Small Business Status in Georgia 2026: Requirements, Application, and the Common Mistakes That Lose You the 1% Rate

Georgia's 1% tax rate is the headline that brings most international entrepreneurs to the country. The math is straightforward: register as an Individual Entrepreneur, apply for Small Business Status, and pay 1% on turnover up to 500,000 GEL per year. For a freelancer earning the equivalent of 150,000 USD, the annual tax bill comes to roughly 4,500 GEL. Almost no other jurisdiction offers something comparable for legitimate, declared income.

The headline is real. What gets missed is the operational picture behind it. Small Business Status is not a "set it up once and forget" structure. The Revenue Service can revoke it. Certain activities disqualify you instantly. And the monthly filing rhythm catches people out who assumed Georgia's tax system would be as automatic as the registration was.

This guide covers what Small Business Status (SBS) actually requires in 2026, how to apply for it, and the five operational mistakes that lose people the 1% rate after they have it.

What Small Business Status is

SBS is a special tax regime available to Individual Entrepreneurs (IEs) in Georgia. An IE is the simplest legal form a self-employed person can hold here. It is registered through the National Agency of Public Registry and operates under your personal taxpayer ID. SBS is then layered on top of the IE registration through the Revenue Service portal at rs.ge.

• •1% on gross turnover up to 500,000 GEL in a calendar year
• •3% on all turnover declared from the month you cross 500,000 GEL onward in that same year, not just on the portion above the threshold
• •You retain SBS for the remainder of that year, but if you cross the threshold in two consecutive years, the status can be revoked the year after

There is a lower tier called Micro Business Status (MBS), which applies a 0% tax rate on annual turnover under 30,000 GEL. MBS is rare in practice for active entrepreneurs because the ceiling is low, but it exists and is worth knowing about if you are testing a side project before committing.

Who qualifies

To qualify for SBS in 2026, you must meet all of the following conditions:

1. 1.Be registered as an Individual Entrepreneur in Georgia. This is a prerequisite. You cannot get SBS as a private individual or as an LLC.
2. 2.Project annual turnover under 500,000 GEL. The status is granted on the basis of an expected ceiling. Cross it in any year and the 3% rate kicks in from the month of the crossing.
3. 3.Operate the business yourself. SBS is for solo operators. You can hire help, but the business should be substantively run by you. Sleeping partners and pass-through arrangements raise red flags.
4. 4.Be in a permitted activity. The Tax Code excludes specific professional categories from SBS. This is where most disqualifications happen.

The excluded-activities trap

This is the part competitor guides skim over, and it is the most common reason a Revenue Service audit ends in revocation.

SBS is not available for the following activities (representative list, not exhaustive):

• •Consulting and advisory services of almost any kind. This is the single most common disqualifier in practice. Management consulting, business consulting, marketing consulting, strategy advisory, HR consulting, IT consulting, all fall outside SBS. The Revenue Service interprets "consulting" broadly, so labeling your work as something else will not protect you if the substance of the work is advisory.
• •Licensed activities (medical practice, pharmacy, certain financial services)
• •Notary and legal services
• •Tax advisory, audit, and bookkeeping services
• •Architectural services
• •Currency exchange and other financial intermediation
• •Gambling
• •Production of excisable goods (alcohol, tobacco, fuel)
• •Trade in goods that are not produced by the IE themselves (i.e., pure resale activities, with some narrow exceptions)

An IE registered under a permitted activity code, but whose invoices and contracts show advisory or consulting work, will be reclassified by the Revenue Service, often retroactively. The activity code on the registration form is not what protects you. The nature of the work you actually invoice is.

If you are not certain your activity qualifies, talk to an accountant before you register, not after.

How to apply: the actual steps

The application is submitted digitally through rs.ge. Plan for the process to take longer than a single working day, especially if your activity description sits anywhere close to the consulting/advisory line.

1. 1.Register as an Individual Entrepreneur. This happens at the National Agency of Public Registry. You will need your passport, a Georgian phone number, and a registered address in Georgia. Foreign nationals can register an IE without being Georgian tax residents, but the address requirement is real.
2. 2.Get rs.ge access. Once your IE is active, you receive a username for the Revenue Service portal. Two-factor authentication is via SMS to a Georgian phone number. This is a hard requirement. International phone numbers will not receive the authentication codes.
3. 3.Submit the SBS application through rs.ge. Inside the portal, navigate to your taxpayer profile and submit the application for Small Business Status. The form asks for your activity description and the basis on which you expect to qualify.
4. 4.Confirmation. Under updated 2026 rules, the status becomes effective on the date the request is submitted, rather than from the start of the following month as under previous practice. This is a meaningful improvement if you are mid-year and want SBS to apply immediately.
5. 5.Set up monthly filing. SBS requires a monthly declaration on rs.ge by the 15th of the following month. Miss it, and you start accumulating late-filing penalties.

How the 1% rate actually calculates

A worked example, because the percentage is misleadingly simple.

You are a software developer. In June you invoice three clients and receive payments totaling 12,000 GEL into your business account. You also receive a 1,500 GEL refund from a hotel because you cancelled a trip, and your sister transfers you 800 GEL because she owes you for splitting rent.

