Georgia: Territorial Tax, HNWI Status and 1% for Sole Proprietors

Over two decades Georgia has assembled a rare combination: a flat 20% income tax, a territorial exemption for the foreign income of individuals, and a small-business regime taxed at 1%. Since the mid-2000s tax reform and the Act on Economic Freedom, the country has kept rates low and administration simple, while the 2022 relocation wave turned it into a mass base for remote workers, freelancers and entrepreneurs with foreign income. Below we work through the three pillars of this design — territoriality, residency and the 1% for sole proprietors — and the new restrictions that appeared in 2026.

Concept: Territorial Principle

Georgia taxes individuals on a territorial basis: a resident's foreign income is generally not taxed, and tax is charged only on Georgian-source income. The basis for this is articles 79 and 82 of the Georgian Tax Code. The income tax rate is flat, 20%, and applies to Georgian income. A "foreign" source is determined by the place where the income is actually generated; the payer's citizenship and the currency of receipt play no role here: a service rendered from Georgian territory can be recharacterised as a Georgian source taxed at 20%. Territoriality therefore works together with the question of substance and source qualification.

Tax Residency: 183 Days or HNWI Status

• 183 days in any continuous 12-month period; or
• HNWI status (high-net-worth individual) — residency without the 183 days, on an economic nexus. Threshold: assets exceeding GEL 3 million, or annual income above GEL 200,000 in each of the last three years; plus a Georgian nexus — a Georgian residence permit or citizenship, or confirmed Georgian income of at least GEL 25,000 for the year (an alternative route is Georgian real estate worth USD 500,000 or more). The status is granted as a residency certificate and renewed annually.

The residency certificate is useful for the treaty tie-breaker and for reducing withholding tax under Georgia's tax treaties (of which there are more than 55).

1% for Sole Proprietors (Small Business Status)

• a sole proprietor (individual entrepreneur) with small-business status pays 1% on turnover up to GEL 500,000 a year (around USD 180,000); from the month in which annual turnover passes that limit, income is taxed at 3% until the end of the year (Tax Code, art. 90). Exceeding the cap two years in a row removes the status from 1 January of the third year. For agrotourism the threshold is higher, GEL 700,000, while turnover up to GEL 30,000 can fall under micro-business status at 0%. The base rate outside the status is the same 20%.
• registration as a sole proprietor is fast and does not require residency;
• popular with freelancers and remote workers serving foreign clients;
• the regime is closed to a whole list of activities: consultancy and advisory services, legal and notarial work, audit and tax work, medical and architectural services, currency exchange and financial intermediation, gambling, excisable and licensed activities. IT development, design, digital marketing and production do qualify, which makes the activity code and description chosen at registration matter more than it looks: the word "consulting" is enough to break the regime;
• only turnover from the activity falls under the 1%. Royalties, dividends, interest, rent, capital gains, gifts and inheritances sit outside the regime and are taxed under the general rules, not always at 20%: Georgian dividends and interest bear 5% at source, residential rent can be taxed at 5%, gifts and inheritances from close relatives are exempt, and a resident's foreign-source income stays exempt (Tax Code, arts. 81, 82, 130 and 131).

The 2026 changes are about administration rather than rates. Order No. 999 on the use of special taxation regimes, as amended on 5 February 2026 and in force from 7 March 2026, moved three parameters. Small business status now takes effect on the date the request is filed with the Revenue Service rather than on the first day of the following month. Failure to file a monthly return is no longer treated as filing a nil return — the return must be submitted every month even at zero turnover, and non-filing is a tax offence carrying a fine. A status revoked because turnover exceeded the cap two years running cannot be granted again in the year of revocation (Order No. 38 of 5 February 2026).

Immigration and Work Permits (2026 Changes)

• short-term, investment and work residence permits; from 1 March 2026 the real-estate threshold for the short-term residence permit (and the D5 visa) has been raised to USD 150,000 (previously USD 100,000), while the investment residence permit still requires an investment or real estate worth USD 300,000 (Law on the Legal Status of Aliens, art. 15);
• from 1 March 2026 (Decree No. 70 of 20 February 2026) a residence permit alone is no longer enough for work or business — a separate "right to labour activity" from the Employment Agency is required, plus a D1 visa or a work residence permit; self-employed foreigners, including sole proprietors, are expressly covered by the requirement; since 15 April 2026 the Law on Labour Migration does not apply to work or services performed for a non-resident where they relate to the non-resident's activity outside Georgia.

