Georgia is continuously trying to simplify its tax code along the lines of the European Union. Its value-added tax structure is also designed after the EU VAT directive. The government of Georgia has defined taxable transactions and time of supply into a single provision. Taxable transactions include-
- Goods/services produced and supplied within Georgia.
- Exchange of goods/services for shares in any of the Georgian legal entity.
- Export of goods outside Georgian territory and import of goods into Georgian territory.
- Transfer of goods/services for non-economic purpose in case the VAT registered taxpayer has credit for these.
Georgia`s VAT system is quite reasonable and easy to follow.The VAT rate in Georgia is a flat 18% which is applicable to imports and most of the taxable transaction unless otherwise stated in the provision. Some taxpayers in Georgia have to be registered for the purpose of VAT collection depending upon the kind of commercial activity their business involves or one can voluntarily register for VAT.
Do You Need VAT Registration?
Companies or taxpayers can either voluntarily register for VAT in Georgia or they must if they come under the following conditions-
- Your company in Georgia needs to be registered for the purpose of VAT if it has performed certain economic activities that come under the purview of VAT taxable transaction and has led to the accumulation of more than GEL 100,000 within in a period of 12 months.
- Companies can voluntarily apply for VAT even if the turnover is less than GEL 100,000.
- Companies that are involved in the production or import of excisable goods into Georgian territory.
- You need to register for VAT even if, just for a day, you are involved in a one-off economic activity that exceeds GEL 100,000.
- You can avail input tax credit for existing inventory at the time of VAT registration.
You can also deregister yourself in case your business is liquidated or if the one-off economic activity that was supposed to generate more than GEL 100,000 could not take place. Deregistration becomes effective from the very first day of the month following the date of submission of the application of deregistration.
There are certain taxable transactions that are VAT exempt and for which one can claim the right to input tax credit. These include-
- Export of goods with a right to input tax credit.
- Supply of international transport services which also include passing through Georgia.
- Gold supply to the National Bank of Georgia.
- Natural gas supply to thermo-electric power stations in Georgia.
- Tourist services used by foreign tourists in Georgia.
- Goods and services used during foreign diplomatic meetings and other meetings of such national importance.
There are certain taxable transactions that are VAT exempt but for which you cannot claim the right to input tax credit. These include-
- Financial services.
- Supply of goods/services for state privatization process.
- Goods/services intended for the use of the oil and gas industry.
- Supply of currency.
- Supply of securities.
- Goods/services supplied between corporations that are part of free industrial zones in Georgia.
- Funeral services.
- Healthcare services.
- Goods supplied to a registered VAT-payer who is operating a free warehouse enterprise.
How to Determine Taxable Amount for VAT?
The taxable amount is usually determined by the transaction amount for the supply of goods/services. To calculate tax in Georgia for the purpose of VAT one should keep the following in mind-
- For goods/services supplied free of charge to employees, VAT is calculated according to the market value of these goods/services.
- The supplier is required to account for VAT according to the market value of the goods/services that are used for non-commercial or personal activities for which input tax credit has already been claimed.
- The VAT should be incorporated into the shelf price of goods.
- The supplier is required to account for VAT according to the market value of the goods that are supplied either free of charge or are used as a part of barter transactions.
- The taxable amount of imported goods involves- the cost of tariffs, customs charges, and costs that are ancillary to importation.
- For goods that are part of temporary imports, VAT of 0.54% of the taxable amount is applicable for every month for which the goods are to be within Georgian territory.
If you are looking for company formation in Georgia, then you must comply with the VAT registration procedure according to the nature of your business operations. For VAT purposes you must be aware of the provisions of Article 157 of the tax code of Georgia.
Our experts in Georgia will help you with VAT registration. They will help you submit the necessary documents for VAT registration with the concerned VAT authorities of Georgia. They can also help you to determine the taxable amount of your goods/services, your rights to claim an input tax credit, VAT refund procedure, determine the place of transaction, time of transaction, VAT remittance and VAT exempt supplies. If you require any services related to a VAT registration in Georgia, then you may contact us.