Value Added Tax (VAT) is one of the most common taxes in the world and levied on all goods and services produced or provided within the borders of each state. Georgia is not an exception, and VAT occupies an important place in the tax system. In this article, we will consider the main aspects of value-added tax in Georgia, its rates, applicable rules and payment structures. This information will be extremely useful for those planning to do business in Georgia.

The information presented in this article was sourced from the official website of the tax code, which provides access to the complete text of the relevant legislation pertaining to Value Added Tax (VAT) in Georgia.

VAT tax rate in Georgia is 18%.

VAT Applicability: Who It Affects and Who It Does not

The following grounds for mandatory registration for VAT have been determined. One needs to register as the VAT payer in the following cases:

• An individual has engaged in economic activities and the cumulative value of transactions subject to Value Added Tax (VAT) conducted over a continuous period of 12 calendar months exceeds GEL 100,000. In such instances, it is imperative that the individual submits an application to the tax authority within two business days following the date on which the transaction exceeds the GEL 100,000 threshold.
• A person who manufactures excisable goods or imports excisable goods into Georgia (except for excisable goods exempt from VAT) must, before supplying excisable goods to Georgia, apply to the tax authority to be registered as the VAT payer.
• The entity established as a consequence of reorganization, wherein the founder is a Value Added Tax (VAT) payer, is required to notify the tax authority within ten calendar days following the conclusion of the reorganization process.
• The VAT payer has contributed goods or services as a non-monetary asset to the charter capital of separate entities. The entity must notify the tax authority before engaging in transactions, and this notification must occur within 10 calendar days of the contribution date.
  
  

Natural Person and VAT Obligation

The obligation to remit Value Added Tax (VAT) may also be conferred upon individual natural persons. The following sections delineate the most prevalent circumstances in which VAT obligations extend to such individuals.

• An individual who has sold his residential apartment (house) with a land plot, the value of which exceeded GEL 100,000. In this case, the person is not obliged to register as a VAT payer, since the sale of 4 residential apartments (houses) with a land plot, owned by an individual, for a continuous 48 months, does not apply to economic activity. Therefore, the sale of one residential apartment (house) is certainly not considered a VAT-taxable transaction and, accordingly, an individual is not required to register as a VAT payer.
• If an individual rents out a residential apartment or commercial space, the income from which exceeds GEL 100,000 for a continuous 12 calendar months period, the rent or lease of property by an individual is considered a VAT-taxable operation. If the income received for any continuous 12 calendar months exceeds GEL 100,000, the individual is obliged to register as a VAT payer no later than 2 working days after receiving the threshold amount and pay VAT in accordance with the established rules.
• If an individual sells their share of an enterprise valued at over GEL 100,000, they are not required to register as a VAT payer or remit VAT, since the sale of an enterprise’s share is a financial transaction exempt from VAT without the right to deduct.
• If the amount of interest and income received by an individual as a result of a loan exceeds GEL 100,000 during continuous 12 calendar months, income received by an individual in the form of interest is not subject to VAT. An individual is not required to register as a VAT payer, since the specified transaction relates to financial services that are exempt from VAT without the right to deduct.

Voluntary VAT Registration

An individual may choose to voluntarily register as a VAT payer. Such registration takes effect from the date of the application submitted to the tax authority, provided it occurs before the deadline established for mandatory registration.

Cancellation of VAT Registration (Deregistration)

The grounds for deregistration as a VAT payer are:

— Liquidation of an enterprise/organization;
— Death of an individual;
— Initiation of a bankruptcy case in accordance with the procedure established by the Law of Georgia on Bankruptcy Proceedings;
— A written request from the taxpayer or, in the case of an application to the tax authority, the consent of the taxpayer.

The taxpayer has the right to apply to the tax authority in writing with an application for deregistration. At the same time, the total amount of taxable transactions carried out by the taxpayer over the past 12 calendar months should not exceed GEL 100,000, excluding VAT, and 1 year has passed since the date of his last registration as a VAT payer.

What other transactions in Georgia are subject to VAT?

In Georgia, the following types of transactions are subject to value-added tax:
– The supply of goods by a taxpayer within the territory of Georgia for a fee within the framework of their economic activity;
– The provision of paid services by a taxpayer as a part of their economic activity within the territory of Georgia;
–The importation of goods.

Submission and payment of the VAT declaration

The submission of the VAT declaration in Georgia is carried out through the tax office – e portal of the taxpayer at www.rs.ge. It is imperative that the form be duly completed, and consequently, Value Added Tax (VAT) must be remitted in the following circumstances:

1. A person registered as a VAT payer is filling to the tax authority a VAT return for each reporting period (a reporting period for VAT is a calendar month) no later than the 15th day of the month following the reporting and pay VAT in the same period.

2. The temporary importation of goods:

a) An individual who is not registered as a Value Added Tax (VAT) payer is required to remit the accrued VAT by the 15th day of the subsequent month. Additionally, the final payment must be made upon the completion of the goods operation associated with temporary importation. The declarant retains the option to settle the total amount due in a single payment.
б) individual who is registered as a Value Added Tax (VAT) payer is not required to calculate VAT.  In addition, it is considered that he has calculated the corresponding amount of VAT on these goods.

3. When importing goods, the payment of value- added tax is made in accordance with the rules established for the payment of import duties. In addition, when importing goods specified in codes 8401-9033, determined by the Decree of the Government of Georgia, the payment of the accrued VAT is made no later than 45 days after the release of the goods.

Key Records Needed for VAT Calculation

The following documents are essential for the calculation of Value Added Tax (VAT):

a) Tax invoice, which may include advance payments; 

b) Customs declaration; 

c) Documentation that verifies payments made for services rendered by legal entities governed by public law, as stipulated by an ordinance of the Government of Georgia. This includes applicable tariffs for goods supplied and/or services provided, which are established in accordance with VAT regulations, as defined by relevant legislation or governmental ordinances.

d) In the cases provided for by Article 1761 of the Tax Code, an appropriate document confirming the purchase of the goods by the buyer, must indicate the amount of money paid for the purchase of the goods (including the amount of VAT).

e) The document confirming the payment of value-added tax charged to the budget by the taxpayer in connection with the importation of goods and/or temporary importation of goods based on the decision of the tax authority.

VAT is only calculated if:
a) Goods and/or services are used or will be used:

• for the gratuitous supply of goods and / or free services to the state and / or local governments by a legal entity of public law;
• on taxable transactions, with the exception of those exempted without the right to deduct;
• when re-exporting and / (or) exporting goods;
• for the provision of services outside the territory of Georgia;

b) goods and/or services are used for the production of goods and/or services referred to in paragraph a.

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