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 100 000. 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).

Income of an entrepreneur natural person is charged with 3 per cent income tax if an entrepreneur natural person with small business status has a document verifying 60 per cent of expenses (except for employee salary charges) associated with the above gross income gain. Otherwise the income of an entrepreneur natural person with small business status is taxed with 5 per cent rate. (Article 13, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010).

Income of an entrepreneur natural person is charged with 3 per cent income tax if an entrepreneur natural person with small business status has a document verifying 60 per cent of expenses (except for employee salary charges) associated with the above gross income gain. Otherwise the income of an entrepreneur natural person with small business status is taxed with 5 per cent rate. (Article 13, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010).

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).

Small business status may not be assigned to a natural person in case the latter is registered as a VAT payer 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)

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)

An entrepreneur natural person with small business status is bound to pay current tax payments to the budget before the 15th day of a month following each quarter. An entrepreneur natural person with small business status shall not be bound to pay current tax payments only if he started activities the current reporting year or he was assigned small business status the previous reporting year and he completed the same year with a micro-business status (Article 15, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

If within a current year a small business status of natural person has been cancelled the income gained by the individual within a reporting year prior to status cancellation is subject to taxation according to the special method prescribed for small business. And the income gained after status cancellation is subject to taxation with income tax according to the general taxation method. (Article 14, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

In case of payment for the provided services a natural person with small business status is not obliged to 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 15, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

The above activities comprise: 1. Renting of property; 2. Income received from loan; 3. Profit received from gambling business; 4. Grant; 5. Surplus income received from further sale of the property: a) real estate; b) vehicle; c) securities; 6. Income received as inherited property; 7. Income received as dividends; 8. Income received as interest; 9. Income received as royalties; 10. Income received as debt forgiveness; 11. Surplus received by sale of partner shares. (Annex 4, Resolution N415 of the Government of Georgia, dated December 29, 2010)

In case within a current reporting year a person turns from a different taxation regime to small business the income (including income received before assignment of small business status) received by the individual within a reporting period (calendar year) is subject to taxation according to the method prescribed for small business status. (Article 14, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

Natural person with small business status is obliged to use cash register for cash payments with consumers (Article 16, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

A person shall have small business status cancelled provided: a) natural person has addressed tax authority with a written statement for cancellation of small business status or micro 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 small business status exceeds GEL 150 000. c) the natural person has carried out activities not allowed for small business; d) the individual has a liability of mandatory VAT registration f) the total gross income gained by the natural person with small business status within a calendar year exceeds GEL 100 000 (Article 18, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

A natural person who carries out activities not allowed for small business will be imposed with a penalty in the amount of GEL 500 in compliance with Article 288 of Tax Code. Mentioned penalty will be imposed to the person with small business status also in case, when he is sanctioned for non-usage of cash registers 3 times a year.

If the obligation of registering as VAT payer occurs for entrepreneur natural person, he/she shall apply to tax authority for registering as VAT payer. 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 (Article 19, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

Following current control procedures may be applied towards a natural person with small 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 20, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

A natural person whose small business status has been cancelled, is authorized to apply to a tax authority with a request of being assigned the status anew provided the natural person meets the requirements prescribed for small business status assignment and the both below stated conditions: a) unless within 12 calendar months following the status cancellation the total amount of the performed taxable operations exceeds GEL 100 000; b) taking into consideration item “a” unless the person is a VAT payer in the year following 12 calendar months after the status cancellation. (Article 12, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

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)

Person with small business status submits annual income tax return within 30 working days at the time of cancelling economic activities (Article 15, Order N999 of the Minister of Finance of Georgia, dated 31th December, 2010)

In mentioned case, person submits simplified income tax return prior to April 1st of the year following the report year and charges income received during the active period of small business status with the rate set for small business. Moreover, if person continues activity after cancelation of small business status, he/she submits annual income tax declaration for the same deadline and charges income received after cancelation of small business status.