Georgia vs Estonia: Where the 1% Rate Actually Stops

Both get recommended to the same person, a solo consultant with foreign clients and no wish to overpay. On headline rate Georgia wins by a distance. On what those rates attach to the answer moves, because Georgia's 1% belongs to a person and Estonia's 22% belongs to a company. Here is what each regime charges, and the exact point where the 1% stops.

The short answer

Figures checked August 2026.

Georgia wins on rate for a high-margin one-person business that takes money out as it earns it. Estonia wins for anything that reinvests, anything that needs an EU counterparty, and anything where limited liability is not optional.

One taxes what comes in, the other taxes what goes out

Georgia's small business regime taxes turnover. Not profit, not income after costs, the money that arrives. Bill 200,000 GEL and spend 150,000 GEL and you pay 1% of 200,000, which is 2,000 GEL against 50,000 GEL of actual profit. That is a 4% effective rate on what you kept.

Run the same regime on a thin margin and it turns. Bill 200,000 GEL, keep 10,000 GEL, and the same 2,000 GEL is a fifth of your profit. Turnover taxes are generous to consultants and brutal to resellers, and the field discusses the first case only.

Estonia taxes profit, and only the profit that leaves. Retained profit sits at 0% for as long as it stays inside the company. Distributed profit is taxed at 22%, calculated as 22/78 of the net dividend, so putting €10,000 in your own hand costs €2,821 rather than €2,200.

That is the honest shape of the choice. Georgia charges you for earning. Estonia charges you for extracting, and lets a business that compounds internally pay nothing for years.

The 3% is a cliff, not a top-up rate

Almost every guide on this comparison, including our own earlier version of this page, describes the Georgian regime as 1% up to 500,000 GEL with 3% on the excess. The statute does not say that.

Article 90 of the Tax Code of Georgia taxes the taxable income of a person with small business status at 3% once gross income has exceeded 500,000 GEL, and applies that rate from the beginning of the month in which the excess is recorded until the end of the calendar year. The 3% lands on income, not on the slice above the limit.

So the month you cross in matters more than the amount you cross by. Passing 500,000 GEL in February puts eleven months of income at triple the rate. Passing it in late November puts one month there. Wine tourism and agro tourism operators get a 700,000 GEL limit instead.

Losing the status is a slower thing than losing the rate. Article 89 revokes small business status only where gross income exceeded the limit in each of two consecutive calendar years, effective from the start of the year after that. One very good year costs you the 1%, not the certificate.

The 1% is not what registration gives you

Registering as an individual entrepreneur does not make you a 1% taxpayer. It makes you a natural person carrying on economic activity, taxed at the ordinary 20% rate under Article 81, and you stay there until the Revenue Service grants small business status on a separate application and issues the certificate.

People find this out months later, having assumed the rate arrived with the registration extract. It is the most common failure in Georgian company formation, and it is why our list of Georgian formation agents weighs whether a firm handles the tax election at all rather than just the filing. Ask any agent two questions before paying: does your fee include the small business application, and will you send me the certificate number when it is granted.

Two conditions rarely make it into English-language summaries. The government can prohibit specific activities from holding the status, and three penalties in one calendar year for cash register breaches revoke it outright. The code also limits the taxable income of a small business to income from a Georgian source, which is a narrower category than the money in your account and worth an accountant's opinion rather than an assumption.

Under 30,000 GEL the rate is zero

Not one page ranking on this comparison mentions micro business status, which is the cheaper half of the same chapter of the tax code.

A natural person who uses no hired labour, works independently and receives under 30,000 GEL of gross income in a calendar year can apply for micro business status, and Article 86 says that person pays no income tax. Not a reduced rate, a nil one. The return is annual rather than monthly, filed before 1 April.

The edges are real. Registering for VAT ends it, an inventory balance above 45,000 GEL ends it, and going past 30,000 GEL gives you fifteen days to apply for small business status or you leave the special regime entirely. For a freelancer in the first year or two of billing, though, the honest Georgian answer is not 1% and nobody in the field is publishing it.

Estonia has a turnover regime too, and it charges 20%

The comparison people should be making is not a Georgian sole trader against an Estonian company. Estonia runs its own simplified turnover regime for natural persons, and setting the two beside each other gives the clearest number here.

