Opening an Individual Entrepreneur (IE) in Georgia offers foreigners a number of significant advantages. With its liberal economic policies and favorable business climate, Georgia is becoming an increasingly attractive place to do business. However, there are also hidden risks for Individual Entrepreneur to be aware of, so it’s important to weigh all the pros and cons carefully.
Key Advantages of Registering as an Individual Entrepreneur in Georgia
1. Low Taxes
Georgia is known for its simple and transparent tax system. IEs can choose among low-tax regimes:
- Small Business Status: If annual revenue does not exceed 500,000 GEL (about $185,000), the entrepreneur may qualify for a 1% turnover tax. This is one of the most attractive conditions for small businesses.
- Microbusiness: If annual revenue does not exceed 30,000 GEL (about $11,000), the tax rate is 0%.
2. No VAT for Small Businesses
Small businesses with revenue up to 500,000 GEL per year are exempt from VAT obligations. This significantly reduces the tax burden and simplifies accounting procedures.
3. Simple Reporting and Minimal Accounting Requirements
IEs are not required to maintain complex bookkeeping, especially when operating under simplified tax regimes (1% turnover tax for small businesses). The main requirement is filing annual income declarations.
4. Modern Banking Services
The quality of financial services at Georgian banks, particularly Bank of Georgia (BoG) and TBC Bank, is high. Service conditions are often more advantageous than in many other countries, and in some cases, accounts can even be opened remotely.
5. Remote Business Management Available
Georgia actively supports digitalization and the simplification of bureaucratic processes. It is possible to register an IE remotely via authorized representatives, and entrepreneurs can generally manage their businesses remotely—particularly useful for freelancers and online business owners.
6. Integration with Neobanks
IEs in Georgia can connect their businesses to international neobanks like Payoneer, Paysera, and Wise. The Georgian tax authorities do not object to entrepreneurs using non-Georgian bank accounts.
Many prospective business owners ask about the hidden pitfalls associated with registering an IE or LLC in Georgia. Let’s first look at the broader challenges of Georgia as a business jurisdiction:
Hidden Risks for Individual Entrepreneur
CRS
For many years, Georgia’s absence from the list of CRS countries was a strategic advantage: entrepreneurs from Russia, Belarus, Ukraine, and other countries actively opened accounts and registered businesses there without fearing the automatic exchange of information with their home tax authorities.
With Georgia’s accession to the CRS, the situation is changing dramatically.
Banks will now be required to collect detailed information about their clients’ tax residency and transmit it to the Georgian tax authorities for subsequent exchange with other countries.
Hidden risks:
- Disclosure of account and income information: Financial data (account balances, transaction histories) may be automatically transferred to the entrepreneur’s country of tax residence.
- Risk of tax audits: Based on the received information, foreign tax authorities may initiate audits, reassess taxes, and impose fines and penalties.
Restrictions on Obtaining Small Business Status
Georgian tax law outlines a number of business activities and types of income that disqualify taxpayers from benefiting from the 1% turnover tax.
Government Resolution No. 415 lists prohibited activities and excluded types of income.
The difference between these two:
- Prohibited activities: If you engage in any prohibited activity, you cannot obtain or maintain Small Business Status.
- Excluded income: Certain types of passive income (such as salary income) may be legally earned while holding Small Business Status, but they cannot be taxed at the 1% rate.
Example:
The Tax Code clearly states that salary income (i.e., employment income) is excluded. If you work for a company (regardless of jurisdiction) while residing in Georgia, your employment income must be taxed at the standard 20% income tax rate, even if you hold Small Business Status.
Failure to comply may result in fines and penalties.
Risk of Incurring 20% Taxation
Obtaining Small Business Status is quick (within a day), but many newcomers do not realize that it only becomes effective from the following month.
For example, if status is granted on January 14, tax benefits will apply only to operations starting February 1. Activities carried out before that date may be taxed at 20%.
Another risk: if you incorrectly specify the business activity code (NACE code) that is not eligible for Small Business Status, authorities may revoke your tax benefits, leading to retroactive 20% taxation.
Hidden risks with Legal Address
Unscrupulous providers of legal addresses can initiate their withdrawal unexpectedly.
For IE registration in Georgia, a valid legal address must be documented. Unlike Armenia, where a nominal address (like a hotel) is often sufficient, Georgia requires official proof.
At the Public Service Hall (where business registration occurs), intermediaries frequently offer addresses.
However, cases are common where vendors promise a “lifetime address” for $35–50, and later threaten to revoke it unless additional monthly or annual fees are paid.
Recommendation: Always purchase legal addresses from reputable companies you can leave public complaints about if necessary.
Risk of Losing Access to a Working SIM Card
A local Georgian phone number is required for tax registration. The main operators are Magti and Silknet.
Since most entrepreneurs travel to Georgia only for a few days to open their IE, a common problem arises:
- Roaming is not automatically enabled by most Georgian operators.
- Upon leaving Georgia, many entrepreneurs find their SIM cards inactive, which can lead to losing access to the tax office account and banking services requiring SMS confirmation.
Restoring a SIM card via power of attorney is extremely difficult. In most cases, a return trip to Georgia is required.
Recommendation: When purchasing a SIM card, ask the vendor to immediately activate roaming.
