Small Business Status for 1% Freelancers: Conditions and Limit

For a freelancer moving to Georgia, small business status with a 1% tax is one of the most favorable regimes in the region. However, the benefit works only if the conditions are met: turnover limit, permitted activities, and correct registration of an individual entrepreneur (I/E). Below you will find out how a freelancer can obtain small business status and not lose it.

How the 1% mode works

Small business status is granted to individual entrepreneurs and is taxed at a rate of 1% on turnover (not profit) up to GEL 500,000 of annual turnover. This is especially advantageous for high-margin freelancers: the tax is calculated from income and no proof of expenses is required. If turnover exceeds GEL 500,000 during the year, income above the threshold (from the month of the excess) is taxed at a rate of 3% until the end of the year.

What happens when the limit is exceeded?

A one-time excess does not automatically deprive the status — but if the turnover exceeds 500,000 GEL for two consecutive years , the small business status is canceled from the next tax year and the entrepreneur switches to the regular regime. For certain activities (e.g. agritourism), an increased threshold of 700,000 GEL applies.

Who is suitable and who is not?

The regime is intended for independent contractors: IT specialists, designers, marketers, translators, consultants who work with foreign clients. However, the Georgian Tax Code excludes some areas from small business status.

Activities that take away 1% status

• Licensed and regulated activities (with separate exceptions);
• Gambling;
• Production and circulation of excisable goods;
• Staffing;
• Currency exchange and cryptocurrency-related activities (VASP);
• A separate consulting profession with restrictions.

If a freelancer combines permitted and prohibited activities, the risk applies to the entire status — so it's worth checking the list of exceptions before registering.

How to register status step by step

1. Registration of a business entity

First, the individual entrepreneur is registered with the House of Justice (Entrepreneurs Register). A passport and address are required; for non-residents, additionally, confirmation of an address in Georgia.

2. Tax registration and status declaration

After registration, an application for small business status is submitted to the Revenue Service. According to the updated rules of 2026, the status is valid from the date of submission of the request to the Revenue Service, and not from the beginning of the following month, as was the case before.

3. Turnover accounting and monthly declaration

An enterprise with small business status keeps an income journal and submits a monthly tax return, paying 1% of turnover. Many freelancers entrust this to an accountant.

Frequently Asked Questions

Is a Georgian bank account required?

A Georgian account is convenient for receiving payments and recording turnover, although income can also be received in a foreign account — the main thing is that all turnover is reflected correctly.

Does the freelancer pay any other taxes?

The basic tax rate for small business status is 1% of turnover. Individual obligations (e.g. VAT reverse charge on some cross-border services) depend on the specifics of the activity, so borderline cases should be examined individually.

Is it possible to regain status after losing it?

Yes, the status can be re-obtained if the conditions are met, but the process is done through the same application procedure.

Conclusion

For most freelancers in Georgia, the 1% small business status is a legal and predictable regime, provided that the turnover is within the limit and the activity does not fall into the excluded list. If your business is on the verge of being permitted and regulated (consulting, fintech, crypto), a one-time consultation before registration is wise. For the basics of registration, see our material on registering an I/E in Georgia.

The article is for general informational and SEO purposes only and does not constitute tax or legal advice. Rates, limits, and exemptions are set by the Tax Code of Georgia and are subject to change; please check the applicable regulations or consult a specialist before registering. — Legal.GE NewsMaker