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VAT in Georgia

Updated on Friday 06th March 2020

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Georgia has a standard VAT rate of 18% that applies to certain taxable transactions, depending on the business field and the commercial activity of the Georgian company. The value added tax (VAT) is just one of the applicable taxes for companies in Georgia and certain taxpayers in the country must be registered for VAT purposes. The registration for VAT can be voluntarily and it is also compulsory in certain cases. Our specialists company formation in Georgia can help you register your company for VAT purposes.
 

Taxable transactions in Georgia

 

Certain activities are regarded as taxable transactions and they are subject to the 18% VAT rate. This is applied to most of the goods and services traded on the Georgian market and our team of consultants in company formation in Georgia can offer in-depth advice on any matter related to the payment of the VAT. This VAT rate is applied to the following:
 
  • the supply of goods or services produced and delivered on Georgian territory;
  • the transfer of goods and services for non-economic purposes (if the taxpayer has a VAT credit for these goods or services);
  • the transfer of goods or services in exchange for shares in a Georgian legal entity or partnership;
  • the supply of goods or services by a taxpayer to its employees;
  • the export of goods outside Georgia and the import of goods into Georgia
 
The standard VAT rate in Georgia is 18% for all imports and taxable transactions, unless otherwise defined in a specific agreement or provision. Some transactions are exempt from the tax without the right to reclaim input VAT. Our company incorporation agents in Georgia can give you complete details regarding the VAT obligations for each business activity.
 

VAT registration in Georgia

 
A company in Georgia can become a VAT payer if it is registered voluntarily for this purpose or if its activity falls into the category of businesses that must register for VAT purposes. Compulsory VAT registration is required for taxpayers who, in a period of 12 months, perform economic activities that have an accumulated value of VAT taxable transaction that exceeds GEL100,000. This is also required in the case of businesses that are involved in the production or the import of excisable goods and products into Georgia, but also in the case of businesses operating here after a reorganization. 
 
The VAT registration in Georgia can also be done on a voluntary basis. This is applicable in the case in which a business has a yearly turnover with a value below GEL 100,000. The requirement for VAT registration is also applicable for companies that are involved in trading excisable goods into Georgia. Besides these, entities that conclude a single economic activity, carried out for a short period of time, even for a day, that has a value of minimum GEL 100,000, must also register for VAT in Georgia. Investors can request additional information on the VAT registration in Georgia from our team of specialists
 
In Georgia, the taxable amount of VAT is calculated based on the value of transaction. As a general rule, the VAT that needs to be charged is calculated taking into consideration the market value of the respective goods or services that are sold on the local market. It is also important to know that the VAT has to be calculated into the shelf price of goods sold in Georgia. For the purpose of VAT registration in Georgia, those involved in temporary imports will need to apply a VAT of 0,54% (calculated on the taxable amount) for each month in which the goods are stored on the Georgian territory
 
 

When is VAT applied in Georgia? 

 
The Georgian VAT is charged to taxable transactions in given moments. For example, in the case of the imports of goods, the VAT is charged on the customs value of the goods declared by the importer. The customs value is calculated taking into consideration the economic value of the goods, the value of the transportation, the customs duties and the excise tax (if applicable), as per the customs legislation available in Georgia.  
 
According to the country’s Tax Code, the VAT is chargeable on a taxable transaction at the moment in which the supply of goods takes place. Several exemptions are allowed and our team of consultants in company registration in Georgia can provide an extensive presentation regarding this aspect.  
 
Businessmen who want to open a company in Georgia should also know that the Tax Code prescribes that the payment of the VAT is imposed to any taxable transaction that occurs on the country’s territory, unless there are specific exemptions that are applicable. In the cases in which the transaction occurs between two parties located in different countries (in Georgia and another jurisdiction), the place of the taxable transaction should include the following: 
 
  • the place of registration where the recipient is a tax resident;
  • the place of management declared by the recipient or the location of its permanent establishment;
  • the regulations are also available for the supply of services (also referred to as intangible assets);
  • intangible assets can refer to consulting services, engineering, legal or accounting services, advertising, but it can also refer to telecommunication, radio or television.  

 

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When should a company issue a VAT invoice in Georgia? 

 
Companies registered for VAT purposes in Georgia must issue specific documents regarding the supply of goods or services delivered here. In this sense, it is legally required to issue VAT invoices to the company’s clients in a period of maximum 30 days; this is a document that is strictly regulated by the Ministry of Finance in Georgia, which provides an evidence on the financial transactions that are charged with the VAT
 

Are there any other important matters concerning the Georgian VAT? 

 
Yes, the legislation concerning the VAT is extensive and covers a wide range of matters. Our team of specialists in company formation in Georgia can offer in-depth information related to the overall tax legislation applicable to the payment of the VAT. However, it is necessary to know the following matters: 
 
  • according to the provisions of the Tax Code of Georgia, the VAT does not apply to hired workforce (Article 16.2). 
  • Article 57 of the same rule of law stipulates that, in the case in which a person is a heir of another person who has conducted a business activity in Georgia and who was a VAT taxpayer, but who passed away, the said person will become a VAT payer, provided that he or she will continue the company’s economic activity;
  • a heir of a business charged with VAT is entitled to obtain VAT deductions, provided that he or she can prove this right through various company documents;
  • overpaid VAT can be refunded to a taxpayer if certain conditions will apply. 
 
