How to Charge, Claim, and Pay VAT in Georgia: An Expert Guide

The Georgian authorities are looking to collect GEL 8.14 billion from Value Added Tax (VAT) in 2026, which will account for a whopping 37% of all budget tax revenue. At the same time, despite the tax’s obvious importance to the economy, the country offers a variety of benefits and deductions, with businesses saving GEL 6 billion annually on VAT alone. To help you optimize your budgets, we have looked at a substantial portion of the Tax Code of Georgia, specifically Articles 156 through 181, to answer your most frequently asked questions.

For those dealing with VAT for the first time

To begin with, legislation defines VAT as a consumption tax added to the cost of goods and services at each stage of their creation, including retail sales. Everyone in the supply chain gets a chance to remit the tax to government coffers while simultaneously gaining the right to reduce their own liabilities by the amount of VAT already included in the cost of the products at the previous stage.

This creates a rather complex sequence of additional charges (output VAT) and deductions (input VAT). Ideally, however, a company or individual entrepreneur pays tax only on the value of the good or service they “added” at their particular stage of production, with the full financial burden borne by the final consumer through the retail price.

In practice, this only works if all counterparties are registered as VAT payers. If someone in the supply chain has failed to register with the tax authorities, they toss a giant spanner in the right to claim input tax deductions.

Registration and liability

To register as a VAT payer, legal entities and individuals (including, but not limited to, Individual Entrepreneurs) must submit an electronic application through the Revenue Service portal at eservices.rs.ge. The law provides for two key scenarios:

• Mandatory registration occurs if a business’s turnover exceeds GEL 100,000 (approximately USD 37,000) over any continuous 12-month period. It is worth noting, however, that the operations generating this GEL 100,000 must themselves be subject to VAT. The law allows two days to register from the moment the threshold is exceeded, and fiscal obligations apply only to those transactions crossing the threshold.
• Voluntary registration is possible without consideration of turnover at the discretion of the business entity seeking to offset input VAT or optimize its operations in some other way. Under voluntary registration, fiscal obligations (primarily regarding VAT calculation) take effect from the date specified in the application, but no earlier than the moment of its submission.

There are also several specific cases where registration is mandatory regardless of turnover. If a company produces excise goods, it must register prior to their sale. A similar requirement applies during corporate reorganization if one of the parties previously held VAT payer status, or when assets are contributed to share capital by a counterparty holding this status.

When it comes to registration, two points deserve close attention:

1. Qualified vs. Unqualified Status: Georgia distinguishes between unqualified and qualified VAT payers. When a company or individual initially applies to the Revenue Service, the regulator automatically assigns the former status—which does not grant the right to receive or issue tax invoices (effectively preventing input VAT deductions, though it does not exempt them from the obligation to calculate output tax). The Revenue Service grants the second status only after a verification process taking up to 10 days, and it is this status that unlocks all the system’s advantages.
2. Registered VAT Payer vs. Taxable Person: It is essential to distinguish between these two legal entities. Generally, an obligation to pay Value Added Tax can arise even without registration with the Revenue Service: during the import of goods into Georgia (excluding transit), the sale of assets under bankruptcy or debt collection proceedings, as well as in cases involving reverse-charge VAT when working with non-residents (which we will cover in a separate section).

VAT exemptions

The general rule for tax assessment is based on the place of supply: VAT must be paid if the place of transaction is determined to be Georgia, provided the transactions themselves relate to economic activity (conducted for the purpose of generating income or compensation).

• For goods, the situation is relatively straightforward—the place of transaction is understood to be the country where the company’s products were located prior to being moved to the final buyer. If this is not Georgia, no VAT is levied.
• For services, the principle is more complex. According to the general rule for B2B transactions, the place of transaction is recognized as the country where the buyer is established. Therefore, if a Georgian company sells software to a client in the US, no VAT liability arises. However, for real estate services, the place of transaction is considered the country where the property is physically located. The same principle applies to cultural, sporting, and educational events—what matters is where they take place in reality.

