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 from the start of the month in which the threshold is crossed until year end — to all turnover earned from that point, not only the excess. The status itself is only lost if the threshold is exceeded in two calendar years, in each of them — the often-quoted “consecutive” does not appear in Art. 89(2)(a). 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 early March 2026: three rule changes
The legal basis is Order No. 38 of the Minister of Finance of 5 February 2026, published on 6 February 2026, amending the instruction on the application of special taxation regimes approved by Order No. 999 of 31 December 2010. It appears on matsne.gov.ge as the most recent consolidated version of that order. It states no calendar date: it enters into force “on the 30th day after publication”, which lands on 7 or 8 March 2026 depending on how the days are counted. The widely quoted “since 7 March 2026” is therefore a calculation, not a quotation.
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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
Where the status is revoked, a new application is possible only from the tax year following the year of revocation. The rule in Art. 12(6) of the implementing instruction applies to EVERY ground of revocation — it contains no carve-out for exceeding the turnover threshold.
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: registration starts at EUR 690 — for a sole trader as much as for an LLC, with the government fee included in every tier. Ongoing bookkeeping for sole traders starts at 250 GEL per month (roughly EUR 90), including the monthly declarations and the annual accounts. Every tier and add-on is itemised in What a Georgian Formation Really Costs. On banking, see Bank account in Georgia; for US LLC structures, see US LLC + Georgia. On when an LLC rather than a sole trader is the right legal form — and why the travel calendar decides that, not the tax rate: Sole Trader or LLC: Who Owns the Turnover for Tax.
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 from the month the threshold is crossed, to all turnover from then on rather than only the excess. The tax base is turnover, not profit.
What changed for SBS in early March 2026?
Three things, and one of them is usually overstated. The status takes effect on the day the application is filed rather than from the following month. After a revocation, a new application is possible only from the following tax year — on every ground of revocation, with no carve-out for exceeding the turnover threshold. On the monthly declaration, however, the duty itself did not change: it has followed from Art. 93(1¹) of the Tax Code since 2018 and applied in months without turnover too. What changed is the consequence of not filing — it no longer counts as a nil return filed. The legal basis is Order No. 38 of the Minister of Finance of 5 February 2026 amending Order No. 999.
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.
Sources
Every legal statement in this article is backed by the primary source listed below.
- Tax Code of Georgia, Art. 88 (small business status) and Art. 89 — Georgian original with version selector
- Revenue Service Georgia — registration and administration of the status