Opening a sole proprietorship in Georgia and obtaining Small Business Status with a 1% tax rate is one of the most popular goals among entrepreneurs, relocators and freelancers. The reason is simple: with annual turnover up to 500,000 GEL you pay just 1% of revenue, registration takes about a day, and no minimum share capital is required. This article breaks the procedure down step by step, shows real figures and warns you about the pitfalls.
What Small Business Status Means in Georgia
A sole proprietor (individual entrepreneur) in Georgia can apply for a special regime — Small Business Status. It applies a 1% rate to turnover, not profit. This is the key point: expenses are not deducted from the tax base.
- The tax is calculated on all incoming revenue.
- The turnover ceiling for the 1% rate is 500,000 GEL per year.
- For agritourism the threshold is higher — 700,000 GEL.
- If you exceed the limit, the portion of turnover above 500,000 GEL is taxed at 3%.
If you exceed the threshold two years in a row, Small Business Status is removed from January 1 of the third year, and you move to the standard regime (20% income tax).
Who the 1% Regime Suits
The regime benefits those with high margins and low costs: consultants, IT specialists, designers, marketers, tutors and service providers. If your business involves large purchases (for example, reselling goods with a 10–15% markup), then 1% on full turnover may not be worthwhile — in that case it's worth running the numbers on other regimes.
A special mention for Micro Business: if turnover does not exceed 30,000 GEL per year and you have no employees, the rate is 0%. This is the starting option for those just testing the waters.
Registering a Sole Proprietorship Step by Step
Step 1. Prepare your documents
You'll need a passport and an address for registration in Georgia. A foreigner does not need a residence permit to open a sole proprietorship.
Step 2. Register with the House of Justice (NAPR)
The sole proprietorship is registered through the House of Justice (Public Service Hall) or the National Agency of Public Registry. The procedure takes about one business day and the state fee is nominal. You receive a taxpayer identification number.
Step 3. Tax registration (rs.ge)
After registering the sole proprietorship, you need to register with the Revenue Service and file an application for Small Business Status. The status is granted, and the 1% rate takes effect from the beginning of the following month.
Step 4. Open a bank account
To receive payments, open an account with a Georgian bank (TBC, Bank of Georgia and others). Banks sometimes request additional documents from non-residents — allow extra time.
Step 5. Cash register and reporting
A sole proprietor on the 1% status files a monthly turnover declaration by the 15th of the following month and pays the tax.
How Much You Actually Pay: An Example
| Annual turnover | Rate | Tax for the year |
|---|---|---|
| 100,000 GEL | 1% | 1,000 GEL |
| 300,000 GEL | 1% | 3,000 GEL |
| 500,000 GEL | 1% | 5,000 GEL |
| 600,000 GEL | 1% up to 500k + 3% above | 5,000 + 3,000 = 8,000 GEL |
At an exchange rate of around 2.7 GEL per dollar, a turnover of 300,000 GEL is roughly 111,000 USD, and the tax is only about 1,100 USD per year.
Important Nuances and Limitations
- Some activities are not eligible for the 1% status (for example, certain licensed services and particular kinds of consulting). It's best to check the list in advance.
- Once turnover reaches 100,000 GEL, you become obligated to register for VAT (18%) — a separate burden and reporting requirement.
- The 1% status is a regime for sole proprietors; it does not replace the corporate regimes available to companies (LLC).
Tax rules in Georgia change from time to time — always verify them on the official rs.ge portal or with a tax advisor before registering.
Conclusion
Small Business Status with a 1% tax makes Georgia one of the most attractive jurisdictions for entrepreneurs and remote professionals. But the benefit depends on the structure of your business: with high margins the regime is almost ideal, while with large purchases it's worth comparing alternatives. To choose the right regime and complete registration correctly, the Angels Investment team will provide a free consultation and support you at every step.
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FAQ
Do you need a residence permit to open a sole proprietorship in Georgia?
No. A foreigner can register a sole proprietorship with a passport, without a residence permit.
Can you work with foreign clients on the 1% status?
Yes, Small Business Status does not restrict where your clients are located. The key is to report turnover correctly.
What happens if you exceed 500,000 GEL?
Turnover above the limit is taxed at 3%. If you exceed it two years in a row, the status is removed from January 1 of the third year.
Do you need to register for VAT?
Yes, once turnover reaches 100,000 GEL, VAT registration is mandatory.
How often do you file reports?
The turnover declaration is filed monthly, by the 15th of the following month.