Simplified Tax Regimes (Micro and Small Business) are among the most attractive components of the Georgian tax system, designed to foster entrepreneurship. These special regimes allow individuals to benefit from minimal tax rates: 0% for Micro Business and 1% for Small Business. However, obtaining and maintaining this status requires strict adherence to defined criteria. Many entrepreneurs are unaware that certain activities (e.g., consulting services, legal services) are prohibited under these regimes. Engaging in them automatically leads to the revocation of the status and a transition to the standard (20%) income tax regime with penalties. Therefore, correct qualification and precise selection of activity codes (NACE) are critically important.
The service includes full legal and tax support from obtaining the status to monthly reporting. Key aspects of the service include:
- Status Determination and Registration: Analyzing the client's activity and advising on which status (Micro or Small) is suitable. Preparing and submitting the application to the Revenue Service.
- Prohibited Activities Audit: Checking whether the planned activity falls under the government's list of prohibited activities (e.g., currency exchange, medical activities, consulting).
- Turnover Monitoring: Controlling the annual limits of 30,000 GEL for Micro Business and 500,000 GEL for Small Business.
- Declaration: Submitting simplified monthly declarations for Small Business (paying 1% of turnover). Submitting annual income tax returns for Micro Business.
- Record Keeping: Maintaining a simplified journal of income and expenses, which is mandatory in case of an audit.
Errors are common in practice and can be costly for entrepreneurs. For example, an IT specialist registered as a Small Business might inadvertently provide "IT consulting" services. During a tax audit, this could be classified as prohibited "consulting service," resulting in the revocation of status and the assessment of 20% income tax on all past income. Another scenario: a Small Business owner exceeds the 500,000 GEL threshold but continues paying 1% instead of the 3% required by law for the excess period (up to 2 years). A third case: a Micro Business owner hires an employee, which automatically disqualifies them from Micro Business status.
Georgian legislation, specifically the Tax Code of Georgia (Chapter XI, Special Taxation Regimes), regulates this area. Articles 84-95 define the criteria for Micro and Small Businesses. Also crucial is Government Decree No. 415, which lists the activities prohibited from using special regimes. Thorough knowledge of these regulations is essential to avoid tax risks.
Working with a specialist begins with a consultation to determine the client's business model. If the activity meets the criteria, registration is completed on RS.ge. Following this, an accountant or tax specialist assists with monthly reporting. Special attention is paid to properly drafting contracts with clients so that the nature of the service is clear and does not raise suspicions regarding prohibited activities.
Legal.ge offers access to qualified tax consultants who will help you safely utilize Georgia's liberal tax regimes. Our experts will assess your activity, assist in obtaining the status, and ensure the accuracy of your declarations. Start your business with minimal taxes and maximum legal guarantees with Legal.ge.
Updated: ...