Small Business
To obtain small business status, an individual must first register as an individual entrepreneur at the House of Justice. It’s important to note that, starting from November 25, 2021, registration as an individual entrepreneur became free of charge. After registration, the individual must apply to the Revenue Service (Tax Authority) at their service centers or through a personal RS (Revenue Service) account page to request small business status. Upon receiving a positive response, the small business status becomes effective from the first day of the following month.
Activities ineligible for Small Business status:
- Activities requiring licenses or permits (except for taxi transportation activities within the capital).
- Activities requiring significant investment;
- Currency exchange operations;
- Medical, architectural, legal (including attorney or notary), auditing, consulting (including tax consultancy) services;
- Gambling activities;
- Personnel supply services;
- Production of excise goods.
Taxation for Small Business Status Holders: Income earned by individuals with small business status (income derived specifically from small business activities) is taxed at 1%. However, if taxable income exceeds 500,000 GEL within a calendar year (excluding salaries paid by the small business and income subject to personal income tax), it becomes taxable at 3%.
Income totaling up to 6,000 GEL (accrued) annually by small business status holders is exempt from taxation if the status was obtained in the same year as individual entrepreneur registration or if income from the previous calendar year did not exceed 50,000 GEL.
Declaration Submission and Tax Payment:
Individuals holding small business status must submit a small business declaration monthly, no later than the 15th of the following month. If an individual conducted business activities before receiving small business status, an annual income tax declaration must be submitted by April 1st of the following year.
Cash Payments and Record-Keeping for Small Business Status Holders Individuals holding small business status are required to use a cash register for cash transactions, including when operating within market areas. Additionally, they must issue a waybill (სასაქონლო ზედნადები) during the transportation of goods.
They must maintain a special journal of business transactions (which can be electronic). If the individual is registered as a VAT payer, accounting must be conducted using the accrual method. (The accrual method recognizes revenue when the obligation arises, not when the cash is received). Example: If goods worth 5000 GEL are sold in a given month, but payment hasn’t yet been received, for VAT purposes, this 5000 GEL is taxable in the month when the goods were sold, not when the cash was received.
Changes in Small Business Activities
If an individual holding small business status changes or adds an activity, appropriate amendments will be made to their issued certificate.
Revocation of Small Business Status
Small business status is revoked from the beginning of the calendar year following the year when:
- The small entrepreneur voluntarily submits a cancellation request;
- The entrepreneur’s annual income exceeds 500,000 GEL for two consecutive years.
- If the individual engages in activities prohibited under small business status, or if they receive penalties at least three times within a calendar year for violating cash register usage regulations, the status is revoked from the beginning of the current year.
