Reverse Charge VAT in Georgia: 18% on Foreign Services
An invoice from a supplier outside Georgia arrives with no VAT on it, and the service still carries 18% Georgian VAT. The buyer accounts for that tax, not the supplier, and owes it whether or not it is registered for VAT. This post covers who counts as a tax agent, which purchases are caught, what the 18% costs and when it is paid.
- Reverse charge VAT is Georgian VAT on a service supplied here by a taxable person that is not established in Georgia, accounted for by the customer instead of by the supplier.
- The rate is 18%, calculated on the amount payable for the service.
- The tax agent is any person established in Georgia apart from an individual who is not in business and a free industrial zone enterprise, registered for VAT or not.
- Services that are exempt from VAT are not reverse charged.
- It applies below the GEL 100,000 registration threshold as well as above it, and what you pay as a tax agent does not count toward your own threshold.
What reverse charge VAT is
Georgian VAT is normally charged and paid over by the supplier. The reverse charge moves that job to the customer. It reaches a service supplied on Georgian territory by a taxable person that is not established here, does not ordinarily reside here or has no fixed establishment here taking part in that supply, and Article 161 of the Tax Code makes the customer the tax agent for it.
The rate is the ordinary Georgian rate of 18%, calculated on the amount payable for the service. Georgia has one VAT rate and no zero rate, so nothing about a foreign supplier makes the figure smaller.
The rules are not confined to services. They also catch goods in 3 cases: goods pledged as security when ownership passes to the creditor, foreign goods bought in a customs warehouse, and foreign goods bought from a free industrial zone enterprise, the last two once released into free circulation. An ordinary import sits outside all of this, because import VAT is paid under the rules for the import duty instead.
Who is a tax agent
The definition settles almost every case: any person established in Georgia other than a non-entrepreneur individual and a free industrial zone enterprise, plus any person with a fixed establishment here through which the service was bought, whether or not it is registered for VAT.
A Georgian company is established here and is a tax agent from its first foreign invoice. An individual entrepreneur is in business rather than a private individual, so a 1% small business holder is caught too. A private individual buying a subscription for personal use is not, which is why a foreign supplier selling to consumers accounts for the Georgian VAT itself.
A company owes this in a month when it owes no profit tax at all, because profit tax arises when profit leaves the company and the reverse charge arises when the service is bought.
| Buyer | Tax agent | Note |
|---|---|---|
| Georgian company | Yes | Established in Georgia, and VAT registration makes no difference |
| Individual entrepreneur, including a 1% small business holder | Yes | In business, so the exception for private individuals does not reach them |
| Micro business holder | No | Not a tax agent for services received, but still pays 18% on services bought from non-residents |
| Free industrial zone enterprise | No | Named in the article as an exception |
| Individual buying for private use | No | A non-entrepreneur individual is outside the definition |
Which purchases are caught
Two things have to be true: the place of supply is Georgia, and the supplier is outside it.
The place of supply of a service is where the customer is established when the customer is a taxable person, and where the supplier is established when it is not. Any person other than a non-entrepreneur individual counts as a taxable person for this test, so a Georgian business buying advertising, cloud hosting or a software subscription from abroad is buying a service supplied in Georgia. Special rules displace that for land and buildings, events, transport and a short list of others.
The GEL 100,000 threshold decides whether you charge VAT on your own sales, not whether you owe this. A business well under the threshold owes the reverse charge in full.
The supplier side turns on where a person is established, which is the place it carries out its main economic activity and where its management body takes the main decisions. A company you registered abroad but run from Tbilisi is not a foreign supplier for this purpose.
Exempt services are not reverse charged, whether the exemption carries the right to credit input VAT or not. Financial services, the supply of a plot of land and gambling services are exempt, so buying them from abroad creates no liability here.
Whether a particular foreign invoice is caught turns on where the supplier is established and what the service is, and David Sisvadze sets that out in a written opinion he signs.
