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VAT Advisory

When is VAT registration mandatory in Georgia?

You must register for VAT if your taxable turnover exceeds 100,000 GEL in any continuous 12-month period.

What is the Reverse Charge mechanism?

It applies when a Georgian entity receives services from a non-resident. The recipient must self-assess and pay the VAT (often 18%) to the state.

Is export subject to VAT?

Export of goods is taxed at 0%. This is beneficial because you don't charge VAT to the customer but can still claim credit for VAT paid on your inputs.

Are medical services exempt from VAT?

Yes, medical services are generally exempt from VAT without the right to deduct input VAT. This means you don't charge VAT but cannot reclaim VAT on your expenses.

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Value Added Tax (VAT) is the most complex and, simultaneously, the most revenue-generating tax for the state budget in Georgia. The VAT rate in Georgia is 18%, but its administration requires deep knowledge of legislation, as there are many specific taxation regimes, exemptions (with and without the right to deduct), and complex rules for determining the place of supply of services. Following the reform implemented in 2021, Georgia's VAT legislation has moved significantly closer to the EU Directive, creating new challenges for businesses, especially in international trade and services. Incorrect qualification—for example, failing to determine whether an operation is subject to reverse charge or whether the company has the right to input VAT credit—can lead to substantial financial penalties and tax disputes. VAT Advisory is a preventive tool that helps businesses correctly plan operations and avoid unforeseen tax liabilities.

What Does VAT Advisory Service Cover?

Tax experts on the Legal.ge platform offer comprehensive services tailored to your business's individual needs. The service includes:

  • Transaction Analysis: Detailed study of planned or executed operations to determine if they trigger a VAT liability.
  • Assessment of International Operations: Determining the tax consequences of import/export, as well as services provided by non-residents (reverse charge).
  • Identification of Exemptions: Analyzing the possibility of using statutory exemptions (e.g., financial, medical, educational services).
  • Proportional Credit Calculation: Correctly calculating the input VAT coefficient in cases of mixed activities (taxable and exempt).
  • Contract Review: Checking contracts from a tax perspective to ensure VAT clauses (e.g., whether the price includes VAT) are clear and secure.

Common Situations and Scenarios

In practice, businesses often make mistakes when determining the "place of supply" for services. For example, a Georgian marketing company provides services to a foreign client. Under old legislation, this might have been taxed, but under new rules, if the client is a business (B2B), the place of supply is considered the client's country, and the operation is not taxed with VAT in Georgia. The opposite situation occurs when a Georgian company receives electronic services (e.g., software license) from abroad—this triggers a reverse charge obligation, which many companies overlook and are subsequently fined for. Another complex scenario is the supply of real estate, where it is important to distinguish between residential and commercial spaces, as well as consider the status of the land plot.

Georgian Legal Framework

VAT regulation is outlined in the relevant section of the Tax Code of Georgia (Articles 156-181). These articles define VAT payers, taxable operations, exemptions, and deduction rules. Critically important are the Orders of the Minister of Finance and Situational Manuals issued by the Revenue Service, which explain the practical application of the law in specific cases. Since Georgian legislation is based on the EU VAT Directive (2006/112/EC), precedents from European Court practice are often used in complex cases to support arguments.

Step-by-Step Service Process

When hiring a consultant on Legal.ge, the process begins with problem identification. In the first stage, the specialist familiarizes themselves with your business structure and the specific transaction. The second stage involves legal research of the issue, covering both the Code and recent practice analysis. In the third stage, you receive a written conclusion (Tax Opinion) detailing tax consequences, risks, and recommendations. If necessary, the consultant will assist in implementing these recommendations (e.g., correcting a declaration).

Why Choose Legal.ge?

VAT legislation is dynamic and constantly changing. Legal.ge gives you access to experts who specialize specifically in indirect taxes and constantly update their knowledge. A specialist selected through our platform will not only explain the dry norms of the law but also give you practical advice on how to legally optimize your tax burden and avoid systemic errors.

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