Tbilisi GMT +4
EY
44 Kote Abkhazi Tbilisi 0105 Georgia
Indirect tax contacts
Tato Chantladze +995 (32) 215-8811 tato.chantladze@ge.ey.com
Ekaterine Kiknadze +995 (32) 215-8811 ekaterine.kiknadze@ge.ey.com
Tina Kachakhidze +995 (32) 215-8811 tina.kachakhidze@ge.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Damatebuli ghirebulebis gadasakhadi (D.Gh.G)
Date introduced 24 December 1993
Trading bloc membership None
Administered by Ministry of Finance of Georgia (http://www.mof.ge)
VAT rates
Standard 18% Other Zero-rated (0%) and exempt VAT number format 123456789
VAT return periods Monthly
Thresholds Registration Businesses established in Georgia
Taxable turnover of GEL100,000 in the preceding 12 months Businesses established elsewhere
Reverse-charge rule applies
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• Supply of goods or services in Georgia, in exchange for consideration within the scope of economic activities
• On termination of VAT registration, the balance value of the goods for which a taxable person has obtained a full or partial VAT credit
• Use of self-constructed buildings as fixed assets, if a taxable person would not be able to obtain a full VAT credit in case of purchasing these buildings from another person
• Transfer of ownership of goods or services in exchange for shares in an enterprise or partner ship
• Import of goods into Georgia
• Transfer of ownership of property or services in exchange for consideration by decision of the state/local self-government body
• Actual delivery of goods under the terms of a rental, leasing or a similar agreement on condition of redemption
• Supply of goods under an agreement, according to which a commission fee is paid for the purchase or sale of goods
• Supply of electric or thermal energy, natural gas, water, cooling energy
• Free supply of goods if a taxable person supplying the goods has obtained a full or partial VAT credit for these goods or expenses incurred on them
• Supply of goods or services by a taxable person to its employee for his/her personal use, or sup ply/use of goods for a purpose different from the purpose of a taxable person’s own activities, if the taxable person has obtained a full or partial VAT credit for these goods or expenses incurred on them
• Goods remaining in the taxable person’s possession after the termination of an economic activ ity carried on by the taxable person or its legal successor, if the taxable person has obtained a full or partial VAT credit for these goods or expenses incurred on them
• Shortages in inventory or fixed assets
• Transfers of intangible property
• Repair of own fixed assets (buildings) for the purpose of a taxable person’s activities, if the taxable person would not be able to obtain a full VAT credit if it were to case of purchase this service from another person
C. Who is liable
Enterprises or individuals are considered to be VAT-taxable persons if any of the following circumstances exists:
• They are registered or required to be registered for VAT.
• They carry out taxable imports of goods into Georgia. Such persons are considered taxable persons with respect to such imports only, without the obligation to register.
• They are tax agents for the operations subject to reverse charge, without the obligation to reg ister.
• They are taxable persons that are not established, or do not usually live in Georgia, or do not have a fixed establishment in Georgia who participate in the rendering of services or making taxable supply of services in Georgia that are not subject to the reverse charge. Such persons are considered taxable persons with respect to such services only, without the obligation to register.
Taxable persons must register for VAT if they satisfy any of the following conditions:
• They conduct economic activities, and the total amount of VAT taxable transactions carried out in any continuous period of 12 calendar months exceeds GEL100,000. Such persons must reg ister within two working days after exceeding the threshold.
• They produce goods subject to excise tax (excisable goods) in Georgia. Such persons must reg ister before making a supply of such goods.
• An entity is established as a result of a reorganization and at least one of the parties to the reor ganization is a taxable person. The entity must register before any taxable transaction is carried out, but no later than 10 calendar days following the completion of the reorganization.
• A taxable person contributes goods or services to the capital of an enterprise or partnership. Registration of the latter is required before any taxable transaction is carried out, but no later than 10 calendar days following the date of the contribution.
