Indirect tax - Georgia

Value Added Tax (VAT) is the principal indirect tax in Georgia. VAT is an indirect tax on a portion of value added in the process of production and circulation of goods, works, and services on the territory of Georgia, and of a portion of value of all taxable goods imported into the territory of Georgia.

VAT is payable at each stage of the production and sale of goods, and delivery of services.

VAT rate is 18% of taxable turnover or taxable import. Export of goods from Georgia is taxed at a zero rate.

The following is a general list of supplies of goods, fulfilment of works and rendering of services, and types of imports, which are VAT exempt:

• rendering of financial services;
• importing fixed assets used in taxable operations;
• disposal of state property under privatization procedures;
• import and supply of certain kinds of medicine;
• supply and/or import of diabetic foodstuffs, baby food and infant hygiene products;
• goods intended for official use by foreign diplomatic and equivalent representative offices, and for personal use by diplomatic, administrative, and technical personnel of these representative offices (including family members living with them);
• import of raw materials and semi-finished goods intended for manufacturing of export goods as well as import of packaging materials to the extent of actually exported finished products. Importing these raw materials, semi- finished goods, and packaging materials affects payment of VAT or the retention of a bank guarantee, while exporting finished products entitles the taxpayer to a refund of the paid VAT amounts from the customs services, or cancellation of the bank guarantee to the extent of the actually exported finished goods;
• transit, re-import, goods into the customs territory of Georgia;
• import of goods intended for re-export;
• import of equipment, transportation facilities, spare parts and materials intended for providing oil and gas operations (transactions) covered by the law on ‘Oil and Gas’;
• domestically-produced primary agricultural products.

VAT exemption may be with or without the right of deduction. A transaction shall be regarded as exempt with the right of deduction when the transaction is not chargeable with VAT (is not taxed) and the right of deduction (set-off) is applied. A transaction shall be regarded as exempt without the right of deduction when the transaction is not chargeable with VAT (is not taxed) and the right of deduction (set-off) is not applied.

In 2017, amendment introduced the option of timing the VAT taxable transaction on the basis of advance payments. Timing of VAT taxable transaction is the date of delivery of goods and services (accrual basis) and date of payment for goods and services (cash basis).

VAT taxpayers are permitted to credit VAT paid to suppliers (input VAT including any VAT paid at importation) on their business purchases against VAT charged to customers on sales (output VAT) and pay the balance to the state budget. Where the input tax exceeds the output tax, a refund can be claimed.

A ‘person’ who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business in any continuous period of 12 calendar months and exceeding taxable transactions of GEL 100,000, a person who produces excisable goods in Georgia;

A person importing excisable goods into Georgia is required to apply to tax authorities to obtain registration as VAT payer within no later than two business days from the day when the aggregate amount of a taxable transaction exceeds GEL 100 000. Taxpayers not exceeding this limit may still choose to voluntarily register as VAT payer.

Once a person is registered for VAT, all of his/her business activities will be covered by the registration – even if the nature of some of those activities are very different.

If detected, that a person liable for VAT registration is not registered as a VAT payer, tax authority shall register the person as a VAT payer. At the same time, the person shall be deemed as VAT payer from the moment when he/she becomes liable for registration.

A penalty shall be imposed by tax authority if person fails to register at required time.

There is no requirement for VAT registration for businesses that are not established in Georgia, unless they have a permanent establishment in Georgia that generates taxable income. Non-established businesses will need to register as soon as they start to make taxable transactions.

However, starting 2021 year, a new definition of Fixed Establishment was added to Tax Code of Georgia for the purposes of VAT.  Fixed Establishment - any place, which is not taxable person’s place of establishment, but can be characterized by a sufficient degree of permanence, as well as a proper structure in terms of human and technical resources, which enables it to provide or receive service and use it for own needs.

Starting 2021 non – resident taxable persons, who are not established or have no habitual residence in Georgia, nor have a fixed establishment in Georgia, and who provide digital services to be used in the territory of Georgia by natural persons who are not taxpayers, are obliged to submit a tax return and pay corresponding tax on the territory of Georgia.   The accounting period is a quarter.  The deadline for filing tax return is no later than the 20th day of the month following the accounting period (quarter). The deadline for VAT payment is no later than the last day of the month following the accounting period (quarter).  Payment may be performed in the following currencies USD; EURO and GEL.

When determining the total amount of taxable transactions of a non-resident for the purpose of his/her mandatory VAT registration, only the supply of goods and services performed through a Georgian-based permanent establishment shall be taken into account.