An Estonian entrepreneur account is taxed at 20% of the amounts received, with no deductions for costs, rising to 22%, 24% or 26% depending on funded pension contributions. Receipts are capped at €40,000 a calendar year, after which registration as a self-employed person or a company becomes compulsory. The mechanics are identical to the Georgian regime and the rate is twenty times higher.

The Estonian sole trader route carries a floor the Georgian one does not. The tax authority states that an e-resident registered as a self-employed person must make advance payments of social tax four times a year, in an amount fixed by the state budget rather than by profit, even as a non-resident. A Georgian individual entrepreneur with no revenue in a quarter owes nothing.

The comparison almost nobody runs correctly

Small business status is granted to an entrepreneur natural person. A Georgian company cannot hold it, at any turnover, under any activity. That single line of the statute breaks the comparison the entire field publishes.

An individual entrepreneur is a registered natural person, which means no liability shield of any kind. A claim against the business is a claim against your house. A Georgian LLC is taxed on the same model as Estonia, 0% on retained profit and 15% on distributed profit, plus a 5% dividend withholding at source under Article 130 where the shareholder is an individual. That is the structure carrying the shield, and it is the structure locked out of the 1%.

So the real question is rarely Georgia against Estonia. It is a sole trader at 1% with nothing between the business and your personal assets, against a limited company at 15% or 22% with a wall in the middle. Employees, stock, premises, a product that can injure someone or a contract that can be sued on all push you toward the company, and the moment you get there the 1% is gone. That trade is the same one facing anyone choosing a structure as a freelancer, and the tax rate is the smaller half of it.

What each one asks of you every month

Georgia is cheaper to open and busier to run. A small business return is filed and the tax paid by the 15th of the month following, twelve times a year, which is not the low-admin regime it gets sold as. Accounting starts around 180 GEL a month and agent fees run 600 to 1,200 GEL for the setup.

The threshold that catches people is not 500,000 GEL. Exceeding 100,000 GEL of taxable transactions across any twelve consecutive months, rolling rather than calendar, obliges you to register for VAT within two business days, and the rate is 18%. That arrives at a fifth of the turnover most readers are planning around.

Estonia charges €265 to register the company and €150 for e-Residency, with no annual state fee and no maintenance charge on the digital ID. Two costs get left out of almost every comparison: the contact person in Estonia that the Commercial Code requires of most e-resident companies, at €200 to €400 a year, and accounting from €50 a month. Estonia's own estimate of a realistic first year is about €600 alone or about €1,300 with accounting support, and the annual report is mandatory even for a company that did nothing. Whether an Estonian agent folds the contact person into its monthly price or bills it separately is the whole distance between those two figures, and it is the first line to check on any quote.

Across three years our own totals put Georgia near $1,200 against roughly $1,600 for a low-tier Estonian company. The gap is real and it is not where the money is decided, which is the same pattern across every jurisdiction we price: registration is the small number and the rate is the large one.

Where you manage from decides who taxes you

e-Residency is a digital identity for signing and filing. It is not residency, it does not make you an Estonian taxpayer, and it does not settle where your company is taxed.

The Estonian Tax and Customs Board is blunt about the consequence. Estonian tax residency does not automatically exempt a company from taxation elsewhere in the world, income of Estonian companies is taxed abroad when the management of those companies occurs outside Estonia, and where an e-resident manages the company from outside Estonia the company will probably have a permanent establishment abroad with tax due on its profit in that state.

Read that against what e-Residency is for. The entire proposition is running an Estonian company from somewhere that is not Estonia, which is the exact fact pattern the warning describes. Georgia carries the same exposure without saying so as plainly, because a business managed from Berlin is a German question no matter which registry holds the file.

Credibility, banking and the EU question

Estonia earns its premium here. An Estonian company is an EU company, it gets an EU VAT number, European clients contract with it without a procurement conversation, and payment processors treat it as domestic inside the EEA.

Georgia is none of those things. The local banking is genuinely good and accounts are usually straightforward to open in person, but Georgian entities are less familiar to European counterparties and international processors are less consistent about them. If your customers are individuals or small businesses paying by transfer, none of this will ever come up. If they are EU companies with a vendor onboarding form, it will come up on day one.

