Natural person may be granted with the small business status, which is entrepreneur natural person (including individual entrepreneur) and is registered as taxpayer. Small business status may be granted to entrepreneur natural person, whose gross income received from economic activity during a calendar year does no exceed GEL 500 000. Person with small business status may have hired work force (Article 11, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010).
3% Tax applies for those entities who can not prove 60% of their expenses.
How can small business status be assigned?
In order to obtain small business status a person addresses to Revenue Service (Service-center of the Service Department) with a statement or submits statement electronically via an official web-page of the Revenue Service– www.rs.ge . Tax authority will consider the statement and in case of its approval it will issue a small business certificate in reasonable time period. The certificate will remain valid for further reporting periods unless small business status of a natural person is cancelled. (Article 12, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)
Which Kind of Activities are not allowed under This special taxation regime?
- Licensed Activities
- Currency Operations
- Medical, Architecture Related, Law Consultancy, Notary, Audit, Consultation Services.
- Human Resource Supply
- Manufacturing of Excised Products
Tax Obligations under Small Business Special Regimes
- Wittholding Tax- An entrepreneur natural person with the small business status shall not be taxed at the source of payment for issued salary charges not to exceed 25 per cent of gross income over a calendar year. And for salary amounts exceeding 25 per cent of gross income the entrepreneur natural person will be imposed with the liability of tax agent. An entrepreneur natural person with small business status is bound to calculate and transfer to the budget tax to be withheld at the source of payment for issued salary amounts exceeding 25 per cent before 15th January of the year following the reporting year. In this view the entrepreneur natural person with small business status shall submit a return of tax withheld at the source of payment to a tax authority. (Article 15, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010).
- VAT TAX – Small business status may not be assigned. except the cases when the natural person is authorized and he/she applies to a tax authority with a request to cancel the VAT payer registration. In addition, registration as VAT payer results cancellation of small business status (Article 11, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010). Small business status will immediately cancelled from the day of registering as VAT payer ad person will not use the benefits set for special tax regimes
Does entrepreneur natural person with small business status have obligation to record expenses?
Small business shall keep a special register for cost keeping where the information on bearing expenses and costs will be entered in chronological order. The above register shall be established per calendar year and a taxpayer shall keep it for at least 6 years period. In case small business exercises a 3 per cent taxation right of taxable income it is bound to verify the expenses associated with this income as per the method prescribed by Tax Code. (Article 16, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)