Small Business Status in Georgia — the 1% tax regime explained

Small Business Status is a special tax treatment under Chapter XII of the Georgian Tax Code. It is what turns an ordinary Individual Entrepreneur, taxed at 20%, into the "1% tax" arrangement Georgia is known for.

The rate

Article 90(1) is short and unambiguous:

Taxable income of a person having the status of a small business shall be taxed at 1%.

The tax base is turnover, not profit. You cannot deduct rent, equipment, subcontractors or software. If 200,000 GEL passes through your business, you owe 2,000 GEL — regardless of what it cost you to earn it.

Article 90(3) narrows the base in two useful ways: taxable income under this regime is income from a Georgian source, and salary income is excluded.

The 3% rule, and what almost everyone gets wrong

Pass 500,000 GEL of gross income in a calendar year and Article 90(2) raises your rate to 3%.

Nearly every explanation online stops there, and leaves you assuming the 3% applies only to the amount above 500,000. It does not. The statute says the higher rate applies:

from the beginning of a respective month (a month when the excess of the GEL 500 000-limit […] has been recorded) until the end of the calendar year.

In plain terms: the moment you cross, the whole of that month and every remaining month of the year is taxed at 3%. Only turnover from the months before the crossing stays at 1%.

The practical consequence is that when you cross matters as much as whether you cross:

• Cross in November, and only two months sit at 3%.
• Cross in March, and ten months do.

Two businesses with identical annual turnover can owe materially different amounts depending purely on the shape of their year. The calculator models this month by month, which is why its answer sometimes differs from simpler tools.

Losing the status

Article 89(2) sets out the grounds for revocation:

• Gross income exceeded 500,000 GEL in each of two consecutive calendar years — status is revoked from the start of the following year (Article 89(3))
• You applied for revocation yourself
• You carried on an activity barred under Article 88(2) — revoked from the beginning of the calendar year (Article 89(4)), which can make the whole year retrospectively taxable at 20%
• You were fined three or more times in a calendar year over cash register rules
• You stopped meeting the basic requirement of being an entrepreneur natural person

The third one deserves attention. Revocation for a prohibited activity is backdated to January, not applied from the date of discovery. That converts a compliance problem into a retrospective tax bill.

The obligations that come with it

• Monthly declarations, filed and paid by the 15th of the following month (Article 93(1¹)).
• A special book of records must be maintained (Article 91(1)). You do not submit it monthly, but it can be requested.
• Losses do not carry forward to the next year (Article 91(5)).

How it compares

If you earn under 30,000 GEL, Micro Business status pays no income tax at all under Article 86 — worth checking before defaulting to 1%.

Is it right for you?

The honest answer depends almost entirely on your margin. Above roughly 5% profit margin, the 1% regime wins. Below it, taxing turnover instead of profit costs you more than the standard 20% would. Put your real numbers into the calculator rather than relying on the headline rate.