How small business tax works
An individual entrepreneur with small business status pays income tax of 1% of income instead of the standard 20% of profit. There are no deductions — the tax is simply a share of what you earn — which is why the status is popular with freelancers, consultants and small traders.
The 1% rate applies while the year's income stays within 500,000 ₾ (700,000 ₾ for wine tourism and agrotourism). From the start of the month in which the limit is passed, the rate rises to 3% for the rest of the calendar year.
Examples
- Income of 60,000 ₾ a year: 1% = 600 ₾ tax, about 50 ₾ a month.
- Income of 600,000 ₾ a year, earned evenly: the limit is passed in November. January–October (500,000 ₾) is taxed at 1% = 5,000 ₾, November–December (100,000 ₾) at 3% = 3,000 ₾ — 8,000 ₾ in total.
- VAT-registered, 118,000 ₾ invoiced including VAT: the tax is charged on 100,000 ₾ without VAT, so 1,000 ₾.
Micro business, small business or standard regime?
- Micro business — income up to 30,000 ₾ a year and no employees: exempt from income tax.
- Small business — 1% (3% above the limit) of income: best when expenses are low.
- Standard regime — 20% of income minus expenses: can be cheaper only when expenses take up most of your income. Enter your expenses above to compare.
What isn't taxed at 1%
Some income is excluded from the special regime and taxed under the general rules even with the status — for example rent, interest, dividends, gains from selling property, and construction services provided to companies or entrepreneurs. Salary you earn as an employee is also taxed separately and doesn't count towards the 500,000 ₾ limit.