
The monthly tax declaration is now mandatory even for months with no turnover. Failure to file is treated as a tax offense.
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Lock-out after revocation
If the status is revoked (other than for exceeding the threshold), a new application is only possible in the following year.
Permitted and excluded activities
Not every activity qualifies: Decree #415 excludes certain business models — most notably consulting.
- IT and software development
- design and graphics
- copywriting and content creation
- marketing services (execution)
- e-commerce services
- consulting/advisory services
- certain licensed activities
The line between “marketing execution” (permitted) and “marketing consulting” (excluded) matters in practice and should be settled before registration — including the correct activity codes and contract wording.
Client mix: documenting genuine self-employment
The Revenue Service examines the substance of the relationship, not the contract title (GAAR, Art. 73.9 of the Georgian Tax Code). Employment income never falls under the 1% regime — it is always taxed at 20%. This reclassification risk targets disguised employment relationships, not genuine entrepreneurship: if you serve several clients in a balanced ratio, this is simply not your problem.
Rule of thumb: no single client above 85% of turnover — sound business practice against concentration risk anyway. What is critical are the classic indicators of an employment relationship: one dominant client, paid vacation, client-provided equipment, or client-paid health insurance. The Revenue Service uses a questionnaire with up to 40 questions; if reclassified, the consequences are 20% tax applied retroactively, penalties of up to 50%, plus interest (3-year statute of limitations).
VAT: usually irrelevant for export freelancers
VAT registration becomes mandatory once turnover reaches 100,000 GEL within 12 months — but the threshold counts only turnover that is taxable in Georgia. Export services to clients outside Georgia are not subject to Georgian VAT and do not count toward the threshold at all: freelancers serving only foreign clients generally remain VAT-free, subject to case-by-case review where the place of supply is in Georgia. Export freelancers also need no local work permit under the 2026 rules — see Digital nomads in Georgia. For passive foreign income, territorial taxation applies on top: Tax-free foreign income.
Registration: the process
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Pre-check
Activity profile reviewed against Decree #415, disguised-employment screening.
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I/E registration
At the Public Service Hall, including tax ID.
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SBS application
With the Revenue Service — effective immediately on the application day.
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Ongoing compliance
Monthly declarations (including zero months), monitoring of the 500,000 GEL and VAT thresholds.
Pricing (May 2026 price list): I/E formation from EUR 990, full package EUR 2,999 (formation, SBS, bank account, setup) plus EUR 1,999/year for ongoing support including monthly declarations. On banking, see Bank account in Georgia; for US LLC structures, see US LLC + Georgia.
FAQ
FAQ
How much tax do I pay with Small Business Status?
1% of turnover up to 500,000 GEL per year. Above that, 3% applies to the excess from the month the threshold is crossed. The tax base is turnover, not profit.
What changed for SBS on 7 March 2026?
Three things: the status now takes effect on the application day, the monthly declaration is mandatory even with zero revenue, and after revocation a new application is only possible the following year.
Can consultants use the 1% tax regime?
No. Consulting is an excluded activity under Decree #415. Permitted activities include IT/software development, design, copywriting, marketing execution, and e-commerce services.
Do I need to be a Georgian tax resident to use the 1% regime?
No, SBS applies regardless of tax residency. Without Georgian residency, however, you face double-taxation exposure in your home country — the income generally must be declared there.
When is a freelancer reclassified as a disguised employee?
When substance points to disguised employment: one client providing over 85% of turnover, paid vacation, client-provided equipment, or client-paid health insurance. Consequences: 20% tax retroactively, penalties up to 50% plus interest, with a 3-year statute of limitations.
This article is for general information only and does not constitute legal or tax advice. If you remain taxable in your home country, you must declare foreign income and accounts there — always involve a tax advisor in your home jurisdiction, especially before relocating. Last updated July 2026; rules may change.