The Small Business Regime in the System of Special Taxation
The Tax Code of Georgia builds a system of special taxation regimes that extends to physical persons holding micro business status, entrepreneur physical persons holding small business status, and persons holding the status of a fixed taxpayer. For an individual entrepreneur the central link of this system is precisely the small business status — with simplified rates and simplified accounting.
Small business status may be granted to an entrepreneur physical person. At the same time, with the consent of the Financial-Budget Committee of the Parliament of Georgia, the Government may prohibit the pursuit of particular activities within which this status cannot be granted to an entrepreneur, and may also define types of income that are not taxed under the special regime and are not counted in total income.
Granting the Status and the Income Thresholds
An entrepreneur physical person who satisfies the established conditions applies to the tax organ for the purpose of being granted small business status, and the organ issues a small business certificate. The threshold of total income for a calendar year is 500 000 lari, while for subjects of wine tourism and agrotourism activities it is 700 000 lari.
The logic of the threshold is repeated in the cancellation rule: if total income received from economic activity exceeded, for 2 calendar years, 500 000 lari in each year (700 000 lari for wine tourism and agrotourism), the status is cancelled. In that case it is considered cancelled from the beginning of the following year.
Other Grounds for Cancellation
Beyond exceeding the threshold, small business status is cancelled if: the person applied to the tax organ before the end of the calendar year — the status then ends from the first day of the month following the month of application; the person carries out a prohibited activity or does not satisfy the basic requirement of the regime — cancellation then operates from the beginning of the current year or from the date the ground arose; or the person was fined at least 3 times within a calendar year for violations of the rules on the use of cash registers.
Cash-register discipline is particularly sensitive here: three fines connected with the cash register within a year abolishes the status and returns the entrepreneur to the general regime, which entails an increased tax burden.