Neither carries the friction of an offshore entity, which is worth remembering if an agent steers you toward a Seychelles IBC on tax grounds. Those get declined by processors that accept both of these without comment. And if EU access is the actual driver rather than the tax rate, the cheaper EU comparison is Estonia against Cyprus rather than either against Georgia.

Which to pick

Choose Georgia if you are one person with high margins, low costs, no client who requires an EU counterparty, turnover comfortably under 500,000 GEL, and a real tolerance for having no liability shield. Nothing else legitimate on this site comes close to 1%, and under 30,000 GEL nothing beats zero.

Choose Estonia if you need an EU entity, if you are reinvesting rather than extracting, if a processor or a customer requires a limited company, or if the work carries any risk you would not want attached to your own name.

If neither fits the shape of the business, a Delaware LLC gives US payment rails at $110 to file, Cyprus gives EU substance if you can absorb 15% and a mandatory audit, and a Dubai free zone attaches a residence visa to the company at a much larger bill. Georgia also runs Virtual Zone and International Company regimes aimed at IT businesses with local substance, and both are company regimes rather than sole trader ones.

One live caveat on Georgia: labour migration rules changed on 1 March 2026 and the English-language guidance still lags the statute badly. Take current advice before you assume anything about permits, and treat any summary older than this year as a lead rather than an answer.

Key takeaways

• Georgia's 1% is a turnover tax on a sole trader, granted on a separate application. Until it is granted you are taxed at 20%.
• Passing 500,000 GEL of gross income moves you to 3% on income from the start of that month to the end of the calendar year, not on the excess.
• Under 30,000 GEL a year, micro business status charges no income tax at all.
• A Georgian company cannot hold small business status. The 1% and limited liability are mutually exclusive.
• Estonia's own turnover regime for individuals charges 20% of gross, capped at €40,000, which is the true like-for-like comparison.
• Estonia costs €265 plus €150 up front, then €200 to €400 a year for a contact person and €50 a month for accounting.
• Watch the 100,000 GEL VAT threshold in Georgia, rolling over twelve months. It arrives long before the 500,000 GEL one.

Frequently asked questions

Is Georgia really 1% tax?

For an individual entrepreneur granted small business status, yes, on turnover rather than profit. Costs are not deducted, so the effective rate on profit depends entirely on your margin. It is the lowest legitimate rate covered anywhere on this site.

Do I get the 1% automatically when I register?

No. Registration makes you an ordinary 20% taxpayer. Small business status is a separate application to the Revenue Service with its own certificate, and until it is granted you owe 20%. Confirm in writing that your agent handles it.

What happens if I go over 500,000 GEL?

The rate on your taxable income becomes 3% from the beginning of the month the excess is recorded until the end of that calendar year. It is not a marginal rate on the amount above the limit, so crossing early in the year costs far more than crossing late.

Do I lose the status if I go over once?

No. Small business status is revoked where gross income exceeded the limit in each of two consecutive calendar years, taking effect from the start of the following year. A single big year costs you the 1% rate for the rest of that year, not the status.

Can a Georgian company use the 1% rate?

No. The status is granted to an entrepreneur natural person only. A Georgian LLC is taxed on the Estonian model instead, 0% on retained profit and 15% on distributed profit, and no turnover level or activity type changes that.

Is there a Georgian rate below 1%?

Yes, for very small operators. Micro business status applies to a natural person working alone with under 30,000 GEL of annual gross income, and it carries no income tax. It ends if you register for VAT or exceed the limit.

Does Estonia have anything like the 1%?

Structurally yes, financially no. The entrepreneur account taxes amounts received at 20% of gross with no deductions, capped at €40,000 a year. Same mechanism as Georgia's regime, twenty times the rate.

How often do I have to file?

A Georgian small business files a return and pays monthly, by the 15th of the following month. An Estonian company files an annual report every year even if dormant, plus monthly returns whenever there is a taxable payment to declare.

Am I protected from liability in either?

In an Estonian OÜ and a Georgian LLC, yes. In a Georgian individual entrepreneurship, no. That is a registered natural person, so business debts and claims reach your personal assets directly.

Does either give me residency?

Neither. Estonian e-Residency is a digital identity for signing and filing, and owning a Georgian business does not entitle you to live in Georgia. Both are separate immigration applications, and Georgia's rules changed in March 2026.