Georgia's 1% Tax for Freelancers: The Complete 2026 Guide
Pay 1% tax on everything you earn. That is not a typo, not a loophole, and not a limited-time offer. It is Georgia's Small Business Status (SBS) — a government tax regime that has turned Tbilisi into one of the most tax-efficient bases for freelancers, remote workers, and digital entrepreneurs in the world.
Most guides on this topic leave out the critical details: the activities that do not qualify, the pension contribution almost nobody mentions, the VAT trap that catches people off guard, and — new for 2026 — the work permit requirement that now sits alongside your tax registration.
This guide covers all of it. Read to the end before you register.
- Tax rate: 1% on gross turnover — not profit
- Annual threshold: 500,000 GEL (approx. EUR 170,000 / USD 185,000)
- Above threshold: 3% applies to the excess for the rest of that calendar year
- Who qualifies: Individual Entrepreneurs (IEs) — sole operators only
- Residency: not required to register, but a work permit is needed if you live in Georgia from March 2026
- Filing: monthly declaration by the 15th of each month
- Hidden cost most guides skip: a 2% pension contribution also applies on top of the 1%
What is Small Business Status and How Does It Actually Work?
Small Business Status is a special tax classification available to Individual Entrepreneurs (IEs) registered in Georgia. An IE is not a company — it is the registration of a single person as a business operator, similar to a sole trader.
When you register as an IE and successfully apply for Small Business Status, your tax works like this:
| Your annual turnover | Tax rate | Real example |
|---|---|---|
| Up to 500,000 GEL per year | 1% on gross turnover | EUR 600 tax on EUR 60,000 income |
| Above 500,000 GEL | 3% on the excess amount | Applies from the month threshold is crossed |
| Standard IE without SBS | 20% on net profit | Much higher effective rate |
The critical word is "turnover" — not profit. You pay 1% on every invoice you issue, before deducting any expenses. Invoice EUR 10,000 in a month, pay EUR 100 in tax.
On top of the 1% tax, IEs with Small Business Status must contribute 2% of gross turnover to a mandatory Georgian pension fund. This is declared and paid separately. In practice your total effective rate is 3% of gross turnover — still extraordinarily low, but worth factoring into your calculations from day one.
Who Qualifies? Activities That Do and Do Not Qualify for 1%
Small Business Status is not available to everyone. Georgia maintains a list of prohibited activities. If your work falls on that list, you can still register as an IE — but you pay 20% income tax on net profit instead of 1%.
Activities That DO Qualify
| Activity | Examples |
|---|---|
| IT and software development | Coding, app development, DevOps, QA, software engineering |
| Digital marketing | SEO, paid ads, social media management, content marketing |
| Web design and UX | UI/UX design, graphic design, branding |
| Content creation | Copywriting, blogging, video production, photography |
| E-commerce | Online stores, dropshipping, marketplace selling |
| Translation | Document translation, interpreting, localisation |
| Online trading and crypto | Buying and selling assets online (check specific structure) |
| Most service businesses | Any service not on the prohibited list below |
Activities That Do NOT Qualify
If your work falls here, you can still register as an IE but pay 20% on net profit instead of 1%.
- Legal and notarial services
- Tax, audit, or financial consulting of any kind
- Financial intermediation or currency exchange services
- Medical and healthcare services
- Architectural services
- Any consulting or advisory services (this is broad — verify carefully if your work involves advice)
- Gambling and betting activities
- Production of excisable goods (alcohol, tobacco, fuel)
- Staffing and employment agency services
- Activities requiring a special government licence (with limited exceptions)
If your business involves any form of consulting — even if you call it something else — verify with a Georgian tax adviser before relying on the 1% rate.
The Threshold, the VAT Trap, and What Happens if You Exceed the Limit
The 500,000 GEL annual threshold is not a cliff edge — but it has real consequences that compound over time.
| Situation | What happens |
|---|---|
| Under 500,000 GEL in year 1 | Pay 1% throughout. Small Business Status retained for the following year. |
| Exceed 500,000 GEL in year 1 | Pay 3% on the excess from that month. Status retained for that year. |
| Exceed 500,000 GEL in year 2 as well | SBS automatically revoked on 1 January of year 3. You revert to 20% income tax. |
| Significantly exceed in year 1 | Revenue Service may revoke status immediately without waiting for year 2. |
The VAT threshold — a separate trap: If your turnover in any rolling 12-month period exceeds 100,000 GEL (approx. EUR 34,000), you must register for Georgian VAT at 18%. However — services billed to clients outside Georgia are generally excluded from this threshold. If all your clients are foreign, you are unlikely to hit the VAT threshold even at very high turnover. Confirm your specific situation with an accountant.