VAT refunds can be obtained on the amount of overpaid VAT in a period of one month since the day in which the taxpayer filed an application (Article 63) in the situation in which the party exported, purchased or imported fixed assets that fall under the definition of the Article 111 of the Tax Code or if a company purchased various goods useful for manufacturing fixed assets included in a specific category (Group IV of the Article 111). 
 

What are the VAT obligations for Georgian small businesses? 

 
Businessmen who want to open a company in Georgia categorized as a small business have to comply with several requirements. Thus, when a company that is represented by a natural person is considered a small business and when the company becomes liable for the payment of the VAT, the businessman has to register as per the provisions of the Article 157 of the Tax Code. Also, the company is required to register its inventory balance available at the moment when the company became liable for the payment of the VAT
 
A natural person interested in opening a company in Georgia as a small business must know that this term is defined under the Article 88 of the Georgian Tax Code, which stipulates that this can be acquired only when the said company has a maximum gross income of GEL 100,000 during a financial year. 
 
With regards to the accounting requirements that must be met by a small business, the Article 91 of the Tax Code stipulates that, at the moment when the company must apply for VAT registration in Georgia, it must maintain its accounts following the stipulation of the Code. 
 
When referring to a micro-business, the status can be granted as long as the company has an yearly income of GEL 45,000. Please note that if the entity, represented by a natural person, conducted the steps for VAT registration in Georgia, then the status of micro-business can’t be obtained. 
 
The manner in which micro businesses and small business have to complete their tax obligations throughout a financial year is prescribed under the Article 93 of the Tax Code. Thus, tax returns, including VAT returns, where applicable, need to be filed with the local authorities no later than 1st of April of the following financial year. 
 
It is also necessary to know that at the moment when the company ceases its financial activities, the tax authorities require the company’s owners to submit their tax returns in a period of 30 working days since the company was closed down; our team of consultants in company formation in Georgia can offer extensive information on the procedures involved when closing down a business.  
 

Who is liable to the payment of VAT in Georgia? 

 
There are multiple categories of entities that are liable to the payment of the VAT. The Section VI of the Tax Code stipulates who the tax payers are and when the VAT registration in Georgia should be done as a mandatory procedure. Article 158 mentions that the registration for VAT purposes can also be done on a voluntary basis and the applicant will gain the VAT payer status once the application forms are submitted with the local tax authorities.  
 
As a general rule, the obligation to pay VAT in this country will arise in the case of entities that are registered for VAT purposes or of those who have applied for VAT registration in Georgia. At the same time, the regulation is available for companies and other parties involved in the import of goods into this country and to non-residents providing various types of services here. Article 156 offers the legal framework with regards to the obligation to pay VAT in Georgia.  
 

What types of taxes are applied in Georgia? 

 
For those opening a company in Georgia, the legal and the tax systems can be rather complicated, especially when investing here for the first time. However, it is necessary to know that the Georgian legal framework resembles in many ways with the legal systems available in European countries.  
 
More than this, it is necessary to know that the local authorities have introduced new rules of law that are in line with the ones applicable in the European Union (EU). With regards to the local tax system, it is important to know that the country charges the following taxes
 
  • the standard rate of VAT in Georgia is of 18%, but specific activities are charged with a 0% tax (applicable in the case of financial services or medical services, for example);
  • the import tax in Georgia is charged at the following rates: 0%, 5% and 12%;
  • the excise tax in Georgia is charged based on the type of good that is imported or sold here and it can range from GEL 0.12 to GEL 800 per unit;
  • the property tax is applicable at a rate of 1% from the value of the property;
  • the land tax is calculated per each hectare of agricultural land and it ranges from GEL 5 to GEL 100. 

 

Revocation of VAT registration in Georgia 

 
Businesses operating in Georgia will no longer be liable to the payment of the VAT in specific conditions, as per the regulations of the Tax Code. There are several ways through which this obligation will be revoked and they refer to the following: a company will no longer be required to pay the VAT if it is involved in the liquidation procedure and the same is applicable when a legal entity enters the bankruptcy procedure, as stipulated by the Law of Georgia on Bankruptcy Proceedings.  
 
The revocation is also applicable at the death of a natural person or when a taxpayer requests this through a written application, following the legal grounds under which the revocation can be granted. However, the manner in which this procedure can be handled is regulated by the Minister for Finance of Georgia
 
 
Businessmen producing and trading excisable goods on the Georgian territory have to register for VAT purposes with the local tax authority prior to starting the supply of goods. Other conditions for registration may apply. Our company incorporation agents in Georgia can tell you more about other cases in which VAT registration is compulsory. Also, we can help you submit the necessary documents for VAT registration with the Georgian tax authorities
 
 

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