• They have a fixed establishment in Georgia and supply goods or services. Such persons must register no later than the last day of the reporting period in which the supplies were made.
In determining whether the threshold required for VAT registration is reached, exempt VAT taxable supplies are not considered, except the following:
• VAT-exempt operations related to financial or real estate, if these operations are the primary activity of the taxable person
• Export operations
• Some supplies of goods/services that are exempt from VAT with the right of deduction
Exemption from registration. The VAT law in Georgia does not contain any provision for exemp tion from registration.
Voluntary registration and small businesses. Enterprises or individuals may register for VAT vol untarily. VAT registration is effective from the submission date of the application but no later than the date when the obligation of mandatory VAT registration arises.
Group registration. Group VAT registration is not allowed in Georgia.
Non-established businesses. A “non-established business” is a business that does not have a per manent establishment in Georgia. The reverse-charge VAT generally applies to the supply of services made by non-established businesses in Georgia. For other supplies of services that are not subject to reverse charge, a non-established business that does not have fixed establishment in Georgia pays VAT without the obligation to register.
According to the order of the Minister of the Finance, the obligation to calculate and pay VAT without the obligation to register for VAT arises for non-established businesses who supply “digital services” (i.e., telecommunication services, radio and television broadcasting services). However, it is not clear in the Georgia Tax Code on the other types of services supplied by a non-established business and the impact on accounting for VAT. The Georgia Tax Code does not clearly indicate whether this means that no VAT should apply in such cases, since there is no mechanism laid out in the order, or the taxable person should pay VAT according to the general rules. Recently, the Revenue Service of Georgia has issued detailed instructions on the matter, which indicate that a nonresident entity should register in Georgia as a VAT payer under the general rules and pay the VAT accordingly. The new rules took effect on 1 July 2021. For the services outlined above, where a non-established business supplies such services in Georgia, the VAT calculation and payment by a non-established business was adopted by the Minister of the Finance on 31 December 2020. According to the new rules, a non-established business must complete the registration form through the online platform available on the website of the Revenue Service of Georgia. The tax authority notifies the non-established businesses about its VAT tax liability, indicating the legal norms on the basis of which the non-established business is obliged to pay VAT to the state budget of Georgia and the web address of the platform created on the Revenue Service website.
Such foreign suppliers will undergo a simplified online registration procedure through the special platform created on the website of the Georgian Revenue Service. To complete the registration procedure, the foreign supplier will have to submit some basic information, such as the legal name of the organization, the headquarters’ address, its website, country of residence for tax purposes, tax ID and contact persons, among other information. There is no requirement to pres ent any documents. VAT returns can be submitted through the same online platform. The VAT reporting period is quarterly. A non-established business that carries out taxable transactions in Georgia must, through the platform created on the Revenue Service website, submit a tax return for each reporting period no later than the 20th of the following month and pay the tax no later than the last day of that month. Thus, the first VAT return under the new rules was due by 20 October 2021.
As to the payment deadline, it is the end of the month following the reporting period. Thus, the first VAT payment under the new rules was due by 1 November 2021. Since foreign currency
payments are accepted, a supplier can transfer the VAT amount from its regular foreign bank account.
The taxable base is compensation received for delivery of digital services to consumers in the territory of Georgia. The VAT rate is 18%.
On 28 July 2021, amendments were published that postpone the entry into force of the rules from 1 July 2021 to 1 October 2021. The amendments also introduce the following changes:
• A non-established business will be able to settle their tax liabilities in US dollars (USD), euros (EUR) or Georgian lari (GEL).
• Non-established businesses will be required to maintain their accounting records for a period of three years from the end of the year when the taxable service was rendered.
These new rules fully entered into force on 1 October 2021.
Tax representatives. Tax representatives in Georgia are only required for VAT-registered busi nesses of EU Member States. Such taxable persons need to meet certain criteria and appoint an authorized representative to obtain a refund of VAT paid when purchasing goods and/or services in Georgia or when importing goods to Georgia.
