Small Business Status vs Employment Income in Georgia

Georgia's Small Business Status is designed for qualifying entrepreneurial activity. It does not automatically apply to every payment received under a contract labelled "consulting," "services," or "independent contractor."

The key tax point is explicit in the Tax Code of Georgia: Small Business Status may be granted to an entrepreneur natural person, and salary income is excluded from the Small Business taxable base.

Why classification matters

The Labour Code defines a labour relationship as the performance of work by an employee for an employer under organised labour conditions in exchange for remuneration.

The Tax Code separately provides the special Small Business regime for entrepreneurial activity.

That means a person's legal and tax position depends on what the relationship actually is under the applicable law. A contract title alone does not answer every classification question.

There is no public "one client" rule in the Tax Code

Receiving most or all revenue from one customer is not, by itself, stated in Articles 88-90 as an automatic loss of Small Business Status.

The old version of this article overstated that point by suggesting a specific Revenue Service "one boss" or single-client test. We have removed that claim because the current primary legislation does not set out such a standalone test.

What remains important is whether the income and relationship are correctly characterised and whether the person's actual activity satisfies the conditions of the special regime.

What should be consistent?

For a genuine independent business relationship, the documentary record should accurately describe the real arrangement.

Depending on the facts, relevant records may include:

• the service agreement and scope of work;
• invoices and payment records;
• the entrepreneur's registered activity;
• deliverables or project documentation; and
• any records needed to explain the source and nature of the income.

The objective is not to insert artificial "contractor language." It is to avoid a mismatch between the legal documents, tax treatment, and the actual way the relationship operates.

Salary and entrepreneurial income should not be conflated

A person may have more than one type of income. The existence of Small Business Status does not convert salary into income taxable at the 1% Small Business rate.

Where the same individual has employment income and entrepreneurial income, the two categories should be analysed and reported under the rules that apply to each.

Remote work adds a separate migration question

Tax classification and labour-migration status are separate issues.

Georgia's Labour Migration Law contains specific rules and exemptions for foreign nationals working in Georgia, including an exemption for certain services provided to a non-resident person where those services relate to that non-resident's activities outside Georgia.

That migration exemption does not itself decide whether income qualifies for Small Business tax treatment.

For a contract, tax and remote-work structure review, see Remote Work Law or contact TK Counsel.