IE with small business status: the 1% turnover tax

One of Georgia's most attractive regimes is small business status for an individual entrepreneur (IE). It lets you pay 1% of turnover instead of tax on profit. For a freelancer or consultant it is often the simplest way to work legally at a minimal tax burden.

Rate and threshold

The key structural limit: the status is available only to an individual entrepreneur. An LLC cannot obtain the 1% at any level of turnover — it operates under the Estonian model at 15% on distribution.

IE or LLC

The choice between the two almost never comes down to a single rate. What has to be compared is liability, access to the money, and how the business will look from the outside.

On liability

This is the main drawback of an IE and the one most often underestimated. The entrepreneur answers for business obligations with personal assets. If your activity carries real risk — large contracts, inventory, liability towards clients — the protection of an LLC is worth its 15%.

Scenario: 60,000 GEL a year

A freelancer earns 60,000 GEL a year and wants to take the income in full.

The table reads directly: if the income is needed in full and immediately, the IE is markedly cheaper. If profit can stay in circulation, an LLC creates no tax at all — but then the money is not freely yours either.

Limitations

• not every activity qualifies for the 1% — some are excluded by law;
• the status has to be maintained: watch the turnover and do not miss RS.ge filings;
• source documents are mandatory even when tax is computed on turnover;
• once the threshold is passed the rate changes within the same year, not from the next one.

Common questions

What happens if I exceed 500,000 GEL?

Exceeding it does not cancel the status instantly, but it changes the rate. Under Article 90(2) of the Tax Code the 3% applies not just to the amount above the threshold but to all turnover from the month in which the threshold is exceeded until the end of the calendar year. Example: turnover by the end of September is 480,000 GEL, another 40,000 GEL comes in October, and the year closes at 520,000. January to September stay at 1%, while October's 40,000 GEL and all of November and December are taxed at 3%. From 1 January the rate is 1% again, provided the status conditions are still met. Turnover is worth tracking month by month rather than discovering the overrun in the annual accounts.

Do I need an accountant at a 1% rate?

The regime is formally simple, but reporting and source documents remain. Most additional assessments arise not from the rate but from sloppy paperwork and missed deadlines.

If you are choosing between an IE and an LLC, run both on your own turnover and against the risks of your activity. We do that calculation in a consultation and register the chosen form end to end.