Reverse charge. The reverse-charge mechanism applies to the following:
• Supplies of services to a tax agent in Georgia by a taxable person that is not established, or does not usually live in Georgia, or does not have a fixed establishment in Georgia participating in the rendering of the services
• The importation of foreign goods purchased at a customs warehouse
• The importation of foreign goods purchased from a Free Industrial Zone Enterprise
Under the reverse-charge mechanism, any persons established in Georgia (except for individuals who do not carry out entrepreneurial activities and Free Industrial Zone Companies) or having fixed establishment in Georgia, through which the services were purchased, are responsible for the calculation and payment of VAT.
Domestic reverse charge. A domestic reverse charge applies in Georgia to the transfer of collat eral objects to the ownership of a creditor, within the measures to ensure fulfillment of contractual terms. In other words, it applies to the instances where items are pledged to guarantee the performance of contractual obligations and then are transferred to the creditor, e.g., when a debtor fails to repay the loan and has to transfer their property to the creditor that was pledged as a collateral under the loan agreement.
Digital economy. As a general rule, in business-to-business (B2B) transactions, the place of rendering services is the place where the customer is established. In business-to-consumer (B2C) transactions (where the consumer is a natural person who does not engage in economic activities for VAT purposes), the place of rendering services is the place where the supplier is established. However, as an exception “digital services” (i.e., telecommunication services, radio and televi sion broadcasting services, and electronically rendered services) are treated as rendered in the territory of Georgia if any one of the following criteria is met:
• The bank account used by recipient is with a financial institution located in Georgia.
• The recipient is physically located in Georgia.
• The IP address of the device used by recipient is in Georgia
• The telephone code used by the recipient belongs to Georgia.
Nonresident providers of electronically supplied services B2B supplies are not required to register and account for VAT on supplies in Georgia. Instead, the customer is required to self-account for the VAT due via the reverse-charge mechanism (see the Reverse-charge subsection above). At the same time, the customer is entitled to credit assessed reverse-charge VAT against the VAT payable if certain conditions are met.
Nonresident providers of electronically supplied services for B2C supplies are liable to pay VAT without the obligation to register.
This obligation is in effect from 1 July 2021. There is no minimum revenue threshold.
Nonresidents are required to register via a special platform created by the Revenue Services for non-established businesses and file VAT returns through that platform. However, they are not considered as registered VAT payers for the purposes of the Georgia Tax Code. See the Nonestablished business subsection above.
There are no other specific e-commerce rules for imported goods in Georgia.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Georgia.
Registration procedures. The VAT registration procedure is straightforward, and a taxable person may register for VAT in one working day. An authorized official of the company or its officially designated representative shall appear in person at the tax office to sign and submit the applica tion. A taxable person may also register for VAT online via the official website of the electronic services of the Revenue Service. In case of mandatory registration, the taxable person must submit a statement including information about the date when the obligation for registration has arisen and about the reason for the obligatory registration.
Deregistration. The VAT registration of a taxable person is canceled in the following cases:
• An enterprise/organization is liquidated.
• An individual passes away.
• A taxable person applies to the tax authorities through a written request or approves a request from the tax authorities to deregister.
• A bankruptcy proceeding is initiated in accordance with the procedure prescribed under the Law of Georgia on Insolvency Proceedings.
A taxable person may request deregistration within one year of the most recent VAT registration if the value of taxable transactions carried out during the preceding 12 calendar months did not exceed GEL100,000. The tax authorities may also request that the taxable person deregister without requiring to meet any conditions if the taxable person approves to deregister. For exam ple, if a taxable person registers as a VAT payer by mistake, they cannot deregister for at least one year. For such cases, the tax authority has a right to deregister the VAT payer without any conditions, if, of course, the taxable person approves of such deregistration
The VAT registration is canceled from the date the state registration is canceled, the date the individual passes away or the first day of the month following the application by a taxable person, the date a court’s statement on bankruptcy is published or an approval of the request from the tax authorities.
