Small Business Status · exclusions
Who cannot pay 1% tax in Georgia: the full list of exclusions, and what consultants do instead
Small Business Status is the most attractive part of the tax system in Georgia (the country) and the most common reason for an awkward conversation with the Revenue Service. There is one cause: the list of activities that do not qualify for the 1% gets read after registration rather than before it. Below is what is excluded, where the grey zones run, and which regimes remain for those who land on the list.
Checked 4 September 2026. General information, not tax or legal advice — your own case deserves a separate look.
Chapter one
How Small Business Status actually works
The mechanics are short. You register an Individual Entrepreneur, apply to the Revenue Service and receive Small Business Status. From that point your business income is taxed at 1% of turnover — turnover, not profit — up to ₾500,000 a year. Everything above that amount is taxed at 3%. Two consecutive years over the cap and the status is withdrawn.
Two dates cost people money more often than anything else. The first: the status takes effect from the 1st of the month following your application. Income received before that date falls under the ordinary 20% rate. So we plan the registration to keep the gap short and to put your first large invoice inside the status.
The second: the declaration is filed monthly, by the 15th, nil returns included. Missing it is not an oversight, it is grounds for a penalty. The procedure itself takes a few minutes in the online cabinet, but it is easy to forget on holiday.
You can check yourself here with two dates: the date your status started, and the date the next declaration is due. If you cannot name both, that is where to start — not with the exclusion list.
Chapter two
The exclusion list: who does not get the 1%
The list of activities that are incompatible with Small Business Status is set by government decree. We give it by substance, without citing an act number: editions get revised, and the version actually in force is worth checking on the date you file.
- Activity that requires a licence or permit — the broadest entry on the list, and it covers whole industries
- Currency exchange and related operations
- Medical activity
- Architectural activity
- Legal and notarial services
- Audit activity
- Consulting services — including tax and financial consulting
- Gambling and games of chance
- Staffing and personnel outsourcing
- Production of excisable goods
The most dangerous line here is consulting services. It is drafted broadly, and in practice it pulls in more than someone who calls themselves a “consultant” out of modesty expects. Second most dangerous is licensed activity: it names no professions, it points to other regulation, so it has to be checked on its own.
A checkable action: open the description of your activity as it reads in your client contract, and compare it with these ten entries word by word. Not the way you explain your work to friends — the wording in the contract.
Chapter three
Grey zones, where the contract decides, not the job title
There is no wall between “development” and “consulting”. There is the wording in the contract and the activity code in your registration data. The three most common borderline situations look like this.
IT consulting versus development. If you write code and hand over the result, that is development, and questions rarely arise. If you audit an architecture, prepare recommendations and sell a report, that sits closer to consulting services, with everything that follows. The difference shows in the subject of the contract and in the acceptance act: “development of a module” and “advice on choosing a solution” are not the same thing.
Marketing versus “consulting”. Running ad campaigns, producing content, managing accounts — those are services. “Marketing consulting” and “strategy sessions” in the name of the service is a signature on your own exclusion. The word in the contract deserves the same care as the rate.
Coaching versus teaching. An online course with a syllabus, a schedule and materials is an educational service. One-to-one sessions where you take apart someone else’s business and give recommendations sit closer to consulting. The format weighs more than the profession in your public profile.
The honest conclusion: the activity code and the real contracts decide, not what you call yourself. Where the substance of the work and the wording diverge, an inspector will look at the substance. Which is why a check before registration means reading your contracts, not discussing your profession.
Chapter four
On the list — what then
Being excluded from the 1% is not a ban on working, it is a different tax route. There are two of them, and the choice between them is arithmetic rather than principle.
An IE on the standard regime: 20% of profit. The rate is higher, but the base is different — costs are deducted. For a consultant with subcontractors, rent and subscriptions, the gap between “20% of profit” and “1% of turnover” can be unexpectedly small, and sometimes the standard regime simply wins. Registration is the same; only the chosen regime differs.
An LLC on the Estonian model: 15% on distribution plus 5% on dividends. While profit stays inside the company — working, reinvested, paying salaries — profit tax is zero. It arises at the moment of payout. For anyone growing a business that is often the better option; for anyone drawing out every last lari each month, it is not. The procedure and the price sit on the LLC registration page.
There is a third scenario worth knowing about: part of your activity legitimately falls under the 1% and part of it does not. The split is then structured properly rather than by eye, and it calls for careful bookkeeping. That gets worked through case by case.
A checkable step: take your annual figures — turnover, costs, how much you draw for yourself — and work out three numbers: 1% of turnover, 20% of profit, and 15% plus 5% on the distributed part. After that the choice usually stops being an argument.
Check yourself
Six lines that decide your right to the 1%
- How is your activity described in the client contract — and does that match the activity code in your registration?
- Do the words “consultation”, “consulting”, “recommendations” or “expert opinion” appear anywhere in your documents?
- Does your profession require a licence or a permit in Georgia — and did you check that rather than assume it?
- Does annual turnover stay inside ₾500,000, and what happens if it is exceeded next year?
- From which date does your status run — the 1st of which month — and was there income before it?
- Was last month’s declaration filed by the 15th, nil return included?
If you are unsure about even one line, the thing to review is documents, not general rules. We check eligibility for the 1% before you pay and give the conclusion in writing — including a negative one.
Questions
Common questions about the 1% exclusions
Development, design and technical support usually do. The problem appears when the subject of the contract is described as advisory work: audits, recommendations, expert opinions. What matters is the wording in contracts and acceptance acts, not the job title.
The Revenue Service can recalculate the tax at the ordinary 20% rate for the relevant period and apply penalties. The earlier the situation is corrected voluntarily, the cheaper it is. This is best worked through with the documents in hand.
The code has to reflect what you actually do. Where the substance of the work diverges from the code, an audit will look at the substance. Choosing the right code makes sense; substituting a convenient one does not.
The excess is taxed at 3%. If the cap is exceeded two years running, Small Business Status is withdrawn, and you continue on the standard regime or through a company.
It is worked out on your figures. An IE on the standard regime pays 20% of profit with costs deducted; an LLC pays 0% on retained profit, 15% on distribution and 5% on dividends. With meaningful costs or reinvestment the second option often wins.
Related pages: IE registration with the 1% status, LLC registration, working from Georgia for a foreign company, the Georgian tax guide.
The next step
Does the 1% tax fit you — we'll check on a free assessment
A guide can't see your passport, your client list or your calendar. One call maps these rules onto your facts: whether your work clears the 1% exclusions, whether the 183-day residency line helps or hurts you, what year one costs. Free, and specific.