How to Set Up the 1% Regime: The Exact Steps
IE registration and Small Business Status are two separate steps. Registering as an IE does not automatically give you the 1% rate. You must apply for SBS separately after your IE registration is complete.
- Register as an Individual Entrepreneur at Georgia's Public Service Hall (in person) or remotely via power of attorney. Legal Vista handles this — registration within 24 hours. Full details in our guide: How to Register as an Individual Entrepreneur in Georgia.
- Obtain your Georgian tax ID (Taxpayer Identification Number) — issued automatically on IE registration.
- Open a Georgian business bank account at TBC Bank or Bank of Georgia. Needed to receive payments and file accurate monthly declarations.
- Apply for Small Business Status via the Revenue Service portal (rs.ge). Submit your activity description. Approval comes within 1-3 working days.
- Apply for the Right to Labour Activity permit (required from March 2026 if you reside in Georgia). Apply at labourmigration.moh.gov.ge. See our guide: Georgia Work Permit 2026: What Foreign Entrepreneurs Need to Know.
- File monthly tax declarations by the 15th of each month. Declare gross turnover for the previous month. Pay 1% tax plus the 2% pension contribution by the same deadline.
Your 1% rate becomes active on the first day of the month after your SBS application is approved — not the day you apply. Apply on 20 April, your 1% starts on 1 May. Income earned in April is taxed at the standard 20% rate. Apply at the very start of the month to minimise the gap.
Georgia 1% Tax vs the Other Popular Options
Georgia is not the only low-tax option for freelancers. Here is how it compares to the alternatives most commonly considered.
| Factor | Georgia IE | Estonia OUE | UAE Free Zone |
|---|---|---|---|
| Tax rate | 1% on gross turnover | 0% until distribution | 0% corporate + flat personal |
| Setup cost | EUR 699 (Legal Vista) | EUR 300-500 | EUR 1,000-2,000+ |
| Setup time | 24 hours | 3-5 days | 1-2 weeks |
| Residency to register | Not required | Yes (e-residency) | Yes |
| EU-based entity | No | Yes | No |
| Banking | Georgian banks | EU / Wise | UAE banks |
| 2026 compliance | Work permit if residing | Standard EU rules | Substance requirements |
Georgia wins on speed, simplicity, and effective tax rate. Estonia wins if you need an EU entity. UAE suits high earners who can justify the substance requirements. For most freelancers earning under EUR 150,000 per year, Georgia is the clear choice.
Frequently Asked Questions
Can I Use the 1% Regime if All My Clients Are Outside Georgia?
Yes — and this is one of the biggest advantages. Having exclusively foreign clients does not disqualify you. The 1% tax applies to your worldwide turnover as a Georgian IE, regardless of where clients are based. Services to foreign clients are also generally excluded from the Georgian VAT threshold.
Do I Need to Be Physically in Georgia to Register?
No. Registration is possible entirely remotely via power of attorney — no travel required. However, if you plan to reside in Georgia, you now need the Right to Labour Activity permit (from March 2026) before legally operating your business from within the country.
Is the 1% Calculated on Revenue or Profit?
Gross revenue — not profit. Every GEL you invoice counts, before deducting any expenses. This is an advantage for high-margin service businesses. For very low-margin businesses (below 5% margin), the 20% of net profit calculation can occasionally work out cheaper — run the numbers for your specific situation.
What Happens if I Hire Someone?
Small Business Status is only available to sole operators. The moment you employ staff, you no longer qualify and an LLC becomes the appropriate structure. See our guide: Georgia LLC vs IE: Which Structure Is Right for Your Business?
Can I Invoice in EUR or USD Rather Than GEL?
Yes. You can invoice in any currency. Turnover is converted to GEL at the official exchange rate for monthly declaration purposes. You can receive payments in foreign currency into a Georgian business bank account and convert as needed.
What if I Already Have an IE and Live in Georgia — Do I Need the Work Permit?
Yes. From March 2026, all foreign nationals residing in Georgia and operating an IE must hold the Right to Labour Activity permit. Read the full guide: Georgia Work Permit 2026: What Foreign Entrepreneurs Need to Know.
This article is for informational purposes only and does not constitute legal advice. Tax law is complex and circumstances vary. Please consult a qualified Georgian tax adviser for advice specific to your situation.