Changes to VAT registration details. Every business entity in Georgia is registered at the National Agency of Public Registry and changes in registration details (company name, address, etc.) are made in the Public Registry. The Public Registry and Revenue Service exchange information, and subsequently every change in registration detail is automatically reflected in the Revenue Service database. Therefore, a taxable person has no additional/separate obligation to notify the Revenue Service about such changes and no penalties apply thereon.
Changes in the registration information at the Public Registry are made through submission of original copies of certain documentation. The Public Registry has no deadline for presenting such documents. After a taxable person decides to make changes, it must gather the necessary documents and bring them in person to the registry. Changes in registration details will only be made after such documents have been provided.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 18%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero rate or an exemption.
The reduced rate of 0.54% previously applied to temporary imports for each full or partial calendar month in which the goods are located in the customs territory of Georgia. The reduced rate was abolished from 1 January 2021. There were no transitional provisions.
The term “exempt” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of goods and services taxable at 0% (i.e., exempt with the right to reclaim input tax)
• Supply of fuel or groceries to the aircraft
• Supply, remake, repair, servicing or lease of aircraft and equipment installed or used on an aircraft
• Supply of goods outside Georgia (export, re-export)
• Supply of goods or services intended for the official use of foreign diplomatic missions and equivalent representative offices as well as for the personal use of the members of such diplomatic missions and representative offices (including family members residing with them)
• Transportation of goods under export, re-export, external processing, and transit arrangements (i.e., foreign goods moving through the customs territory of Georgia) and related services
• Transportation of goods not yet declared into import, warehouse, temporary import, internal processing or free-zone operations between points located in Georgia and related services (except for storage services)
• Transportation of goods declared into import, warehouse, temporary import, internal process ing or free-zone operations before entering the territory of Georgia from the customs border of Georgia to the destination point and related services (except for storage services)
• Transportation of passengers and cargo and related services if the departure or arrival point is located outside Georgia and if a unified transportation document is issued for such transporta tion
• Import and supply of products to be provided on board for international flights or international sea passages
• Transportation, loading, unloading and storage services provided for the purpose of sending (returning) empty transport facilities (including containers and wagons) outside Georgia
• Supply of natural gas to thermoelectric power stations
• Withdrawal of assets by the state or a local governing body from an entity’s capital if more than 50% of the shares are owned by the state or the local governing body
• Free supply of goods or services to the state or a local governing authority
• Supply of Georgian goods to a duty-free outlet for sale, and sale of goods and provision of cater ing services in a duty-free zone
• Supply of gold to the National Bank of Georgia
• Organized foreign tours into Georgia by tour operators and the supply of tourist packages to foreign tourists
• Rendering of services to ships on carrying goods into the customs territory of Georgia
• Supply of goods or services or import of goods that qualify for VAT exemption in accordance with the framework of international agreements ratified by the parliament of Georgia
• Supply of unprocessed agricultural products produced in Georgia (except for eggs and chick ens)
• Supply/import of books and e-books, also, rendering of sales and printing services for the goods
Examples of exempt supplies of goods and services
• Supply or import of certain medicines
• Supply or import of passenger cars
• Import of publications and mass media
• Import of baby products
• Supply of land plots
• Supply of goods and services between Free Industrial Zone Companies
• Conduct of financial operations or supply of financial services
• Supply of medical services
• Supply of educational services
• Supply of assets under finance leases if the assets are exempt without the entitlement to credit
• Supply of betting and gaming services
• Import of gold for supply to the National Bank of Georgia
• Supply or import of goods and services needed for the oil and gas industry under the Law of Georgia “on Oil and Gas”
• Import of natural gas for electricity production
• Import of goods by an issuer or a recipient of a grant as defined by the grant agreement
• Import or temporary import of goods or services intended for the official use of foreign diplo matic missions and equivalent representative offices, as well as for the personal use of the members of such diplomatic missions and representative offices (including family members residing with them)
• Import or temporary import of goods intended for the personal use of the citizens of foreign countries employed at oil and gas exploration and extraction works
• Import of natural gas for electricity production
• Import of goods by an issuer or a recipient of the grant as defined by the grant agreement
• Supply of property by partnerships to their members if all the members are individuals, the partnership is not a taxable person, and the members have not changed since the moment of establishment of partnership
Option to tax for exempt supplies. A VAT-registered taxable person may apply to pay VAT on cer tain transactions that qualify for exemption without the right to reclaim input tax (namely finan cial transactions and/or financial service and the supply of a land). This option gives the taxable person the right to reclaim input tax against output tax.
