Digest of legislative changes in Georgia for the first quarter of 2025

In December 2024, amendments were made to Government Decree No. 415 “On Special Taxation Regimes” and Order of the Minister of Finance No. 390 “On the Application of Special Tax Regimes” concerning the regulation of individual entrepreneurs (IEs) with small business status. The monthly tax declaration was detailed (with particular attention paid to methods of income generation), the maximum income threshold eligible for the 1% tax rate was increased for certain types of businesses, and some types of activities became ineligible for small business status.

Starting from February 1, 2025, individual entrepreneurs (IEs) engaged in the construction sector will be taxed at a rate of 20% instead of the previous 1%.

According to the amendments to Government Decree No. 415 of Georgia, from February 1, 2025, small entrepreneurs in the construction sector will no longer be eligible to apply the 1% tax rate if they provide services to companies, organizations, or other IEs.

Such income will be subject to a 20% income tax (applied to the difference between income and documented expenses).

The changes cover a wide range of construction activities, including buildings, roads, bridges, electrical installations, finishing works, and more.

If the services are provided to individuals (private persons), the 1% tax rate remains applicable.

700,000 GEL Threshold for Agritourism and Wine Tours

Starting from January 1, 2025, the annual turnover threshold for entrepreneurs engaged in agritourism and wine tourism will be increased, allowing them to retain the preferential tax rate:

• New threshold: The limit is raised from the previous 500,000 GEL to 700,000 GEL per year.
• 1% tax rate retained: If the annual income does not exceed 700,000 GEL, the entrepreneur will continue to pay tax at the rate of 1%, as before.
• Exceeding the threshold: If this amount is exceeded in any given month, the tax rate will increase to 3% starting from that month. Further growth in turnover may require a transition to the general taxation system or registration as a legal entity (e.g., LLC).

This change broadens opportunities for businesses in the rural and wine tourism sectors, reflecting the government’s intention to support the development of these areas while maintaining favorable tax conditions.

Georgia Extends Deadline for Compliance with the Law on Entrepreneurs

The deadline for complying with the amendments to the Law “On Entrepreneurs” has been extended in Georgia. The law requires that companies registered before January 1, 2022, update their registration data in accordance with the new legal requirements.

Originally, the deadline for compliance was set for April 1, 2025. Companies failing to meet this requirement would be removed from the Public Registry and would no longer be allowed to operate.

However, the Parliament’s Sectoral Economy Committee has supported extending the transition period by one more year — until April 1, 2026.

Updated Small Business Declaration Rules Effective from December 2024 Reporting Period

Starting with the reporting period for December 2024, updated rules for completing the small business tax declaration have come into force. The declaration now includes new lines, a revised Line 15, and a mandatory breakdown of income by payment method (cash, POS terminal, bank transfers, etc.). The government has tightened control over small business operations by requiring precise categorization of income by type and source.

According to the updated declaration form (Annex No. 5 to Order No. 999, as amended by Order No. 390), individual entrepreneurs with small business status are now required to report income by the following categories:

• Line 18 – Cash (cash register receipts, cash income orders);
• Line 19 – POS terminal receipts;
• Line 20 – Non-cash payments (bank transfers, online payments);
• Line 21 – Other forms (PayPal, Wise, cryptocurrency, etc.).

Accounting Method

1. Cash basis – Only Lines 18–21 are filled; Lines 22–24 are left blank.
2. Accrual basis – In addition to Lines 18–21:
   • Line 22 – Accrued but not yet received income;
   • Line 23 – Previously recorded but now actually received income;
   • Line 24 – Received advances.

Taxable income (Line 17) is calculated as:

(Lines 18–21) + Line 22 – Line 23 – Line 24

Line 15 (Cumulative income since the beginning of the year) must also be completed, excluding income taxed under the general regime (e.g., dividends).

Once the data is entered, the system will automatically calculate:

• Line 16 – Applicable tax rate
• Line 17 – Tax amount due

These changes aim to improve transparency and accountability in the small business sector.

Author: Zautashvili Nino