Georgia IE or LLC: choosing between 1% and 15%

Georgia offers two business forms for most foreign founders: the Individual Entrepreneur, a person registered to do business, and the Limited Liability Company. The first can carry Small Business Status and its famous 1% rate. The second uses the "Estonian model", taxing profit only when it leaves the company. Choosing between them is less about the headline rate than about what you do, where you do it and how much you earn.

The figures below are current as of 30 September 2026. Georgian tax rules change often; we confirm them against the Revenue Service before every registration. For our setup service and fees, see company formation in Georgia.

IE and LLC side by side

How the 1% Small Business regime works

Small Business Status is not a company type. It is a tax status that an Individual Entrepreneur applies for after registering, through their personal account on the Revenue Service portal. Approval is usually quick, often within a business day.

The GEL 500,000 threshold

The 1% rate applies to gross turnover — not profit — up to GEL 500,000 in a calendar year. Income above that threshold in the same year is taxed at 3%. Sources disagree on whether 3% applies only to the excess or from the month the threshold is crossed, so we model both cases for clients near the limit. If you exceed GEL 500,000 in two consecutive years, the status is withdrawn from 1 January of the following year. For agritourism and wine tourism, the threshold is GEL 700,000.

What the 1% does not cover

The status covers only business income. Rental income, capital gains, dividends, interest and royalties are taxed under the normal rules. And income that is really salary — one client, fixed hours, their equipment, their instructions — is employment income, however the invoice is labelled. Georgian tax audits look for this "disguised employment".

Micro Business Status

Very small businesses with turnover up to GEL 30,000 a year can qualify for Micro Business Status, which exempts that income entirely. It suits side activities rather than a main business.

What changed on 7 March 2026

• Small Business Status now applies from the date you apply, instead of the following month.
• A monthly declaration is mandatory even with zero income. Missing it is the most common way foreign IEs get into trouble.
• If the status is withdrawn, you can reapply only from the next tax year.

Earlier, from 1 February 2025, IEs providing construction services to companies lost the 1% rate for that work.

Activities excluded from the 1% rate

The excluded activities are set out in a Government resolution on special tax regimes. As reported by Georgian law and accounting firms, they include:

• activities that require a licence or permit, with limited exceptions;
• currency exchange and other financial intermediation;
• legal, notarial, audit and tax-advisory services;
• medical and architectural services;
• gambling;
• production of excise goods;
• staffing services.

Activities that commonly qualify include software development, design, content creation, online sales, translation, photography and many other freelance and creative services.

The trap for non-residents working from abroad

This is the point most online guides skip. Georgia taxes individuals territorially, and a non-resident can use Small Business Status only for Georgian-source income — broadly, work physically performed in Georgia.

A developer who registers a Georgian IE by power of attorney and keeps working from Dubai, Warsaw or Almaty is performing the work abroad. That income is not Georgian-source, so the 1% does not properly apply to it — and the country where the work is done may consider the income taxable there anyway.

The regime works cleanly for people who actually live and work in Georgia. For everyone else, the question is not "IE or LLC" but where your tax residence really is. We cover that in residence permit vs tax residence.

Becoming tax resident in Georgia

You become tax resident by spending at least 183 days in Georgia in any continuous twelve-month period ending in the tax year. A separate high-net-worth route grants tax residence without a day count to people with at least US$500,000 of assets in Georgia and either total assets above GEL 3 million or income above GEL 200,000 in each of the last three years, plus a residence permit or GEL 25,000 of Georgian-source income. A tax residence certificate is issued through the Revenue Service portal and can be used under Georgia's double tax treaties, of which there are roughly 55 to 60 — though not with the United States.

When an LLC is the better answer

The LLC is not the expensive option; it is a different tool. Under the Estonian model in force since 2017, a Georgian company pays no corporate income tax while it keeps its profit. It pays 15% when profit is distributed, and the shareholder then pays 5% withholding tax on the dividend. If all profit is paid out, the combined rate is about 19%. If profit is reinvested, the rate is zero until it leaves.

Choose an LLC when:

• your activity is excluded from Small Business Status, including consulting;
• turnover will exceed GEL 500,000 regularly, or your margins are thin — 1% of turnover can be more than 15% of a small profit;
• you have partners or investors, or plan to sell the business;
• you want limited liability, because contracts, employees or suppliers create real risk;
• you plan to reinvest rather than distribute profit.

Special statuses for IT companies

Two regimes improve the LLC for technology businesses. International Company status reduces profit tax to 5% and salary tax to 5%, with dividends untaxed, for IT and maritime companies with at least two years of relevant experience and real operations in Georgia. Virtual Zone status has historically exempted profit from software exported abroad. Check the current conditions of both before relying on them; they are granted by the authorities, not automatically.

The same income under both structures

The comparison depends on margin as much as turnover, because the IE pays on turnover and the LLC on profit. Two simplified examples, ignoring VAT and assuming all LLC profit is paid out as dividends in the same year:

For a high-margin service business that qualifies and genuinely operates from Georgia, the IE is hard to beat. For a low-margin trading business, the gap disappears — and the LLC adds limited liability and the option to reinvest tax-free. If profit stays in the company, the LLC's tax in both scenarios is zero until it is distributed.

VAT: the cost both forms share

Small Business Status does not exempt you from VAT. Registration is mandatory once taxable supplies exceed GEL 100,000 in any twelve-month period, and the standard rate is 18%. Services bought from abroad — software subscriptions, advertising, outsourced work — can trigger 18% reverse-charge VAT even if you are not VAT-registered. Many exported services are outside the scope of Georgian VAT, but the rules are detailed, and we review them with every client.

Registration and banking in practice

Registering without travelling

Both forms can be registered remotely through a notarised, apostilled power of attorney translated into Georgian. You need a Georgian legal address, with the owner's consent if you do not own the property. An IE registration takes a day; Small Business Status is applied for online immediately afterwards.

Opening a Georgian bank account

A bank account is not legally required for the status, but you will need one. Georgian banks — including Bank of Georgia's SOLO, TBC and Credo — generally ask for apostilled documents, a registry extract, a beneficial-owner declaration, a business description and a video identity check. Fully hands-off remote opening is not the norm; business accounts for LLCs typically take three to six weeks end to end, with extra scrutiny for crypto and gambling businesses.

A quick decision guide

1. Is your activity excluded? If yes, or if it is consulting, choose an LLC.
2. Will you live and work in Georgia? If not, the 1% is unlikely to be the right tool; review your tax residence first.
3. Is turnover under GEL 500,000 with healthy margins? An IE with Small Business Status is usually the most efficient choice.
4. Do you need partners, limited liability or reinvestment? Choose an LLC.
5. Are you an IT company with staff in Georgia? Look at International Company status.

Georgia 1% tax: common questions