After applying to the tax authorities to use this option, it becomes effective from the first day of the reporting month following submission of the application and is valid for 12 calendar months for all transactions.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” The “basic” tax point is the moment when goods are supplied or services are rendered. However, the “actual” tax point is the moment of receipt of advance payment if the latter occurs earlier than the basic tax point.
A range of other situations have different time of supply rules that do not fit naturally into the above scheme. The following are some of these special time of supply rules:
• In case of VAT deregistration, the moment when registration is canceled
• The moment of discovering inventory and/or fixed asset shortage
• The moment of completing the repair of own fixed assets (buildings)
•
In case of bringing self-constructed buildings into use as fixed assets, the starting point of their use in economic activity
• In case of regular or continuous supplies of goods (electrical or thermal energy, gas or water), the last day of the reporting period
Deposits and prepayments. If a deposit/prepayment is made as an advance payment for subsequent supply of goods/services, then the time of supply is the moment such payment is received.
Continuous supplies of services. For telecommunication services, the time of supply is the last day of the reporting period. For continuous supplies of other services, the same time of supply rule applies, provided no advance payments are made.
Goods sent on approval for sale or return. There are no special time of supply rules in Georgia for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply.
Reverse-charge services. The time of supply for services subject to the reverse-charge mecha nism is determined in accordance with the standard rules discussed above.
Leased assets. In the case of delivery of goods under the terms of a rental, leasing or a similar agreement on condition of redemption, the time of supply is the moment of actual delivery of goods.
Imported goods. The time of supply for imported goods is the date on which the commodity declaration is filed at the border and the goods are accordingly placed into release for free circu lation procedure.
F. Recovery of VAT by taxable persons
VAT-registered taxable persons may recover input tax, which is VAT charged on expenses related to the supply of goods and services. Taxable persons generally recover input tax by deducting it from output tax, which is VAT charged on supplies made. Input tax includes VAT charged on goods and services acquired in Georgia, VAT paid on imports into the customs territory of Georgia and VAT self-assessed for reverse-charge services received from outside Georgia, provided that respective goods/services are intended for use in taxable operations. VAT-registered taxable persons may also recover input tax, which is charged on expenses related to the supply of goods/services outside Georgia.
The time limit for a taxable person to reclaim input tax in Georgia is three years. No input tax credit is allowed if three years have passed from the end of calendar year in which the taxable transaction took place.
Nondeductible input tax. No VAT credit is allowed in the following circumstances:
• VAT paid on goods and services intended for use in exempt supplies without the right to reclaim input tax
• VAT shown on tax invoices that do not make the identification of the seller of the goods or services possible or are not issued according to the law
• VAT shown on tax invoices, if three years have passed from the end of the calendar year in which the taxable transaction took place.
