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Micro Business

Who can be granted with the status of micro business?

Natural Person registered as taxpayer may be granted the status of micro business. In order to obtain a status of micro business, it is not necessary person’s registration as entrepreneur natural person.
Natural person may obtain status of micro business, if the following conditions are met:
a) Does not use hired work force
b) Independently conducts economic activities and his/her total gross annual income does not exceed GEL 30 000 for a calendar year (Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Which activities are not allowed for micro business?

Following are activities that are not allowed for micro business: 1. Activities requiring licensing or permits; 2. Activities the income gained from which may exceed GEL 30 000 within a calendar year; 3. Carrying out currency exchange operations; 4. Medical, architectural, lawyer, notary, audit, consultant (including tax consultant) activities; 5. Gambling business. 6. Trading (mentioned prohibition does not concern the cases when treatment and delivery of produced or purchased goods is performed by this person). (Annex 2, Resolution N415 of the Government of Georgia dated 29th December, 2010)

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Can a person with micro business status be registered as a VAT payer?

A person with micro business status cannot be registered as a VAT payer provided that VAT payer cannot obtain status of micro business. In addition, registration as VAT payer results abolition of the status of micro business (Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010, Articles 3 and 8).

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How can micro business status be assigned?

In order to obtain micro 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 micro business certificate in reasonable time period. (Article 3, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Does a person with micro business status submit annual income tax return?

Person with micro business status is obliged to submit simplified annual income tax return prior April 1st of the year following the report year to tax authority (Article 5, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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When is person having micro business status obliged to address tax authority with the request to cancel the status of micro business and/or transfer from micro business status to small business status?

If total gross income received by natural person during a calendar year exceeds GEL 30 000, he will stars using hired work force, will decide to conduct prohibited activity, or if his/her balance of the inventory items exceeds GEL 45 000, person is obliged to address tax authority with the request to cancel micro business status. At the same time, he/she has right to request granting of small business status (Article 8, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Is it possible that person with micro business status uses hired work force for conducting economic activities?

Person with micro business status is prohibited to use the hired work force, except his/her family member (Article 8, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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In case of micro business status cancellation or transfer from micro business status to small business status how will be income received by a person charged?

If within a current tax year a person’s micro business status has been cancelled and he/she has not obtained small business status, income within a reporting year (including within the period when micro business status is active) is subject to income tax according to the general method. Furthermore, according to Article 155 of Tax Code, current tax payments will not be accrued for the year when micro business status was canceled. In case micro business status has been cancelled and small business status has been assigned the gross income received by the person within a calendar year (including in the period of micro business status validity) will be charged according to the method prescribed for small business status. (Article 5, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Shall a person with micro business status withhold tax at the source of payment in case of payment for the provided services?

In case of payment for the provided services a person with micro business status shall not withhold tax at the source of payment; apart from that in case of payment for services provided by non-resident the person is bound to charge the operation with VAT according to the method of reverse charging prescribed by Tax Code. (Article 5, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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If within a calendar year a person decides to turn from a different taxation regime to micro businesses how will his/her income be charged?

In case within a current reporting year a person turns from a different taxation regime to micro business the income (including income received before assignment of micro business status) received by the individual within a reporting period (calendar year) is subject to taxation according to the method prescribed for micro business status. (Article 5, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Does a person with micro business status use a cash register?

A person with micro business status is released from an obligation to use cash register (Article 7, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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In what cases shall a person have micro business status cancelled?

A person shall have micro business status cancelled provided: a) natural person has addressed tax authority with a written statement for cancellation of micro business status or small business status assignment; b) as a result of inventory performed by a tax authority it was detected that the balance of inventory items of the natural person with micro business status exceeds GEL 45 000. c) the natural person has carried out activities not allowed for micro business; d) the natural person has an employee (for the above purposes family members cannot be deemed as employees); e) the individual has a liability of mandatory VAT registration f) the total gross income gained by the natural person with micro business status within a calendar year exceeds GEL 30 000 (Article 8, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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What kind of responsibility will a natural person be charged with provided the natural person carries out activities not allowed for micro business?

A natural person who carries out activities not allowed for micro business will be imposed with a penalty in the amount of GEL 500 in compliance with Article 288 of Tax Code.

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How shall a natural person with micro business status act if his/her total gross income exceeds GEL 30 000 or the natural person starts to use hired work force?

In case the total gross income received by a natural person with micro business status exceeds GEL 30 000 or the natural person starts to use hired work force, within 15 calendar days from this moment the natural person shall apply to a tax authority with the purpose of being assigned small business status. Unless this right is exercised the micro business status will be automatically cancelled and the natural person will be removed from the special regime of taxation (Article 8, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

 

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What type of current control procedures may be applied towards a natural person with micro business status?

Following current control procedures may be applied towards a natural person with micro business status: a) test purchase of goods/services b) observation c) observation of rules of cash register use in respective situations d) chronometric examination e) inventory (Article 10, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Does natural person with micro business have obligation to pay current tax payments? .

Persons with micro business status do not pay current tax payments. According to Article 155 of Tax Code, person whose micro business status was cancelled during current year will not pay current tax payment as well

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Does person with micro business status have obligation to submit return at the time of cancelling economic activities?

Person with micro business status submits annual income tax return within 30 working days at the time of cancelling economic activities (Article 5, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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Does person with micro business status have obligation to record incomes and expenses?

Person with micro business status does not have an obligation to record incomes and expenses, but in case of consumer’s request, he may issue prior tax document, where his status and certificate number is indicated (Article 6, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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What kind of tax return is submitted by person whose micro business status is cancelled during current year and he/she is transferred to ordinary taxation regime?

In mentioned case, person submits annual income tax return prior April 1st of the year following report year and charges income received during a year with 20% income tax.

 

 

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