Your declarable turnover for June is 12,000 GEL (the client invoices). The hotel refund is not revenue. The transfer from your sister is not revenue. These get separated before you touch the rs.ge form.

Your tax for June: 12,000 x 1% = 120 GEL, due by July 15.

If in November your turnover pushes year-to-date receipts past 500,000 GEL, the 3% rate applies to the full turnover declared in November and every month after that, not just the portion sitting above the threshold. If November's total declared turnover is 60,000 GEL and it pushes you past 500,000 GEL for the year, the November tax is 60,000 x 3% = 1,800 GEL. Any further turnover in December is also at 3%. If you cross the threshold again the following year, SBS can be revoked going forward.

The five mistakes that lose you the 1% rate

After helping clients with SBS revocation appeals, these are the recurring failures.

1. 1.Declaring activities you do not actually perform. People sometimes register under a broad activity code thinking it gives them flexibility. The opposite is true. If your activity description does not match your actual work, the Revenue Service will reclassify, often retroactively.
2. 2.Treating SBS as automatic and skipping monthly declarations. A common mistake among foreigners who assume the system is similar to PAYE or annual filing regimes elsewhere. Georgia requires monthly action even when turnover is zero. Filing a zero-turnover declaration is still required.
3. 3.Mixing personal and business banking. SBS uses your personal taxpayer ID. The Revenue Service still expects you to know which inflows are business turnover. If your account is a tangle of business invoices, personal transfers, refunds, and reimbursements, an audit becomes painful fast. The fix is a dedicated business account, even though one is not technically required.
4. 4.Earning income from prohibited activities and assuming the 1% still applies. If you have SBS for a permitted activity but also receive consulting fees that fall under an excluded category, those consulting fees do not qualify for the 1% rate. They get taxed under the standard regime. You cannot blend.
5. 5.Crossing 500,000 GEL without restructuring. SBS becomes economically inefficient above the threshold. The 3% rate on excess turnover starts to compete with what you would pay through an LLC with smart distribution timing. Most entrepreneurs who reach 500,000 GEL annually should at least review whether an LLC structure makes more sense from year three onward.

What SBS looks like month-to-month

Once SBS is active, the following recurring obligations apply on an ongoing basis:

• •By the 15th of each month: File the previous month's turnover declaration on rs.ge. Pay 1% of declared turnover from a Georgian bank account.
• •Annually: A simplified annual reconciliation. No formal financial statements are required from IEs with SBS.
• •Record keeping: Keep invoices, contracts, and bank statements for at least six years. The Revenue Service can audit back this far.
• •VAT awareness: The 100,000 GEL VAT registration threshold applies only to Georgian-source turnover. Income from foreign clients (export of services to non-residents) is generally outside the scope of Georgian VAT and does not count toward the threshold.

There is a second VAT layer most international-facing entrepreneurs miss: reverse-charge VAT. When you purchase services from a foreign supplier (for example a SaaS subscription, an overseas marketing agency, or an international contractor), Georgian VAT rules require you to self-account for VAT on that purchase. This applies regardless of whether you are VAT-registered and the obligation is real even at modest spend levels.

When to outgrow SBS

Three signals that suggest you should look at restructuring out of SBS into an LLC:

• •Your annual turnover has been above 500,000 GEL for two consecutive years.
• •You are hiring employees and the management complexity of running everything through your personal tax ID is creating risk.
• •You are taking on investors, applying for loans, or selling to enterprise clients who want to contract with a legal entity rather than an individual.

An LLC in Georgia operates under the 15% corporate income tax on distributions (an Estonian-style retained-earnings exemption) plus 5% dividend withholding tax. With careful distribution timing, the effective rate can be very competitive against a 3% SBS rate at the higher end. The decision is rarely just about the headline percentage.

The next structure is not always an LLC; sometimes it is a partial split (a side LLC for high-margin work, SBS retained for the rest). Talking it through before the calendar year flips is much cheaper than restructuring mid-year.

FAQ

Can a non-resident foreigner get SBS?

Yes, as long as you have registered the IE in Georgia. You do not need to be a Georgian tax resident to register or to hold SBS. You do need a Georgian phone number for rs.ge authentication and a Georgian bank account for tax payments.

Can I have SBS and a job at the same time?

Yes. Salary income from an employer is taxed separately under personal income tax and does not affect your SBS turnover ceiling.

What happens if I file late?

Late filing penalties begin accumulating. The Revenue Service issues notices, and persistent non-filing can lead to status revocation. The fix is usually fast if you act on the first notice.

Do I need an accountant for SBS?

Legally, no. Practically, yes for most foreigners. The combination of Georgian-language portal interfaces, monthly rhythm, rs.ge two-factor authentication tied to Georgian phone numbers, and the cost of getting an excluded-activity classification wrong make a small monthly fee very worthwhile.

Can I change my activity later?

Yes. You can update your activity declaration through rs.ge. Doing this proactively (when your actual work changes) is much safer than waiting for the Revenue Service to flag a mismatch.