• VAT shown on tax invoices issued with respect to bogus operations or fictitious agreements
Examples of items for which input tax is nondeductible
• VAT paid on representative expenses (which refer to expenses incurred by a person within the scope of economic activity) including:
Expenses (for juices, mineral waters, soft drinks, tea, coffee, breakfast, lunch, dinner, ban quet) related to events (presentations, receptions) arranged on behalf of a person
Expenses for excursions and cultural and entertainment events
Souvenir expenses
Guest service expenses
• VAT paid on expenses incurred for entertainment events
Examples of items for which input tax is deductible (if related to a taxable business use)
• Any item that is not specifically defined as nondeductible by the Tax Code of Georgia is deductible, if it is related to a taxable business use. Examples include: Leased property
Fixed assets wholly used in taxable transactions
Office inventory
Partial exemption. Input tax directly related to exempt supplies with the right to reclaim input tax is recoverable in full, while input tax directly related to exempt supplies without the right to reclaim input tax is not recoverable. If a taxable person makes both exempt supplies (with and without the right to reclaim input tax) and taxable supplies, it may not recover input tax in full and must be apportioned. This situation is referred to as “partial exemption.”
The statutory method of apportionment is a pro rata calculation. The portion of input tax to be recovered is calculated by fraction and is fixed as a percentage, where the numerator is the value of supplies with the right to reclaim input tax and the denominator is the total turnover of the business. The recoverable VAT for each reporting period is calculated in accordance with the fixed annual percentage of the previous tax year and is adjusted in the last reporting period according to the annual percentage of the current tax year.
The following shall not affect the calculation of the fixed annual percentage:
• The turnover related to the supply of fixed assets used for taxable person’s own activity
• The turnover related to immovable property or financial transactions if these are not the pri mary activity of the taxable person
Approval from the tax authorities is not required to use the partial exemption standard method in Georgia.
Special methods are not allowed in Georgia.
Capital goods. Capital goods are items of capital expenditure that are used in the business for more than one year.
The recovery of input tax on capital goods is similar to the other goods described above with one exception. This exception applies if fixed assets are used in both taxable and exempt supplies (with and without the right to reclaim input tax) and the input tax cannot be directly attributed to either of these types of supplies. In these circumstances, the input tax is recoverable in full in the first reporting period if exempt supplies without the right to reclaim input tax account for less than 20% of the total turnover of the preceding tax year of the business. The recoverable VAT is adjusted at the end of each calendar year based on the value of exempt supplies without the right to reclaim input tax as compared to the total turnover of the business for the respective calendar year.
If the abovementioned 20% threshold is not met, the input tax is recoverable only in the last VAT return of a calendar year in the proportion of supplies with the right to reclaim input tax to total turnover of the business during the calendar year.
The following adjustments must be made to the value of input tax for capital goods:
• For an immovable property, an adjustment of 1/10 of total input tax applies annually for 10 calendar years from the year of bringing the property into use.
• For other fixed assets, an adjustment of 1/5 of total input tax applies annually for five calendar years from the year of bringing the asset into use.
Refunds. The excess of input tax over output tax in the reporting period must first be used to offset other taxes payable. If the amount of VAT credit exceeds all taxes payable, the excess can be used to cover future VAT and other tax liabilities or a refund may be claimed. In certain cases, excess VAT may be refunded to a taxable person automatically.
Pre-registration costs. The recovery of VAT incurred before VAT registration is allowed on the balance of inventory acquired for business purposes outstanding at the moment of VAT registra tion.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Georgia.
Noneconomic activities. Input tax may not be recovered on purchases of goods and services that are not used for economic activities.
G. Recovery of VAT by non-established businesses
Non-established businesses, except EU taxable persons, cannot recover VAT in Georgia, because generally only entities registered for VAT in Georgia may claim recovery of input tax.
EU taxable persons have a right to refund the VAT amount paid on purchased goods (except real estate), services or the importation of goods to Georgia. In order to enjoy the above tax relief, an EU taxable person must satisfy the following conditions:
• The person must not have a fixed establishment in Georgia, or its place of business activity or permanent residency must not be in Georgia.
• Goods/services purchased in Georgia or goods imported into Georgia must be used for the taxable transactions.
• If the operations were carried out by a Georgian taxable person, the VAT paid would be recov erable in accordance with the Tax Code of Georgia.
