This short Individual Entrepreneur’s Start Guide summarizes the main considerations and responsibilities you have as a Georgian Small Business owner. This will be even more useful for you if you have recently registered your Individual Entrepreneur (IE) & Small Business Status (SBS). You also need to action some important points from day 1, so start right away to avoid future problems.
Your Tax Filing Responsibilities In a Nutshell
|Monthly by the 15th||As-it-happens|
|– Income Tax (1%) Declaration|
– Reverse VAT Declaration*
– VAT declaration
(only if VAT-registered)
– Tax withholding declaration*
– Tax Payment To Treasury
|– 18% Reverse VAT* payment on foreign service purchases (Can claim back, if VAT-registered)|
– 20% Personal Income Tax payment on salaries**
– Maintaining a General Journal in accordance with accounting laws
** Note that in many cases, Income Tax is also due on salaries paid to non-residents. Ask your accountant for more.
You or your accountant will need to file the above declarations within the deadline via RS.ge, and ensure that the accounts are in compliance with the law at all times.
Your first online filing is due by the 15th of the month following the activation of your SBS. Before your first filing, you must list any and all of your business activities on your Tax Card.
Accountant – Do You Need One?
Some people choose to file their own taxes via RS.ge, and that’s perfectly fine.
It’s important to understand, however, that by opting to not have an accountant represent you, the liability for any errors in filing declarations or maintaining books is on you.
The value that an accountant brings is not just the act of filing an Income Tax Declaration each month, but the elimination of liability, and being able to alert you of any issues in advance.
If your business serves only foreign-based businesses then you may benefit from voluntary VAT registration.
VAT registration will likely save you money if:
- You do not sell products or services to anyone based in Georgia and have no intention to in the future.
- You do have foreign service purchases from outside Georgia (software, contractors, etc.)
- You do have business expenses in Georgia where VAT is levied (ie. purchasing office furniture, electronics, etc.)
- You only sell to businesses abroad (B2B).
Speak to your accountant about the pros & cons of VAT registration. For ExpatHub’s monthly accounting clients, registering you for VAT is free of charge, and filing VAT declarations is already included in many of our monthly packages.
You MUST explicitly request VAT registration. We will not register you automatically. To request VAT registration, please fill out this form.
Service Purchases From Abroad
All Georgian businesses that purchase services from abroad are subject to Reverse charge VAT, however, they can claim reverse charge VAT back by voluntarily becoming VAT-registered.
Regardless of whether the business is VAT-registered or not, Reverse VAT must be declared. This means that if you purchase services from abroad and do not declare them on the applicable declaration, you’re breaking the law and may face consequences.
Qualifying for Georgian Residency
If you are considering legal residency, then you should start planning for it from day 1. Otherwise, you may find further down the track that you have followed incorrect procedures which will lead to additional expenses or a failed application.
To qualify on the basis of your Small Business income, the essential requirements are:
- 40 days or more left on your legal stay.
- Sufficient funds to support yourself. The exact figure varies periodically, but greater than 15,500 GEL is a good starting point.
- Annual turnover of at least 50,000 GEL per foreigner employee applying for a work permit (for this purpose, as an IE, you are an employee).
You can prove turnover by the following methods ONLY:
- Your VAT turnover statement from the Revenue Service. You MUST be a VAT-payer for this method to work. Only income earned since the day your VAT registration was completed will count towards the turnover requirement.
- OR a non-standard turnover statement from the Revenue Service. This can take up to 10 business days and you must NOT be a VAT-payer in order to use this method.
Both of these require you to have made tax declaration prior to requesting the turnover statement.
In extremely rare circumstances, when getting these documents is not justifiably possible, you can use the following documents to prove turnover:
- Assessment by a licenced auditor verifying turnover paid into your bank accounts. Auditor fees are approximately 500 to 2,000 GEL, depending on the complexity of the case.
- OR Bank statement of your Georgian Business Bank Account in GEL. This must be a proper Georgian corporate bank account. Accounts with online banks, personal bank accounts, and foreign accounts are not acceptable.
If you want help with residency, ExpatHub offers a full assistance residency package. Read our Comprehensive Guide on Georgian Residence Permits, or simply Get in Touch and let professionals handle your application!
A few other things to note, not explained above.
- You cannot accept cash payments without a government-certified cash register. You can contact one of the Georgian banks to ask about PoS payment terminals which can be used as cash registers. Alternatively, accept cash via payboxes around Georgia.
- The tax year runs from January 1st to December 31st. Any other Georgian-sourced income you receive that is not declared as part of your regular monthly declarations must be declared separately. Most declarations are due by March 31st of the following year. Learn more about annual filing.
- If your gross turnover exceeds 500,000 GEL in any single calendar year, you will be taxed 3% on turnover for the remainder of the tax year, beginning with the month in which you exceeded the threshold. If your annual gross turnover exceeds 500,000 GEL in two consecutive years, you will lose your Small Business Status and the 1% tax rate.
For any help or assistance, please feel free to reach out to ExpatHub’s friendly team.
Disclaimer: This document summarizes some of the most important points that affect the majority of Individual Entrepreneurs with Small Business Status. We take no liability for how you use this information or for any additional considerations that are not listed here that might apply in your specific case.