As of January 1, 2025, the Georgian government amends the “small business” regime to tighten control and more precise separation of activities. At the same time, agro- and wine tourism is incentivized, where businesses can now reach a higher turnover limit while remaining in the 1% regime.

Below we analyze the key changes and give recommendations on how entrepreneurs can continue to operate without unnecessary risks.

1. GEL 700,000 limit for agrotourism and wine tours

Starting January 1, 2025, agritourism and wine tourism receive an increased turnover limit:

• New limit: instead of GEL 500,000, a limit of GEL 700,000 per year is introduced.
• Conditions for maintaining the 1% rate: if annual income does not exceed GEL 700,000, the entrepreneur continues to pay 1% tax as before (all other things being equal).
• Exceeding the limit: if in any month the turnover exceeds GEL 700,000, the rate turns into 3% from the beginning of that month. And in case of further exceeding of the limit, it will be necessary to switch to the general system or another form (LLC, for example).

Thus, agritourism and winemakers in the tourism sector receive an expanded window of opportunity. The state apparently sees high potential in the development of rural and wine tourism and seeks to give entrepreneurs a wider limit with low taxes.

2. Exclusion of construction services from the “small business” regime

As of February 1, 2025, codes from the National Classifier of Georgia (CEK 006-2016) numbered 41.2, 42 and 43 are withdrawn from the 1% regime if construction and repair services are used by Georgian sole proprietors, enterprises or organizations. These are:

• 41.2: construction of residential and non-residential buildings;
• 42: Civil construction (bridges, roads, other engineering structures);
• 43: specialized construction works (finishing, plumbing, electrical, etc.).

What it means for a sole proprietor:

1. You cannot use the 1% rate: if you provided construction services under a contract with Georgian legal entities, sole proprietorships or organizations, from February 2025, income from such contracts is not subject to preferential taxation.
2. The rate of 20%: income will have to be declared in the annual declaration as under the general system (20% of net profit).
3. The reason for the changes: the authorities see a frequent practice of tax avoidance, when workers (actually hired employees) are registered as “small businesses”, but work under the control of large companies. The new rules are designed to eliminate the scheme and equalize taxation in the construction sector.

3. Changes in the declaration and new income itemization

1. Updated reporting form: From the December 2024 reporting period, the small business declaration will have additional lines, a revised column 15 and a mandatory division by type of payment (cash transactions, POS, non-cash, etc.).
2. Tighter control: The state continues to check in detail the compliance of activities and declared codes. If you declare tourism but are actually engaged in construction or consulting, you may face fines.

4. Why is the government changing the small business regime?

• Combating hidden mercenary relations: especially in construction.
• Stimulating agro-tourism: raising the limit to GEL 700,000 will help develop farms, wineries and tourist-oriented guesthouses.
• Administrative control: more detailed declaration and clear distribution of income reduce the risks of tax evasion.

5. Recommendations and conclusions

1. Check your business codes. If you already operate under the “1%” and have contracts for construction or specialized installation services, you will have to switch to the general 20% regime or consider the LLC form (15% profit sharing) as of February 2025.
2. Benefit Analysis. Compare what is more profitable: to stay as a sole proprietorship with the general regime (20% of the difference between income and expenses) or to open a company (LLC) with 15% tax on distributed profits.
3. Income accounting. If you are in agrotourism or wine tourism, use the increased limit (up to 700,000 GEL). But don't forget: if you exceed the limit in any month, the rate rises to 3% (from the beginning of the month).
4. Preparing for the updated declaration form. From the December 2024 declaration you will have to report in more detail. Collect proofs (checks, statements) to correctly split your receipts.

Registration of IE in Georgia and consultations from ESPERO

If you are in doubt as to which taxation regime to choose, how to correctly classify activities or how to register a business (IE, LLC) in Georgia, ESPERO is ready to help. We specialize in:

• Registration of IE and companies (including remotely);
• Support in selecting OKED codes (so that your actual activity corresponds to the declared one);
• Accounting services and submission of declarations;
• Assistance in the transition from 1% to the general regime or opening an LLC for construction, consulting and other areas.

Bottom line

Georgia continues to be a loyal state for small businesses, but there are important adjustments beginning January 1 and February 1, 2025:

• Agro-tourism gets a limit of GEL 700,000,
• Construction loses access to 1% rate,
• Declaration becomes more detailed,
• Benefits and controls are more clearly delineated.

In order not to lose benefits and not to face penalties, it is important for entrepreneurs to prepare in advance for the new rules, analyze activity codes and, if necessary, change tax status.

Need experts to adapt your business to the new rules?

Contact ESPERO for a consultation. We can help:

• Check current codes
• Register a sole proprietorship or LLC
• Customize your accounting and keep maximum tax advantages!

Ask a question or get a personalized consultation at espero.ge today!