To obtain a refund of VAT, EU taxable persons are required to appoint a tax representative for this purpose (see Section C. Who is liable).
H. Invoicing
VAT invoices. A VAT-registered taxable person must issue a VAT invoice upon supply of goods/ services to another taxable person. VAT invoices can be issued according to the supply cycles for electrical or thermal energy, gas or water supplies if the taxable person accounts for the supplies based on cycle accruals and payment is usually made periodically and not according to the calendar months. A VAT invoice is issued electronically or in written form.
Credit notes. The amount of VAT may be adjusted if the circumstances on which this amount was determined have changed. Any adjustment is made in the reporting period when the change in circumstances occurs. The rules for making adjustment to VAT invoices are defined by the Minister of Finance of Georgia.
Electronic invoicing. Electronic invoicing is allowed in Georgia, but not mandatory. A VAT invoice may be issued and submitted in electronic form. VAT invoicing is done electronically through the Revenue Service web portal. Paper-based invoicing is also allowed, though it is used very rarely in practice.
Simplified VAT invoices. Simplified VAT invoicing is allowed in Georgia. As of 1 January 2021, simplified invoicing was approved in the Georgia VAT law. However, at the time of preparing this chapter, detail around when simplified VAT invoices can be issued and what information must be reported for simplified VAT invoices has not yet been issued by the tax authorities.
Self-billing. Self-billing is not allowed in Georgia.
Proof of exports. Goods exported from Georgia are exempt from VAT with the right to reclaim input tax. To confirm the applicability of this exemption, the supplier must collect and provide to the tax authorities all relevant supporting documents: sales invoice, sales contract, transporta tion document, license/certificate, etc.
Foreign currency invoices. No foreign currency invoices are allowed for VAT purposes. VAT invoices must be issued in the domestic currency, which is the Georgian lari (GEL).
Supplies to nontaxable persons. When a VAT-registered taxable person delivers goods or services to a consumer (B2C), a VAT invoice is issued only upon request. Where the customer does not request an invoice, no invoice is required to be issued.
Records. There are no specific requirements related to record keeping for indirect tax in Georgia. As a general rule, taxable persons must keep primary documents, accounting registers and other documents on the basis of which taxable objects are defined and tax liabilities are established. For VAT purposes, such documents may include VAT invoices, commodity declarations, con tracts and other transaction-related documentation.
There is no provision in the Georgia VAT law on where to hold such records. However, in prac tice, records may be held in or outside of Georgia. If the records are held outside of Georgia, the taxable person must be able to provide the records to the tax authorities upon request within five days, though the deadline may be extended upon written request.
Record retention period. Generally, all records relevant to indirect tax need to be kept for the statute of limitations period, which is three years.
Electronic archiving. Electronic archiving is allowed in Georgia. It is not mandatory, and as such physical archiving (i.e., paper) is also allowed. In practice, documents are archived and provided to tax authorities upon request in either form (i.e., electronic and paper).
I. Returns and payment
Periodic returns. The VAT reporting period is monthly. Taxable persons must file VAT returns by the 15th day of the month following the reporting period. VAT returns must be completed in GEL and filed electronically.
Periodic payments. The VAT amount payable to the budget is the difference between output and input tax. Payment in full is required by the due date for the VAT return, i.e., by the 15th day of the month following the reporting period. VAT liabilities must be settled in GEL through bank transfer to the State Treasury Account.
VAT on imports is paid at the moment the goods are imported into Georgia. Reverse-charge VAT must be paid by the 15th day of the month following the reporting period.
Electronic filing. Electronic filing is mandatory in Georgia. VAT returns must be completed and filed electronically through the Revenue Service web portal (http://eservices.rs.ge/). Prior regis tration with the Revenue Service is required to access the taxable person’s account on the web portal.
