The Architecture of the One-Per-Cent Regime
The small-business status is the central element of the special-regime system of the Tax Code: an entrepreneur natural person, within a defined ceiling, receives the right to taxation at a one-per-cent rate. All five pillars of the regime — who is eligible, how the status is put at risk, how the rate works, what accounting is required and what payroll relief exists — must be read as a single structure. A boundary is noted too: the administrative procedure of granting the status is set by an act of the Minister of Finance, and the prohibited and excluded types by a government act — those acts must be analysed before planning a structure. A special regime means that, instead of the general rules, the special rules of the Code apply — and they follow the status: losing the status means leaving the special taxation regime.
Eligibility, the Ceiling and the Risks
Small-business status may be granted to an entrepreneur natural person; the ceiling is aggregate income of five hundred thousand lari in a calendar year — seven hundred thousand for subjects of wine tourism and agrotourism. To obtain the status, the person applies to the tax organ, which issues a certificate. The status is voided in five cases: exceeding the ceiling in two calendar years; applying before the end of the calendar year; carrying on a prohibited activity; being fined not less than three times in a year for breaches of cash-register rules; and non-conformity with the conditions. The timing rules of voidance are also precise — upon exceeding, the status is void from the beginning of the following year; where the person applied before the end of the calendar year — from the first day of the month following the month of application; for a prohibited activity or cash-register fines — from the beginning of the current year; and for non-conformity with the conditions — from the date the respective ground arose. Upon cancellation of the status, the accounting of the existing goods balances is likewise determined by an order of the Minister of Finance.
The Rate, Accounting and the Payroll Relief
Taxable income is taxed at one per cent; where the person's aggregate income exceeds five hundred thousand lari (seven hundred thousand for wine tourism and agrotourism), the excess is taxed at three per cent — from the beginning of the month of exceeding until the end of the year. Taxable income comprises income from Georgian sources, except salary and excluded types. The accounting principles are light but mandatory: a special journal (in the manner set by order of the Minister of Finance) and waybills for the carriage of goods; the annual loss is not carried to the next year unless the regime is left. The declaration and payment are periodic, within the period established by the tax legislation; no current payments are made. The payroll relief also matters: salary paid to employees up to six thousand lari in aggregate per year is not taxed at the source where the person registered as an individual entrepreneur and received the status in the same year, or where the previous year's income did not exceed fifty thousand lari.
Managing the Ceilings and Protecting the Status
The practical management of the one-per-cent regime means controlling the ceilings: the five-hundred-thousand boundary operates on two levels — for the existence of the status (exceeding in two years voids it) and for the rate (three per cent begins from the month of exceeding). Structuring therefore requires watching the annual turnover and reacting in time: staying below the ceiling in the second year keeps the status; exceeding changes the rate. The second risk is the cash-register rules — three fines in a year void the status, and it is precisely the risk that accounting discipline removes. The third line is accounting: the correctness of the journal and the possession of waybills in carriage is often decisive for the recognition of costs as well. Finally, the two conditions of the payroll relief — registration in the same year or previous-year income up to fifty thousand — must be planned together with the hiring decision.
Frequently Asked Questions
Below we answer the most common questions about the one-per-cent regime.
What is the ceiling of the regime?
Aggregate annual income of five hundred thousand lari; in wine tourism and agrotourism — seven hundred thousand.
When does three per cent apply?
From the beginning of the month of exceeding the ceiling until the end of the year.
What accounting is required?
A special journal and waybills for carriage; the loss is not carried to the next year.
Is there payroll relief?
Yes — salary up to six thousand lari per year is not taxed at the source under defined conditions.
How We Help on Legal.ge
Structuring on the one-per-cent regime requires precise planning of ceilings, status risks and accounting rules. On Legal.ge you can consult an experienced tax lawyer who will help you build the structure and keep the status. Fill in the request form on the site and receive qualified advice.