Georgia's 1% Tax Explained

Georgia's 1% tax is real, but it is narrower and more conditional than most of the content written about it suggests. This article explains what the regime actually is, who it was designed for, and the points where people get it wrong.

What the 1% actually applies to

The 1% rate is not a corporate tax rate and it is not a personal income tax rate in the usual sense. It applies to an individual registered in Georgia as an Individual Entrepreneur who has been granted Small Business Status, and it is charged on qualifying turnover rather than on profit.

That distinction matters more than anything else on this page. Because the tax is calculated on gross qualifying turnover, business models with high revenue and thin margins can end up worse off under a turnover tax than under a profit-based system, while service businesses with very low costs tend to benefit most.

The structure in plain terms

Three separate things have to line up, and they are often confused with each other:

• Registration — you register as an Individual Entrepreneur in Georgia.
• Status — you apply for, and are granted, Small Business Status.
• Compliance — you keep turnover within the applicable threshold, stay out of the excluded activities, and file on time.

Where the threshold comes in

Small Business Status is subject to an annual turnover threshold. Turnover above that level is treated differently, and repeated breaches can put the status itself at risk rather than simply changing the rate on the excess.

In practice this means the regime suits entrepreneurs whose revenue is comfortably inside the threshold, or who understand in advance what happens as they approach it. Growth planning is part of the tax planning, not something to deal with later.

Excluded and restricted activities

Certain activities are excluded from Small Business Status altogether. Consulting is the most commonly discussed area, because how the work is characterised and documented can affect whether the activity is treated as eligible. Regulated and licensed activities, and some goods-based and financial activities, need closer review before anything is registered.

This is the single most important reason not to register first and ask questions afterwards. Restructuring after the fact is slower, more expensive and more visible than getting the characterisation right at the start.

The part almost nobody mentions: your home country

Georgian registration does not, by itself, end your tax exposure elsewhere. Your home country decides where you are tax resident under its own rules, and many countries look at days present, where your permanent home is, where your family lives and where your economic interests sit.

If you remain tax resident somewhere else, you may still have reporting and payment obligations there on the same income. Controlled foreign company rules, permanent establishment risk and double tax treaty positions all sit in this space, and they are jurisdiction specific.

Who the regime genuinely suits

In our experience the strongest fits are location-independent service businesses with low cost bases, a genuine intention to spend meaningful time in Georgia, and revenue inside the threshold. The weakest fits are high-turnover product businesses, regulated activities, and people who want the tax outcome without changing where they actually live.

Frequently asked

Is the 1% tax a company tax?

No. It applies to an individual registered as an Individual Entrepreneur with Small Business Status, on qualifying turnover. Georgian companies are taxed under a different system.

Do I have to live in Georgia to use it?

Registration and residency are separate questions, but ignoring where you are actually tax resident is the most common and most expensive mistake people make.

Can my activity be refused?

Yes. Some activities are excluded from Small Business Status, so the characterisation of what you do should be reviewed before registration.