Changes regarding VAT in the tourism Sector Order No. 107 on March 28, 2023

Georgia has emerged as a prominent global destination that offers a unique blend of ancient culture, rich history, scenic landscapes, and hospitable locals. The country’s tourism industry is rapidly expanding, and the government actively supports this sector to enhance the tourism infrastructure. This has led to the emergence of new hotels, restaurants, and other facilities that make Georgia an even more attractive destination for travellers seeking a memorable experience. However, as the tourism industry grows, companies must consider the tax implications of their operations, particularly with regard to value-added tax (VAT).

Georgia applies a standard VAT rate of 18% on the sale of goods and services, which generates significant revenue for the government. Companies can become VAT payers by registering voluntarily or if their activities meet the criteria for compulsory registration. Mandatory registration is required for businesses whose accumulated value of VAT-taxable transactions exceeds 100 000 Georgian Lari within a period of 12 months. Additionally, companies involved in producing or importing excisable goods and products into Georgia, as well as those operating after a reorganization, must register for VAT. Voluntary registration is available for businesses with an annual turnover below 100 000 Georgian Lari and those trading excisable goods in Georgia.

In the tourism industry, VAT is levied on various goods and services such as accommodation, food and beverages, transportation, and tours. However, companies providing services to foreign tourists may be exempt from VAT if they meet certain conditions. The Minister of Finance issued Order No. 107 on March 28, 2023, which introduced changes to VAT taxation on tourist services. According to this order, tourism products provided to foreign tourists in Georgia are exempt from VAT with the right to deduct. A tourism product, according to Georgian legislation, is a type of tourism service that includes at least two components such as transportation, accommodation, food, tour guide services, and auxiliary tourism services. Furthermore, services provided to tourists outside Georgia and related support services are considered services provided outside of Georgia and are therefore not subject to VAT.

Tourism companies often purchase goods and services to facilitate the arrival and stay of tourists. Under the new order, tour operators are entitled to a VAT deduction for the goods and services they have acquired.