Payments on account. Payments on account are not required in Georgia. Special schemes. Secondhand items, works of art, collectibles, antiques. Supplies of secondhand items, works of art, collectibles and antiques are subject to a special scheme for VAT. Under the special scheme, the taxable amount is determined by dividing the seller’s profit margin by 1.18. If the seller is applying the special scheme, neither the seller, nor the buyer have the right to reclaim input tax.
To apply the special scheme, a taxable person must notify the tax authority indicating the period of application of the scheme, which may not be less than 24 months.
Annual returns. Annual returns are not required in Georgia.
Supplementary filings. No supplementary filings are required in Georgia.
Correcting errors in previous returns. Any errors in previous returns can be corrected by submitting an adjusted return electronically. The adjustment of the taxable transaction amount is made in the reporting period when the circumstances causing the adjustment occurs. The taxable amount should be adjusted if the circumstances/factors based on which the taxable amount was determined have changed. From 1 January 2021, the Minister of Finance of Georgia determines the cases of adjustment of the amount taxable with VAT, as well as the procedure for subscribing and submitting the document. According to the order of the Minister of Finance of Georgia, the amount of the taxable transaction is adjusted in the following circumstances:
• The taxable transaction was canceled.
• The type of taxable transaction has changed (including the tax regime).
• Parties agreed to change the amount of remuneration determined at the time of taxation, except for changes caused by changes in exchange rates.
• The goods/services were fully or partially returned to the supplier.
If a VAT invoice was incorrectly issued for a taxable transaction, a taxable person should issue a corrected VAT invoice. A corrected VAT invoice has the same requirements as an ordinary VAT invoice.
Digital tax administration. There are no transactional reporting requirements in Georgia.
J. Penalties
Penalties for late registration. The penalty for late registration equals 5% of the VAT taxable turn over (except for exempt operations) for the entire period of operating without VAT registration.
Penalties for late payment and filings. Late payment interest is calculated from the day following the payment due date. Late payment interest is imposed at a rate of 0.05% of the overdue tax amount for each overdue day. The payment day is considered an overdue day in case of delay.
If the submission of a tax return is delayed for up to two months, the penalty is 5% of the tax pay able based on this tax return. If submission of a tax return is delayed for more than two months, the penalty is 10% of the tax payable based on this tax return.
Penalties for errors. If understated tax does not exceed 5% of the reported tax, a penalty equal ing 10% of the understated amount is imposed. The same penalty applies if the understatement results from a change of a tax point by the tax authorities. If understated tax amounts to 5%–20% of the reported tax, a penalty equaling 25% of the understated amount applies. In any other case, a penalty equaling 50% of the understated amount is imposed.
No penalty is imposed for incorrect information presented in the return or calculation form filed by the taxable person if the latter files an amended return or calculation form before receiving the notification regarding the tax audit or the tax violation from the tax authorities.
No penalty applies for failure to notify the Public Registry about changes to a taxable person’s VAT registration details. For further details, please see the subsection above Changes to VAT registration details.
Penalties for fraud. If input tax credit is claimed based on bogus operations, fictitious agreements or fake documents, a penalty of 200% of the credited tax amount is imposed.
For the issuance of a fake invoice or the issuance of an invoice based on bogus operations or fictitious agreements, a penalty equal to 200% of the VAT amount indicated in this VAT invoice is imposed.
Personal liability for company officers. Company officers cannot be held personally liable for errors and omissions in VAT declarations and reporting in Georgia. However, in case of intentional evasion of taxes in the amount exceeding GEL100,000, criminal proceedings are institut ed.
Statute of limitations. The statute of limitations in Georgia is three years. The statute of limita tions for conducting a tax audit, assessing taxes and imposing sanctions on a taxable person is three years from the end of the calendar year in which the taxable transaction was performed. Taxable persons have the same time limit to voluntarily correct errors in previous tax returns. Notably, if less than a year remains before the expiry of the three-year period and the taxable person files a tax return (including an adjusted tax return) for the relevant period, the statute of limitation is extended for one year.