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July 20, 2021
2021-1387

Georgia imposes VAT on foreign suppliers of digital services

As part of recent Value Added Tax (VAT) reform in Georgia, effective from 1 July 2021, foreign suppliers of digital services to non-entrepreneurial natural persons (consumers) in the territory of Georgia are required to assess and pay VAT to the state budget of Georgia. There is no minimum revenue threshold.

Digital services are treated as rendered in the territory of Georgia if any one of the following criteria is met:

  • The bank account used by recipient is with a financial institution located in Georgia
  • The recipient is physically located in Georgia
  • The IP address of the device used by recipient is in Georgia
  • The telephone code used by the recipient belongs to Georgia

Assuming any of the above criteria is met, such foreign suppliers will undergo a simplified online registration procedure through the special platform created on the website of the Georgian Revenue Service. To complete the registration procedure, the foreign supplier will have to submit some basic information such as the legal name of the organization, the headquarters’ address, its website, country of residence for tax purposes, tax ID, and contact persons, among others. There is no requirement to present any documents.

VAT returns can be submitted through the same online platform. The VAT reporting period is quarterly. The deadline for submission of a VAT return is the 20th of the month following the reporting period. Thus, the first VAT return under the new rules is due by 20 October 2021.

As to the payment deadline, it is the end of the month following the reporting period. Thus, the first VAT payment under the new rules is due by 1 November 2021. Payment can be made either in US dollars or in Euro. Since foreign currency payments are accepted, a supplier can transfer the VAT amount from its regular foreign bank account.

The taxable base is compensation received for delivery of digital services to consumers in the territory of Georgia. The VAT rate is 18%.

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For additional information with respect to this Alert, please contact the following:

EY LLC (Georgia), Tbilisi

 

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