What about B2C relations involving services provided to foreign individuals? By default, the place of transaction is the seller’s country, but an exception applies to the cases listed below, where the place of transaction is recognized as the location of the individual (meaning no tax):

• Advertising services
• Provision of staff (HR outsourcing)
• Services provided electronically
• Data processing and the provision of information
• Telecommunications services, including television and radio broadcasting
• Consulting, engineering, legal, accounting services
• Banking, financial, insurance operations (except for safety deposit box rentals)
• Rental of movable property (except for transport)
• Transfer of copyrights, patents, and licenses
• Obligations to fully or partially refrain from carrying out an economic activity or exercising a right provided for in this section (e.g., non-compete agreements, exclusive rights)

At the same time, the Tax Code identifies goods and services that are exempt from Value Added Tax regardless of the place of transaction (partially overlapping with and complementing the list of exceptions above). They can be divided into two main categories:

• Exempt without the right to input VAT deduction (credit): medical, educational, funeral, and financial services, as well as the supply of land plots and paper products such as newspapers, magazines, and sheet music. As an exception, transactions between participants in Georgian Free Industrial Zones are also exempt without the right to deduction.
• Exempt with the right to input VAT deduction (zero-rated): export and re-export of goods and services (including the aforementioned services to non-residents), international transport of cargo and passengers, supplies for diplomatic missions, and supplies of natural gas for power plants.

The law also refers to transactions that are not recognized as supply and are not considered subject to VAT. These include the transfer of funds and cryptocurrency, the transfer of assets between participants in a reorganization, the transfer of all assets or an entire independent enterprise from one VAT entity to another, as well as contributions to an organization’s capital (note that despite being exempt from the tax, the latter case may give rise to an obligation to register the company as a VAT payer—as described in the previous section).

Value Added Tax Rates

The standard Value Added Tax rate in Georgia is 18%, but based on the criteria listed above, some companies operate at a 0% rate simply due to the nature of their business.

* It should be repeated that these benefits stem mostly from general VAT exemptions rather than the specific statuses of the companies. Ordinary LLCs, JSCs, or Individual Entrepreneurs can also count on a 0% rate with the right to deduction if they export goods abroad. However, special regimes still offer advantages regarding other taxes, including corporate income tax and personal income tax. For more details, read the general article on taxes for businesses in Georgia.

Calculating VAT in Georgia

If a company or individual is registered as a VAT payer (or faces the need to pay tax regardless of registration), understanding the taxable base and the exact moment of tax assessment (accrual) is essential for issuing output VAT when selling a good or service.

• What is included in the taxable base: This is the amount of consideration the company intends to receive from the client, excluding VAT. It may include other taxes and duties previously paid by the enterprise, as well as associated expenses for packaging, transport, storage, and other items. If a transaction takes place via barter or between related parties, the market value of the goods or services is typically taken as the baseline.
• When the tax is calculated: The obligation to pay tax arises in the same reporting month when the supply of goods/services took place or at the moment advance payment is received—whichever happens first. The accounting department records the VAT calculation in a tax invoice containing all transaction details. It is issued electronically on the Revenue Service website.
• Special Tax Invoices: Georgia uses special tax invoices that replace two documents at once: a standard invoice and a commodity waybill. This simplifies accounting during the transportation of goods.
• Deadlines: The Value Added Tax declaration is filed monthly—by the 15th day of the month following the reporting one, and payment is made within the same timeframe.

Let’s break this down with an example: Suppose a company sells software to a client in Georgia for a nominal value of GEL 10,000. 18% of this is GEL 1,800. Consequently, the final price of the product for the buyer, including VAT, will be GEL 11,800. Following the delivery of the software (or receipt of payment), the accountant must issue a tax invoice indicating the amount and the tax and file a declaration at the close of the reporting month. If the company had input VAT in the same month—say, GEL 1,000 for marketing services or office rent—it can offset it and pay only the difference of GEL 800 (1,800 – 1,000). Typically, the Revenue Service’s electronic system calculates the deduction automatically.

There is a video on the regulator’s official channel explaining how to work with special tax invoices in the Revenue Service’s electronic system. It’s in Georgian, but something like Google’s NotebookLM can help with that.

The VAT implications of offsetting

Tax deductions are carried out on the basis of the previously mentioned tax invoices (there may be several) received from the supplier of the good or service—they automatically flow into the company’s personal account on the Revenue Service website, forming a kind of digital purchase ledger.

