A 1% turnover tax is what brings freelancers and remote workers to Georgia. The regime genuinely works and can be set up in a day, but it has three things people learn about too late: the list of prohibited activities, the VAT threshold, and the fact that rental income does not fall under the 1%. Let us take them in order.
- 1% of turnover with annual turnover up to 500,000 GEL (about $180,000). Above that, 3% on the excess.
- Micro business: turnover up to 30,000 GEL is taxed at 0%, but no employees are allowed.
- Not for everyone: consulting, legal, medical, audit and financial services and licensed activities are excluded.
- Rent, dividends, interest and capital gains fall outside the 1%: they have their own rules (residential rent is 5% with no deductions).
- VAT at 18% is a separate matter: registration is mandatory once turnover exceeds 100,000 GEL over 12 months.
How the regime works
Small business status is not a separate legal form but a tax regime layered on top of Individual Entrepreneur status. The order is: first you register as an IE, then you separately apply for small business status with the Revenue Service.
Registering as an IE does not by itself give you the 1%. These are two different procedures, and people regularly find that out when the tax falls due at the standard rate.
The rate applies to gross turnover with no deduction for expenses. For services that is favourable — costs are low. For trading with a high cost of goods, do the maths carefully: 1% of turnover can exceed 20% of the actual profit.
Thresholds and what lies beyond
| Annual turnover | Rate | Comment |
|---|---|---|
| up to 30,000 GEL | 0% (micro business) | A separate status; employees are not allowed |
| up to 500,000 GEL | 1% | The main small business regime |
| above 500,000 GEL | 3% on the excess | For agritourism the threshold is higher — 700,000 GEL |
| exceeded two years in a row | status is revoked | From 1 January of the third year |
Who is excluded
The exclusion list is the most common disappointment. The regime does not cover:
- legal and notarial services;
- tax and audit consulting;
- medical and architectural work;
- advisory services and financial services (currency exchange, financial intermediation);
- gambling and excise-taxed activities;
- staffing services;
- any activity requiring a special licence (with narrow exceptions such as a Tbilisi taxi permit).
The "advisory services" item catches many people out: if your contract describes your work as consulting, the status may be refused or withdrawn retroactively. The wording in client contracts has direct tax consequences here — this is a case where an hour of advice before applying is worth it.
One more limitation that gets forgotten: the regime is designed for services supplied within Georgian territory. Work actually performed outside the country may be taxed differently and raise questions in another jurisdiction.
Rent and other passive income
This is the key point for our readers. Whether or not you hold small business status, the standard 20% rate applies to:
- income from renting out property — under its own rates: 5% on residential rent with no deductions, or 20% on net income if expenses are deducted;
- capital gains;
- interest, dividends, royalties;
- gifts, inheritances and winnings.
In other words, rental income cannot be moved under the 1%. Rentals have their own rules and rates — they are covered in our article on renting out an apartment, and the overall picture of property taxes is in property taxes.
VAT: the hidden threshold
VAT is remembered last, yet it is unrelated to small business status and runs in parallel. VAT registration becomes mandatory once turnover exceeds 100,000 GEL in any rolling 12 months. The rate is 18%.
An important detail: B2B services supplied to non-residents are excluded from that calculation. That is why a freelancer with foreign clients often never reaches the threshold, while someone serving the Georgian market reaches it quickly.
How to register and report
- Register as an IE through the Revenue Service portal — the process is digital and usually takes a day. The fee is small, in the range of 50–100 GEL.
- Apply for small business status separately, from your personal account.
- Monthly declarations are mandatory for everyone with the status, even with no turnover.
- Pay the tax by the 15th of the following month.
Non-residents can also obtain the status if they meet the conditions and earn Georgian-source income. Where you are a tax resident is a separate question — see our article on tax residency; the two statuses should not be confused.
What it means for a property owner
A short summary, so you do not build plans that will not work:
| Scenario | How it is taxed |
|---|---|
| Freelancing for foreign clients + small business status | 1% of turnover; VAT usually does not arise |
| Renting out your apartment long-term | Not under the 1%; rental income rules apply |
| Short-term rentals as a business | Counted separately; VAT appears above 100,000 GEL of turnover |
| Selling the apartment | Not under the 1%: the two-year rule and 5% on the gain |
If you are choosing an apartment to rent out, it helps to see where yields are higher in advance: live numbers by district are on the district pages, and you can shortlist properties in the sale search.