The Map of Special Tax Regimes
The tax regimes of micro and small business sit in the special-taxation chapter of the Tax Code: the law provides that special regimes extend to the micro-business and small-business statuses, and each status has its own conditions, rate and duties. This page explains the micro-business regime — the simplest contour, reaching a full exemption — and separately notes the rate-based taxation of small business, which is devoted to its own page. A boundary is noted too: the administrative procedure of granting statuses and the details of accounting are settled by acts of the Minister of Finance, while the list of prohibited activities by a government act — those lists should be reviewed before filing an application.
The Conditions and the Exemption
Micro-business status may be granted to a natural person who does not use the labour of hired persons and independently carries on economic activity from which his aggregate annual income does not exceed thirty thousand lari. Two thresholds are central here: the absence of hired employees and the income ceiling. The law empowers the government to define types of activity to which the thirty-thousand ceiling does not extend, to prohibit particular activities for the status, and to define excluded types of income — these acts draw the practical map. A physical person holding the status does not pay income tax — this full exemption is the core of the regime. The certificate, and the granting and cancellation of the status, follow the procedure established by the Minister of Finance.
The Cases of Cancellation of the Status
The status is cancelled during the current tax year where: the person himself applied to the tax organ for cancellation or for the granting of small-business status; an inventory conducted by the tax organ established that the residue of goods and material stocks exceeds forty-five thousand lari; or the person registered as a VAT payer. The rule following a breach of the ceiling is particularly important: where, within fifteen days of breaching the income limit, the person does not apply for the granting of small-business status, the micro status is cancelled and he leaves the special regime. Upon cancellation, the income existing at that moment becomes subject to taxation: upon receipt of small-business status — in accordance with the rule established for micro business, and in other cases — under the general rule established by the Code. This transitional regime is precisely the point at which a planning error is paid for in money.
Duties and the Declaration
The exemption does not come without duties. When issuing a primary tax document, the micro-business holder must indicate his status and the certificate number, and where such a document is issued, keep it. The declaration deadline is also set by law: the micro business submits the declaration to the tax organ by the first of April of the year following the reporting year; upon cessation of activity — within thirty working days; while the small-business holder submits and pays by the fifteenth day of the month following the reporting month. The procedure for submitting the declaration is defined by an order of the Minister of Finance. This calendar is simple but exact: exemption from tax does not mean exemption from document flow.
Planning the Status and Choosing Between Regimes
Planning the micro regime stands on a two-sided question: first — whether the activity is subject to the status at all (the list of prohibited types and the exceptions to the ceiling); then — whether the annual turnover fits within the thirty-thousand ceiling. Practice shows two risks: growth of income mid-year, which breaks the conditions of the status; and the engagement of a hired person as the business grows. Accounting for both risks in advance means that, before applying, an income forecast and a comparison of alternatives — the one-per-cent small-business regime or the general rule — must be made. Documentary discipline — indicating the status and certificate number and keeping the documents — is part of this plan, because it is precisely this trace that is read at an inspection: where the ceiling is exceeded, a timely decision within the fifteen-day window to move to small status saves the person from leaving the regime altogether.
Frequently Asked Questions
Below we answer the most common questions about the micro-business regime.
Who is granted micro status?
A natural person using no hired labour, whose aggregate annual income does not exceed thirty thousand lari.
What tax does the micro business pay?
No income tax — the regime means a full exemption.
When is the status cancelled?
On one's own application, where the stock residue exceeds forty-five thousand lari, or on registration as a VAT payer; upon breach of the ceiling — where no application is filed within fifteen days.
What duties attach?
Indication of the status and certificate number on documents, keeping the documents, and the annual declaration by the first of April.
What happens upon cessation?
The declaration is submitted within thirty working days of ceasing activity.
How We Help on Legal.ge
Choosing a special regime and keeping the status requires precise knowledge of the conditions, the acts and the deadlines. On Legal.ge you can consult an experienced tax lawyer who will help you plan the status and build the declaration calendar. Fill in the request form on the site and receive qualified advice.