The Legal Foundations of VAT Regulation
Every practical question of value added tax in Georgia rests on precise norms of the Tax Code: the taxable person is defined in Article 158, the taxable amount in Article 164, registration and its cancellation in Articles 165, 165-1 and 165-2, the right of deduction in Article 175, and the refund of the tax in Article 181. Sound advisory work applies these norms together to a concrete business model, because a single transaction is often assessed across several articles, and an error at any stage turns into tax risk.
The Taxable Person and Economic Activity
Under Article 158, a taxable person is any person who independently carries out any kind of economic activity in any place, regardless of its purpose and result. Economic activity includes operations of persons supplying goods or providing services, apart from one-off or irregular activities, and the use of property for deriving regular income. The supply of a non-residential building is in any case treated as economic activity. Conversely, the activity of a state or municipal organ acting as a state organ is not economic activity, although the Code carves out spheres where this exception does not apply, such as telecommunications, the supply of water, gas, electricity or heat energy, transport, port and airport services, warehousing, advertising, public catering, and radio and television broadcasting.
Formation of the Taxable Amount
Article 164 provides that the taxable amount is the consideration received or receivable for the supply of goods or services, without VAT, including a subsidy directly linked to the price — a rule embracing barter as well. It must include taxes, fees and charges other than VAT, and incidental costs — commission, packaging, transport and insurance — passed on to the purchaser. It excludes discounts for advance payment, concessions received by the moment of supply, reimbursement of expenses incurred in the purchaser's name, and penalties for breach of contract. For a multi-purpose voucher, the taxable amount is the consideration paid for it; where that is unknown, the value indicated is divided by 1.18. Between related parties, in defined cases, the taxable amount is the market price without VAT.
Registration as a VAT Payer and Its Cancellation
Article 165 obliges a taxable person to apply for registration once taxable operations over any continuous 12 calendar months exceed 100 000 lari, no later than 2 working days from the day of exceeding. The duty to report and pay arises from the operation that crossed the threshold, inclusive. A producer of excise goods applies before the first supply; an entity created by reorganization — within 10 days of its completion; an enterprise receiving a contribution in kind — within 10 days. Voluntary registration is also available. Cancellation follows Article 165-1: where operations over the last 12 calendar months do not exceed 100 000 lari without VAT and a year has passed since the latest registration, the person may request cancellation, and registration terminates on liquidation, death, application, or the opening of a bankruptcy regime. Article 165-2 adds that, even without registration, VAT is paid by an importer, a tax agent under the reverse-charge method, a person realizing goods to enforce a tax debt, and a non-resident whose place of service supply is Georgia.
The Right of Deduction and the Refund of the Tax
Under Article 175, where goods or services are intended for taxable operations, the taxable person may deduct the VAT paid on acquisitions from another taxable person in Georgia, on import, and charged under the reverse-charge method. Article 181 governs refunds: where in a reporting period the deductible amount exceeds the amount to be assessed, the person acquires the right to a refund. A grant recipient must submit the supporting document within 3 months from the end of the month of the operation. A special rule protects foreign citizens: when goods purchased in Georgia are taken abroad, VAT is refunded on the basis of a special receipt issued by the authorized seller, provided the goods leave within 3 months of purchase and the value under a single receipt exceeds 200 lari without VAT.
Frequently Asked Questions on VAT
When must a business register as a VAT payer?
When the total of taxable operations over any continuous 12 calendar months exceeds 100 000 lari. The application must be filed no later than 2 working days from the day of exceeding, and the obligation to report and pay arises from the operation that crossed the threshold, inclusive.
What is included in the taxable amount and what is not?
It includes the consideration without VAT, subsidies directly linked to the price, taxes and fees other than VAT, and incidental costs charged to the purchaser. It excludes discounts, reimbursements of expenses incurred in the purchaser's name, and contractual penalties.
Can the registration be cancelled?
Yes, where the total operations of the last 12 calendar months do not exceed 100 000 lari without VAT and a year has passed since the latest registration. The tax authority may also cancel the registration on its own initiative with the person's consent.
How does a foreign citizen recover VAT on goods purchased in Georgia?
Upon taking the goods out of Georgia, VAT is refunded on the basis of a special receipt issued by the authorized seller, provided the goods leave within 3 months of purchase and their value under one receipt exceeds 200 lari without VAT.
How We Help on Legal.ge
The Legal.ge team reviews your business processes through the lens of these Tax Code norms: it assesses your registration duties and deadlines, verifies the correct formation of the taxable amount, helps prepare deduction and refund documentation, and protects your interests in dealings with the tax authority. Contact us for a consultation — we will examine your case individually.