If the service is performed by non-resident person (natural person or company) on the territory of Georgia, resident company which receives the service is obliged to tax the non-resident persons’ service by reverse VAT and can made a corresponding VAT deduction at the same time, unless this service is used for taxable operations of VAT exemption without the right of deduction.

Starting 2021 non – resident taxable persons, who are not established or have no habitual residence in Georgia, nor have a fixed establishment in Georgia, and who provide digital services to be used in the territory of Georgia by natural persons who are not taxpayers, are obliged to submit a tax return and pay corresponding tax on the territory of Georgia. The accounting period is a quarter. The deadline for filing tax return is no later than the 20th day of the month following the accounting period (quarter). The deadline for VAT payment is no later than the last day of the month following the accounting period (quarter). Payment may be performed in the following currencies USD; EURO and GEL. 

No.

VAT returns normally cover an accounting period of one month, ending on the last day of a calendar month.

All VAT returns have to be submitted within 15 days from the end of the relevant accounting period, together with any tax due. All returns and payments have to be submitted electronically.

The deadline for filing tax return for non – resident taxable persons, who are not established or have no habitual residence in Georgia, nor have a fixed establishment in Georgia, and who provide digital services to be used in the territory of Georgia by natural persons who are not taxpayers, is no later than the 20th day of the month following the accounting period (quarter). The deadline for VAT payment is no later than the last day of the month following the accounting period (quarter).  

A default surcharge penalty and fines may be imposed by the authority if VAT returns are not submitted on time, or the related tax is not paid by the due date.

Understating payable taxes in a Tax Return by a person, if caused by tax control authority changing the moment (period) of origin of the person’s tax liability-shall entail imposing a penalty on the person in the amount of 10% of the understated sum of payable taxes.

The percentage of the penalty in case of reduction of payable amount in the tax return might be 10%, 25% and 50% of reduced tax. The rate of penalty depends on the amount of reduced tax.

If the payments are not made in time, tax authorities may issue a tax collection order and tax payer’s bank will be obliged to transfer funds (if available for the moment) from clients account on behalf of the client to state treasury.

Also, a pledge may be issued by tax authorities on tax payer’s movable and immovable property, until tax dues are fully paid.

No.

Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.

Understating payable taxes in a Tax Return by a person, if caused by tax control authority changing the moment (period) of origin of the person’s tax liability-shall entail imposing a penalty in the amount of 10% of the understated sum of payable taxes.

Understating payable taxes in a Tax Return shall entail imposing a penalty on the person in the amount up to 50% of the understated sum of payable taxes.

Understating payable taxes in a Tax Return in excess of GEL 100,000 shall be deemed tax evasion in large amounts and entail responsibility in accordance with the criminal legislation of Georgia.

Violation by a person of the time limit determined by the tax legislation of Georgia for filing a tax return/tax calculation with the tax authority – shall entail imposing a penalty on the person in the amount of 5% of the sum to be assessed for payment on the basis of the tax return/tax calculation for each overdue complete/incomplete month (an incomplete month shall be counted as one month). At the same time, the total amount of a penalty for the entire overdue period shall not exceed 30% of the amount to be assessed for payment.

Conducting activity without registration as a VAT taxpayer – shall entail imposing a penalty on the person of 5% of the amount of VAT taxable transactions (except VAT exempt transactions) carried out during the period of activity without registration.

Failure of a supplier of goods/provider of services to issue a tax invoice to the buyer, at the request of the latter – shall entail imposing a penalty on the person of 100% of the VAT amount of the taxable transaction.

Issuing of a tax invoice for a fictitious/non-commodity transaction or a fake tax invoice by a person – shall entail imposing a penalty on the person having made out/issued the tax invoice of 200% of the VAT amount indicated in the tax invoice.

No, an entity must be registered to claim tax refunds.

A VAT invoice must show:

• an invoice number which is unique;
• seller's name;
• seller's VAT registration number;
• invoice issue date;
• time of supply if this is different from the invoice date;
• customer's name;
• customer's VAT registration number;
• a description sufficient to identify the goods or services supplied to the customer;
• measurement and quantity of goods;
• total amount including VAT;
• type of taxation (regular or exempt);
• VAT amount;
• excise (if applicable);
• if VAT invoice is issued for goods, corresponding way bill number must be indicated.

For each different type of item listed on the invoice, the following must be shown:

• the unit price or rate, including VAT;
• the quantity of goods or the extent of the services;
• the rate of VAT that applies to what's being sold;
• VAT amount.

Where a VAT invoice includes zero-rated or exempt goods or services, it must:

• show clearly that there is no VAT payable on those goods or services;
• show the total of those values separately.

VAT invoices are issued, received and stored in electronic format on the official revenue service's web site.

Not applicable.