Мы предлагаем услуги по «регистрации малого бизнеса» (налог 1%)

What is small business?

“Small Business” is a special tax regime applied to a certain type of individual taxpayers (entrepreneurs/freelancers) if they meet the criteria provided by law, register as a taxpayer in Georgia, apply for and receive the status (certificate) of “small business” from the Georgian Tax Administration.

«Small business» isn’t a legal form of taxpayer status per se. «Registering as a small business» is a commonly used term, but it’s not legally accurate. You register as a sole proprietor or simply as an individual taxpayer (depending on your activity) and subsequently receive a «small business» certificate/status if you meet all the required conditions.

However, obtaining small business status and a 1% tax in Georgia isn’t as easy as it first appears. First, you need to ensure you truly meet all the criteria for small business status and that there’s no risk of this status being revoked.

We offer a full package of small business services for individuals:

• Primary tax analysis;
• Business registration;
• Opening a bank account;
• Provision of a legal address;
• Registration with the tax office;
• Obtaining the status of a “small business”;
• Accounting/reporting services for small businesses.

What tax breaks apply to «small businesses»?

Individuals with small business status are subject to income tax at a rate of 1% instead of the standard 20%. It is noteworthy that small business status does not provide an exemption from VAT. VAT will be applied to small businesses in the same way as other taxpayers once the turnover threshold of 100,000 GEL is exceeded in 12 months. However, if an individual provides services to foreign clients, VAT will most likely not apply (individual bases are subject to analysis).

How to register a small business in Georgia?

To get started, you need to meet the following requirements for a small business:

• Your annual income (taxed at 1%) does not exceed the threshold of 500,000 Georgian lari for 2 consecutive years;
• Your business activity falls under the category of “permitted activities for small businesses”;
• Your contractual relationship with the client(s) is not, by its nature, an employment relationship (regardless of the title of the contract);
• The Georgian Tax Administration does not have a legal basis to re-qualify your transaction for tax purposes, which may result in the abolition of the 1% tax regime.

The tax rate is 1% in Georgia.

Georgia’s 1% tax rate doesn’t apply to earned income, and the title of your contract with the client(s) isn’t crucial. The Georgian Tax Administration uses a specially designed questionnaire to determine whether your contract is an employment contract or a service contract. You can read our article here about the risk that the Georgian Tax Administration may reclassify your contract from a «service contract» to an «employment contract.»

You can read more about taxation, risks, and tax benefits for small businesses in Georgia in our article here .