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 different.
- 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.
From July 2020, a new rule was introduced for multinational enterprises (MNEs) that are residents of Georgia. Namely, such persons 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.