Despite the fact that the overall tax burden in Georgia is low and the country is in the fourteenth place in the Paying Taxes 2020 ranking, the VAT rate has been and remains at the level of 18%. In this article, we will analyze the main issues of the formation of value-added tax, the possibility of optimization, and refund. This memo to companies dealing with VAT in Georgia will be useful for those who have already opened a business in Georgia, or just going to do it.
Who should pay VAT and how it is charged in Georgia
VAT (Value Added Tax) is a fee that is set as a surcharge to the price or tariff for a product/service. It must be paid by importers or those who supply the product/service, while they must be registered as VAT payers.
The VAT rate in Georgia is 18% of the taxable turnover or import of goods/services.
According to the Tax Code of Georgia, VAT must be paid by:
- the company is voluntarily registered as a VAT payer;
- a company whose turnover exceeds 100,000 lari within 12 calendar months;
- companies that temporarily introduced goods into the country (the status of a VAT payer is not required);non-residents who provide services in the country and are not registered;
- persons engaged in the transfer of property to the creditor;
- persons who pay the debt with goods.
When you need to register as a VAT payer
Companies that have registered with the Revenue Service as VAT payers have an obligation to declare VAT (a company can register voluntarily or if its turnover exceeds 100,000 lari for 12 continuous months, for example, from May 1 to April 30). The declaration is submitted by the 15th day of each month following the reporting one. Selling goods and services, the company has an obligation to pay VAT, while purchasing goods and services, the company deducts the paid VAT. The difference between these two indicators can be either positive or negative.
When the difference is positive, the company must pay VAT;
When the difference is negative (in case the credited VAT exceeds), then the difference is accumulated in a single tax account and these funds can be used for other taxes, or, having once written an application to the revenue service, subsequently, return VAT to the company's bank account.
There are also areas of activity in Georgia that are exempt from VAT, including tourism, which retains the right to offset the input VAT.
From November 17, 2020, Georgian taxpayers have the opportunity to automatically reimburse the surplus arising from the payment of VAT without submitting an application.
If a company is an intermediary between a tourist and hotels, hostels, restaurants, tours around the country, etc., provides at least 2 services in the field of tourism, then it has the right to a full refund of incoming VAT, up to a simplified withdrawal to the company's account.
VAT rules for non-residents and how you can avoid payment
Services provided by a non-resident company on the territory of Georgia are taxed in accordance with the VAT refund rule. The company charges VAT on the amount payable for the service outside the country, the so-called import (reverse) VAT.
VAT is not paid by companies on import proceeds when:
- the company is registered in one of the FIZ (read more about free industrial zones by the link)
- the company is a representative of the IT-sphere and has the status of a Virtual Zone, as well as employees on the territory of Georgia.
It is important to know that if VAT tax was calculated incorrectly for you or your organization on the territory of Georgia, or the tax was charged for a non-value-added product, then you can return the funds. To do this, the entrepreneur must submit the appropriate declaration to the tax authorities of the country.
If you have any questions or difficulties with VAT refunds or accruals, we can help you. We will make a competent calculation, fill out a declaration (we will teach you how to fill it out yourself), or explain how to optimize VAT and other taxes. Leave a request to get a free consultation.