📌 What is Small Business Status?
According to the legislation of Georgia, the status of a small business is granted to individual entrepreneurs who meet specific criteria concerning their annual turnover. Specifically, a business may qualify as a small business if its annual turnover does not exceed GEL 500,000 (equivalent to approximately USD 190,000 as of October 2023). In Georgia, small businesses are entitled to certain benefits, such as simplified tax reporting and reduced tax rates, designed to facilitate their growth and development.
📌 List of Prohibited Activities
The status of a small business cannot be granted to an individual who engages in certain activities that are prohibited for small businesses. These activities include:
Activities that require licensing or permission, with the exception of transportation by car-taxi (category M1) within the capital city of Georgia;
Activities that necessitate significant investments, such as the production of excise goods;
Conducting foreign exchange operations;
Providing medical, architectural, legal, notarial, auditing, consulting (including tax consulting) services;
Operating in the gaming industry;
Providing staffing services; and
Manufacturing excise goods.
📌 Taxable Income and Rates for Small Businesses
In accordance with the established regime for small businesses, taxable income is calculated based on income generated within the territory of Georgia. Individuals holding the status of a small business are subject to a tax rate of 1% on their taxable income. However, if the taxable income from economic activities exceeds GEL 500,000 during a calendar year (from the month of excess to the end of the same calendar year), the tax rate increases to 3%.
When calculating the limit of GEL 500,000 for taxable income received by a small business during a calendar year, income earned in the form of salary and income types subject to income tax under the general taxation regime, as designated by the decree of the Government of Georgia, are excluded from consideration.
📌 Income Taxation for Small Businesses: Incomes Taxed Under General Regime
An individual holding the status of a small business may receive income in addition to the income generated through activities subject to special taxation regime. These additional types of income, as designated by the decree of the Government of Georgia, are not considered as income generated through small business activities and are not subject to special taxation regime. Instead, these types of income are subject to income tax in the general manner. The following are types of income subject to the general taxation regime for individuals with small business status:
Leasing of property or renting of real estate;
Income from lending;
Profits earned from gambling business;
Income received from the sale of real estate, motor vehicles, or securities that exceeds the original cost of acquisition;
Inherited property income;
Income from debt forgiveness; and
Surplus income received from the sale of a partner's share.
📌 Tax Declarations & Payment
For the portion of income subject to taxation under the special taxation regime, income tax must be paid monthly and no later than the 15th day of the month following the reporting month. Additionally, individuals holding the status of a small business must submit a monthly income tax declaration to the tax authority during this period. Furthermore, if an individual with small business status engages in activities subject to general taxation regime, they must submit an annual income tax declaration for such activities by April 1 of the following fiscal year.
📌 Termination of Small Business Status
The small business status will be revoked from the beginning of the next calendar year if any of the following conditions occur:
The individual applies to the tax authority for the cancellation of their small business status before the end of the current calendar year;
Based on the data from two consecutive calendar years, the total income received from the economic activity of the individual exceeds GEL 500,000 in each calendar year;
The individual engages in activities prohibited for small businesses, and as a result, their status will be revoked from the beginning of the current calendar year;
The individual with small business status is fined at least three times during the calendar year for violating the cash register usage rules, and their status will be revoked from the beginning of the current calendar year.