VAT in Georgia Country: New Rules since 2021

Rules of VAT in Georgia Country were changed in 2021. The new VAT rules in Georgia aim to converge with the VAT rules applicable in the EU. These changes apply to all companies and individuals residing in Georgia, expatriate entrepreneurs, self-employed persons providing services abroad, or registered as Georgia VAT-payer.

VAT In Georgia Country: What’s changed in 2021?

• All purchases of products and services by a Georgian company from any non-Georgian foreign company are subject to a Reverse VAT Charge of 18%. You shall report on your monthly tax returns, whether or not you are registered for Georgia VAT.

• All B2B (Business To Business) transactions between a Georgian company and a non-Georgian company located outside Georgia are fully exempt from Value Added Tax in Georgia.

• VAT exemptions for B2C transactions between a Georgian company and a non-Georgian individual (customer) outside Georgia have been amended.

What Is Reverse Charge Vat?

Your Georgian company purchases goods and services from foreign companies. These purchases are subject to both declaration and payment of 18% VAT in Georgia. It is called reverse charge VAT. This reverse charge Value Added Tax applies to ALL purchases from a foreign company. VAT must be declared to the Revenue Service, with a reverse charge VAT rate of 18%.

Georgia VAT: B2B Transactions

If a Georgian resident Company provides services or products to a foreign company outside Georgia, these transactions are exempt from VAT in Georgia Country. Your Georgian company no longer needs to charge VAT on products or services provided to foreign companies, defined as natural or legal persons subject to VAT in their home country.

B2B Transactions Requirements To Benefit Georgia VAT Exemptions

• The service recipient must be a taxable natural or legal person, subject to VAT.
• The place of supply of the service must be outside Georgia’s territory.
• The location of supply of service is defined as follows: where the recipient of the service has its registered office and from where it operates: i.e., its place of registration or its place of management.

The term “taxable person” means any person carrying on independently an economic activity of any nature, in any place, whatever the purpose and result of that activity.

Georgia VAT: B2C Transactions

If a Georgian resident Company provides services to a Foreign Customer (an individual not subject to VAT, and therefore not a VAT-taxable legal or natural person). The service’s place of supply is where the client is registered or carries out his economic activity; then the service may be taxable in Georgia.

List of VAT exemptions to B2C Transactions

The list of VAT-exempt transactions between a Georgian company and its foreign consumers. Software Developer, Freelance Language Teacher, Digital Services & Products Provider. Georgia VAT does not apply to a B2C transaction in the following cases.

• The transfer of patents, licenses, trademarks, copyrights, or other similar intangible assets;
• Delivery of consulting, legal, accounting, engineering, and other related services, also processing and delivery of data and information;
• Provision of personnel;
• Renting out the movable property, except for the renting of vehicles;
• advertising services;
• Obligation to refrain from business activities or from exercising the right described in this subparagraph;
• Financial and insurance transactions, including reinsurance;
• Telecommunication, radio, and television broadcasting services;
• Electronically delivered services;
• Delivery of services through an intermediary who acts in the name and on behalf of another person and takes part in delivering the services described in this paragraph.

These legal VAT exemptions apply to the types of services listed above. However, the list of services is not exhaustive and leaves room for interpretation as these provisions stipulate “and other similar services…“. The legal definition of your type of activity requires further analysis on a case-by-case basis.

VAT In Georgia Country: Focus On B2C Electronically Delivered Services

If the service is rendered to your foreign client electronically, the place of supply is where the recipient is based abroad. If you are a Georgia VAT Payer (mandatory when your taxable turnover exceeds 100k GEL), you do not need to charge VAT.

What Activities Are Provided Electronically?

Electronic services – services provided via the Internet or an electronic network, the provision of which is mainly automated, requiring minimal human intervention, and the condition of which is impossible without information technology; for instance :

• The supply of websites;
• The development and supply of software and its upgrades;
• The supply of distance learning services;
• The supply of digital products, including software support and delivery of upgraded version
• Web hosting, remote maintenance of software and hardware;
• The supply of images, text, and information to guarantee access to the database;
• The supply of music, films, and games (including games of chance);
• Broadcasting and delivery of political, cultural, artistic, sports, scientific, and entertainment programs;
• Other types of services are defined by the Minister of Finance of Georgia.*

In addition to services rendered by electronic means, other activities could be considered exempt from VAT in Georgia Country. These activities are dealt with in Articles 170 to 172 of the Georgian Tax Code.

VAT In Georgia Country: How Much To Pay?

Moto: Each time a cross-border supply of a service takes place, the question is whether or not this service has been provided on the territory of Georgia and, therefore, whether or not it is taxable for VAT purposes. Therefore, you should be cautious when analyzing whether your business can be considered included in the provisions of these VAT rules in Georgia. A qualified tax advisor shall analyze your case to ensure that you meet all obligations and avoid penalties. If you have any doubts, do not hesitate to consult one of our Senior Tax Advisors.