Small Business Status taxes turnover at 1% up to 500,000 lari — and the exclusions are where people get caught

Small Business Status is granted to a registered individual entrepreneur, not to a company, and the 1% is charged on gross turnover rather than on profit. That is the part that confuses people arriving from systems built around deductions: under this regime there are none. Rent, software, travel, a laptop — none of it reduces the bill. Declarations are monthly, filed through the revenue service portal, and due by the middle of the following month. For very small operations there is a separate micro business status with no income tax at all, capped at a far lower level of turnover.

The ceiling is annual turnover below 500,000 lari. Cross it and the rate rises to 3% on income from the month the threshold was passed through to the end of the year — the 1% does not simply continue. Cross it in two consecutive years and the status itself is withdrawn for the following tax year, which drops the business onto the standard 20% charge on net profit. For anyone close to the line in the autumn, the practical implication is that timing an invoice matters: a payment that lands in December rather than January can re-rate several months of income.

The regime is closed to licensed activities and to a list of professions that includes legal, notarial, auditing, medical and architectural work, currency exchange, gambling and staffing. The entry that trips up the most newcomers is consulting, which is read broadly — advisory work billed as consulting is generally outside the regime regardless of the sector it serves. Work that is really employment dressed up as invoicing is also treated as employment and taxed accordingly. Anyone whose activity sits near one of these lines should get the classification confirmed before relying on the 1% in a budget.

Small Business Status says nothing about VAT. Registration becomes obligatory once taxable turnover exceeds 100,000 lari across any rolling twelve months, and the standard rate is 18%. Because that threshold is five times lower than the 1% ceiling, a growing freelance or service business normally meets VAT long before it meets the turnover limit. The two regimes then run in parallel, with monthly VAT reporting on top of the income declaration. Budgeting on the 1% alone, without pricing in the possibility of VAT within the same year, is the most common planning error in this regime.