Suspending or closing a sole proprietorship in Georgia: Which option to choose and how to proceed in 2026

Many entrepreneurs in Georgia find themselves in a situation where their business operations are temporarily suspended: projects have ended, they have relocated, their country of residence has changed, or the business has simply been put on hold. In such cases, the question arises: what is the best course of action—to close the sole proprietorship entirely or to temporarily suspend operations?

At first glance, both options allow you to stop filing tax returns and avoid unnecessary obligations, but there are important differences between them. VAT payers should approach this issue with particular care.

In this article, we’ll examine both options and discuss the pitfalls that are often overlooked.

Option 1. Closing an Individual Entrepreneur (IE) business in Georgia

The complete closure of an Individual Entrepreneur business involves deregistering the entrepreneur with the National Agency of Public Registry (House of Justice).

Before closing the business, you must:

• file all required tax returns;
• pay any taxes owed;
• pay any fines and penalties (if applicable);
• ensure there are no outstanding debts to the tax authority.

After closing the IE, you must also resolve any issues related to tax status.

For example, if the entrepreneur utilized Small Business status (1 %), an application to revoke it must be submitted.

Procedure for closing an Individual Entrepreneur

The procedure typically proceeds as follows:

Step 1. File the final tax returns

If business operations continued until the closure, you must file a return for the last tax period.

Step 2. Pay taxes

Ensure there are no outstanding debts in your personal account.

Step 3. Close the sole proprietorship at the House of Justice

After closure, the information is automatically forwarded to the tax service.

Step 4. Cancel special tax statuses

If you have Small Business status or other special tax regimes, you will need to submit a separate application to terminate them.

Option 2. Suspending Operations

If an entrepreneur plans to resume operations in the future, it is often more convenient not to close the sole proprietorship entirely, but to put the business on hold.

This option allows you to retain:

• registration details;
• tax history;
• bank accounts (if the bank has no other requirements);
• the ability to quickly resume operations.

How to suspend operations

There are two common methods.

Method #1. Set inactive status

In the taxpayer’s personal account, you can change the business status to inactive.

In the absence of business activity, this allows you to avoid filing regular tax returns under most tax regimes.

Method #2. Submit an application to suspend business activities

A special form for applying for a temporary suspension of business activities is available in your Revenue Service account.

This option is convenient if you need to specify a specific start date for the suspension.

An important restriction for VAT payers

This is one of the most important points that entrepreneurs often overlook.

If a sole proprietor is registered as a VAT payer, simply suspending operations does not exempt them from their VAT obligations.

Even if:

• there are no sales;
• there are no customers;
• there are no deposits into the account;
• business operations are effectively suspended,

the entrepreneur is required to continue filing VAT returns as long as they retain their status as a VAT payer.

In practice, this means filing “zero” returns.

Why you can’t simply opt out of VAT

In Georgia, voluntary VAT registration remains in effect until the end of the calendar year.

If an entrepreneur has voluntarily registered as a VAT payer, it is generally not possible to opt out of this status in the middle of the year.

Cancellation takes effect only at the beginning of the following calendar year after submitting the relevant application.

Therefore, a situation where an entrepreneur:

• has obtained VAT payer status;
• decides to put the business on hold after a few months;
• stops filing returns,

can lead to fines and problems with the tax authorities.

What should a VAT payer do if business operations are suspended

If business operations have effectively ceased, it is recommended to:

• continue filing VAT returns;
• monitor reporting deadlines;
• plan in advance to opt out of VAT payer status for the next calendar year;
• only consider fully suspending business operations after VAT registration has been canceled.

Every situation is unique, so it is advisable to check your current tax status in your personal account before submitting any applications.

Which is better: closing your sole proprietorship or putting it on hold?

You should choose to put it on hold if:

• you plan to resume operations;
• you have active bank accounts;
• you don’t want to go through the registration process again;
• the hiatus will be temporary.

You should choose to close your business if:

• your business is being permanently shut down;
• you are moving to another country;
• you no longer need the sole proprietorship;
• you need to completely terminate your tax obligations.

Is it possible to resume operations after a hiatus?

Yes.

If an entrepreneur has chosen to suspend operations, in most cases it is possible to return to active status through the taxpayer’s personal account.

However, the following factors must be taken into account:

• the existence of special tax regimes;
• VAT payer status;
• possible changes in legislation;
• the need to resume reporting.

Conclusion

Suspending business operations and closing an individual entrepreneur in Georgia are different procedures, each suited to its own specific purposes. If there is a likelihood of returning to business, it is usually more convenient to use the temporary suspension mechanism. However, VAT payers should be aware of an important exception: even in the complete absence of business activity, the obligation to file returns remains in effect until VAT payer status is revoked.

Before making a decision, it is recommended to verify your current tax status, check for any outstanding debts, and review any special tax regimes to avoid fines and issues with the tax authorities in the future.