When dealing with input VAT, there are some non-obvious details:

• Offsets for advance payments: A buying company has the right to claim a tax deduction based on an advance tax invoice in the same month it transferred the partial payment to the supplier. However, following the final purchase, it is vital for the accountant to prevent a repeated offset of the VAT amount that was attributed to the advance payment—the law prohibits this. To avoid complicating the documentation, companies often wait for the final delivery and claim the deduction based on the entire tax amount at once.
• Non-economic expenses: Offsets for expenses (purchases) unrelated to economic activity are prohibited by the Tax Code. If a company still offsets such a purchase but later recognizes it as non-economic, it must independently assess VAT on it as a “hidden supply” (e.g., a gift to an employee), thereby returning the previously claimed tax.
• Entertainment expenses: Offsets for entertainment expenses (spending on hotels, restaurants, transport, etc.) can only be carried out within a limit of 1% of the entity’s income for the previous calendar year. Anything above this threshold cannot be recovered (and is additionally subject to corporate income tax).

Separately, it should be noted that if a company conducts mixed activities—where some operations are subject to VAT and others are exempt without the right to deduction—the input VAT on general expenses (office rent, utilities, security, internet) is divided proportionally to the share of taxable turnover in total revenue.

For example, an IT company might generate half of its income from selling software inside Georgia (subject to VAT) and the other half from selling programming educational courses (exempt). In this case, it will only be able to claim a deduction for 50% of the VAT from its rent and utility bills.

How reverse-charge VAT works in Georgia

If a Georgian company or individual purchases goods or services from foreign contractors who do not have a registration or permanent establishment in the country, and the place of transaction is recognized as Georgia, they automatically become their tax agents through the reverse-charge VAT mechanism. This means that the obligation to calculate and pay output Value Added Tax is shifted from the seller to the buyer. The rate remains unchanged at 18%, but several scenarios are possible:

• Non-registered buyers: If a company or individual is not a registered VAT payer, they must calculate and pay reverse-charge VAT according to general rules—by the 15th day of the month following the reporting one. Furthermore, if an advance payment was made as part of the operation, the taxation period for the reverse-charge VAT is the month the advance was paid. In that case, upon completion of the purchase, the accountant no longer needs to levy the tax on the operation.
• Registered VAT payers: If the company or individual is registered as a VAT payer (and actually pays taxes at the standard rate), they calculate the reverse-charge VAT but claim it as a deduction in the very same declaration, meaning no actual payment occurs.
• Exempt production: If a buyer of a service or good from a non-resident is registered as a VAT payer but sells products in Georgia that are exempt from VAT without the right to deduction, they will also be unable to offset the reverse-charge tax.
• Mixed activities: VAT payers with mixed activities can account for reverse-charge tax using the proportional method (see the previous section).

*Free Industrial Zone participants are exempt from reverse-charge VAT regardless of their status.

When offsetting reverse-charge VAT, a company must guarantee that the acquired service will be used in the current or future periods for the supply of goods or services within or outside the territory of Georgia (except for cases where an exemption from VAT without the right to deduction applies). If no associated income follows the purchase, the company must not claim a deduction for the reverse-charge VAT.

Conclusions: Benefiting from VAT

Within the scope of this article, we have reviewed most of the provisions of the Tax Code of Georgia dedicated to VAT and would highlight the following:

• It is most profitable to work on exporting goods or services from Georgia—they are not subject to 18% VAT and yet allow you to claim input tax deductions.
• If a company frequently buys services or goods from non-residents without a representative office in Georgia, it may be beneficial to register as a VAT payer voluntarily, even without a turnover of GEL 100,000 as this will help cancel out reverse-charge VAT. A similar approach can be taken if major purchases lie ahead.
• For ordinary individuals, it can also sometimes make sense to become a VAT payer: for example, during substantial investments in commercial real estate.
• Mixed activities—where some of a company’s services are subject to VAT and others are exempt without the right to deduction—should be avoided whenever possible. In this scenario, the business loses a portion of its input VAT, as it is credited proportionally.

If you still have questions about VAT or need assistance with company registration, tax accounting, or other matters, contact the specialists at PB Services using the form below. We also offers outsourced accounting services.