Georgia

Corporate - Significant developments

Last reviewed - 04 January 2022

Value-added tax (VAT) legislation

From 1 January 2021, new VAT regulations have been enacted in Georgia. These changes are a result of the European Union (EU)-Georgia Association Agreement signed in 2014 and aim to approximate the Georgian VAT system with the EU VAT directive.

As a result, significant changes have been introduced in Georgian VAT rules, including the following:

  • The definition of VATable person has been formulated differently.
  • A notion of a fixed establishment has been introduced.
  • Changes were introduced with respect to mandatory VAT registration rules.
  • The concept of supply of goods and services has been defined differently.
  • The rules of place of supply have been significantly changed, and concepts of business-to-business (B2B) and business-to-consumer (B2C) have been introduced.
  • Changes affecting certain aspects of the VAT chargeable amount, the moment when VAT becomes chargeable, and input VAT deduction rules.
  • A new approach of VAT treatment has been introduced in relation to transfer of going concern, reorganisation, and in-kind contribution of goods/services into equity.
  • Rules of VAT refund for EU-based businesses have been reformulated.
  • VAT rules have been established in relation to non-Georgian established businesses providing digital services to Georgian consumers along with the relevant compliance procedures.
  • Concepts of single and multiple purpose vouchers have been introduced along with the relevant VAT rules.
  • VAT rules of margin scheme have been introduced.

    VAT compliance for Digital Business

    Persons that are not established or have no habitual residence in Georgia and/or does not have a fixed establishment in Georgia, and provide digital services to the individuals on the territory of Georgia, have the obligation to declare and pay VAT in Georgia.

    Digital services are considered rendered in Georgia if one from the following conditions is met:

    • Georgia is the location of the financial institution (in which the account is opened and used to reimburse the services rendered) or of the electronic financial operator (through which the payment is made)
    • Location of the service recipient is Georgia
    • Network address (IP) of the device used by the service recipient to purchase the service is located in Georgia
    • Phone code of the country used to purchase/pay for the service belongs to Georgia

    VAT calculation and payment liabilities arise on provided digital services from 1 October 2021.

    Reporting should be made on a quarterly basis by 20th day of the month following the reporting period (1 January - 31 March, 1 April - 30 June, 1 July - 30 September, 1 October - 31 December) while payment deadline is the end of the month following the reporting period.

    Payment could be executed in: USD, EUR or GEL. 

    Transfer pricing

    From July 2020, a new rule was introduced for multinational enterprises (MNEs) that are residents of Georgia. Namely, parent entities are required to submit a country-by-country (CbC) report to the tax authorities by 31 December following the reporting year.

    This requirement applies to MNE groups with total consolidated group revenue of the previous fiscal year higher than 750 million euros (EUR).

    Apart from this, the ultimate parent company or surrogate parent entity, which is part of the MNE group and simultaneously the resident of Georgia, is required to notify the tax authorities regarding its obligation of CbC reporting by the end of the reporting year.