Scenarios

Remote worker / freelancer. Small-business status (1%) on Georgian turnover plus territorial treatment of foreign income. The narrow spots are source qualification and the new right to labour activity for the self-employed from 2026. An account for that turnover can be opened remotely as well: the digital Hashbank onboards a foreigner on a travel passport without a visit, whereas the large banks increasingly ask for source of funds and physical presence.

HNWI. A residency certificate without the 183 days — for those who need the status and the tie-breaker without physically living in the country.

Entrepreneur with a foreign business. Territorial treatment of foreign income where the business is genuinely managed outside Georgia.

Risks

• the 1% is a Georgian regime; for foreign income what matters is the source and the real place where the services are performed (substance);
• territoriality does not itself settle continuing tax obligations elsewhere: check any applicable CFC or exit-tax rules, residence under domestic law and any applicable treaty, and automatic exchange (CRS); (Sources: Georgia: tax treaties; FNS: CFC; HMRC: CFC).
• a "foreign source" is sometimes recharacterised as Georgian when the work is physically carried out from Georgia;
• the right to labour activity has applied since 1 March 2026: the transition window for the self-employed expired on 1 May 2026, and working without the permit is fined.

Regulation: The 2026 Labour Reform

From 1 March 2026 Georgia moved from what was effectively an open labour market to a permit-based model. Decree No. 70 of 20 February 2026 and amendments to the laws on labour migration and on the legal status of foreigners introduced a mandatory "right to labour activity": a temporary residence permit on its own no longer confers the right to work or run a business. A foreigner must simultaneously hold a work permit from the Employment Support Agency and a corresponding D1 visa or work residence permit.

For a sole proprietor working for foreign clients, the amendment of 15 April 2026 answers the main question: the Law on Labour Migration does not apply where a foreigner works for, or provides services to, a non-resident and the work is connected with the non-resident's activity outside Georgia (art. 1(4)). The exemption turns on the client's residence and on where the client's business is carried on; Georgian clients, a Georgian-resident counterparty or work tied to the Georgian market bring the requirement back, so outside that profile obtaining the right to labour remains the default scenario.

Territoriality, Substance and Information Exchange

A residency certificate does not create an automatic exemption for any "foreign" income — it merely fixes residency. What decides the rest is source qualification: where value is physically created and whether real substance stands behind the structure. If the centre of the work sits in Georgia, the income is highly likely to be treated as Georgian at the 20% rate.

The territorial regime does not override the rules of the former country of residence. CFC and exit-tax consequences depend on the relevant country's rules and the person's tax status; former residence alone does not make them apply indefinitely, and a Georgian certificate reduces withholding tax only where a treaty between Georgia and the source state is in force and applied. In parallel, automatic exchange (CRS) is in force: residency in Georgia does not make accounts invisible.

Evolution and Takeaway

Georgia's logic has held steady for two decades — low flat rates and territoriality as a tool to attract capital and people. What has changed is the surrounding framework: tighter control over the source of income, alignment with the exchange standards, and the 2026 labour reform, which closes off "grey" self-employment. The base remains convenient for those whose income is genuinely created outside the country and who arrange residency and the right to labour carefully. Regimes close in logic are the Greek non-dom and the perpetual-traveler lifestyle. In the territorial and remittance table of special tax regimes for new residents Georgia stands beside Panama, Paraguay, Costa Rica, Malaysia, Thailand and Uruguay, and the relocation matrix sets its entry conditions and exit consequences against the other destinations on one grid.

Georgia offers three independent levers: a territorial exemption for foreign income (arts. 79 and 82 of the Tax Code), residency through HNWI status without the 183 days, and 1% for sole proprietors with turnover up to GEL 500,000. All three come down to one question — where the income is really created; from 1 March 2026 a mandatory right to labour activity has been added to it.