Tax benefits for small businesses
Terms used:
“Micro” – micro business status
“Small” – small business status
‘Fixed’ – fixed tax payer
The article discusses Special tax treatments: micro business status, small business status, fixed tax payer.
Special tax treatments shall apply to: natural persons having the status of a micro business; entrepreneur natural persons having the status of a small business; persons having the status of a fixed tax payer.
You can see the list of activities by following the link:
In what field (who) can be granted – the status of micro business
In what field (who) can be granted – small business status
In what field (who) can be granted – the status of a fixed tax payer
There is a list of certain activities at the end of the article, when it is prohibited to grant the status of small and micro business.
The status of a micro business may be granted to a natural person who does not use the hired labor and conducts economic activity independently, the gross receivable income from which during a calendar year does not exceed GEL 30 000. The inventory balance of a natural person having the status of a micro business exceeds GEL 45 000. There is a certain list of activities to which the above-mentioned income limitation of up to 30,000 GEL does not apply. When the income reaches the limit for mandatory VAT registration, the micro-business has no right to be a VAT payer or must leave the micro-business status.
As for individuals with small business status, small business status can be granted to an entrepreneur individual who pays tax based on income. The tax determined according to the income can be 1%, while the annual income does not exceed 500,000 GEL or 3% if the income exceeds the established 500,000 GEL. In addition, there is a prerequisite for granting small business status, according to which the income of each calendar year for two years should not be more than 500,000 GEL. An individual with the status of a small business has the right to hire labor for the purpose of performing work.
A person having the status of a small business begins accounting for tangible goods when registering as a VAT payer and does not pay current tax based on income.
A person having the status of a small business is allowed to be a VAT payer. He is compulsorily registered as a regular entrepreneur as a VAT payer.
A fixed tax payer is also subject to the special taxa treatment, which can be an LLC or an individual entrepreneur.
The status of a fixed tax payer can be obtained by both a natural person and a legal entity. Persons with the mentioned status are taxed at 3% of income, or at a fixed rate from 1 to 2000 GEL.
A fixed tax payer cannot be a VAT payer. The status of “fixed” is canceled during mandatory VAT registration. Individuals and legal entities with the mentioned status can use the labor of a hired person.
Persons with a “fixed” status start accounting for tangible goods when registering as a VAT payer and do not pay current taxes (profit tax, income tax)
List of prohibited activities, in case of implementation of which micro business status cannot be granted to an individual
- Activities that require licensing or a permit, except for the activities provided in Article 24, Clause 261 of the Law of Georgia “On Licenses and Permits” (“Permit to transport in the capital of Georgia by light vehicle – taxi (M1 category)”).
- Activities from which the received income may exceed 30,000 GEL during the calendar year.
- Implementation of foreign exchange operations.
- Medical (except for the activities performed by the village doctor and nurse/nurse within the framework of the “Village Doctor” state program), architectural, lawyer or notary, audit, consulting (including tax consultants) activities.
- Gaming business.
Note: Clause 6 of the mentioned appendix does not apply to the case when the processing and delivery of the purchased goods is carried out.
List of prohibited activities, when the status of small business cannot be granted to an entrepreneur natural person
- Activities that require licensing or a permit, except for the activities provided in Article 24, Clause 261 of the Law of Georgia “On Licenses and Permits” (“Permit to transport in the capital of Georgia by light vehicle – taxi (M1 category)”).
- Activities which require significant investment (production of excise goods).
- Implementation of foreign exchange operations.
- Medical, architectural, lawyer or notary, auditing, consulting (including tax consultants) activities.
- Gaming business.
- Provision of personnel.
- Production of excise goods.