Your own sales run the other way. A service sold to a business customer established outside Georgia is supplied where that customer is, which puts it outside Georgian VAT and outside the count toward your registration threshold.
What the 18% costs you
The base is the amount payable for the service, so the 18% sits on top of the supplier's price rather than coming out of it. The supplier invoices its own figure and charges no Georgian VAT; you add the tax yourself.
An invoice in dollars or euros is converted into lari at the National Bank of Georgia official rate for the day the transaction is carried out, and the 18% is worked out on the lari figure.
Say you pay a design studio outside Georgia GEL 2,000 for a service in March.
- The reverse charge is 18% of GEL 2,000, so GEL 360.
- The studio invoices GEL 2,000 and charges no VAT of its own.
- You declare and pay the GEL 360 as tax agent by 15 April.
- Registered for VAT, with the work feeding your taxable sales, the same GEL 360 goes back in as a credit in that return.
- Not registered, the GEL 360 stays a cost and the service has cost you GEL 2,360.
Reverse charge on the 1% and micro regimes
Small business status taxes your income, not your purchases. The 1% is charged on your taxable income under the regime, while the reverse charge falls on the service you bought.
A small business holder is an entrepreneur natural person, which puts them inside the tax agent definition and outside the exception for individuals who are not in business. Buy GEL 10,000 of foreign advertising in a year and the reverse charge on it is GEL 1,800, payable alongside the 1% on your own income.
Micro business status is the odd one. A micro business holder pays no income tax on business income and is not a tax agent for services received, yet the Minister of Finance order governing the status charges VAT at 18% under the reverse charge rules on services received from a non-resident. Registering for VAT is no way round it, because micro status cannot be held by a VAT-registered person and is revoked on registration.
If you are VAT registered
Registration does not remove the obligation. It changes what happens to the money.
VAT assessed under the reverse charge is creditable input VAT where the purchase is used in taxable transactions, and the document that grounds the credit is the assessed amount shown in that same return. Charge and credit land together, so a fully taxable business carries no cash cost. Where a purchase serves both credit-entitled transactions and others, only the proportional part is creditable, worked out from the year's turnover excluding VAT.
Only a person registered as a VAT payer has the right to credit input VAT at all, so a tax agent outside the register pays the 18% and keeps nothing back.
Declaring it, and the penalties for getting it wrong
The VAT reporting period is the calendar month, for every VAT payer, with no quarterly or annual option. A registered tax agent puts the reverse charge in its monthly VAT return, due with payment by the 15th of the month following the reporting period. A tax agent that is not registered pays the assessed tax by the same date, under reporting rules set by the Minister of Finance rather than by the Tax Code.
The liability falls in the period of the supply, except that a payment made in whole or in part before the supply pulls the tax into the period of the payment. The date on the supplier's invoice triggers nothing.
A late return carries a fine of 5% of the tax due under it up to 2 months late and 10% after that, with no fine where the tax due is zero. Unpaid tax carries interest of 0.05% for each overdue day, and a tax audit can cover 3 years counted from the end of the calendar year audited, so a purchase made 2 years ago is still reachable.
No foreign supplier invoices Georgian VAT, so nothing in your inbox says this is due. The liability dates from the supply, and the interest starts running the day after the payment deadline. On the GEL 360 in the example above, a year unpaid adds 365 days at 0.05%, GEL 65.70, and the tax itself is still owed on top.
Frequently asked questions
Do I need to pay reverse charge VAT in Georgia?
Yes, if you are established in Georgia and buy a service from a supplier that is not. The definition covers companies and individual entrepreneurs, registered for VAT or not, and excludes only a non-entrepreneur individual and a free industrial zone enterprise.
What is the reverse charge VAT rate in Georgia?
18%, calculated on the amount payable for the service. Georgia has a single VAT rate and no zero rate, so a foreign supplier's service is charged at the same rate as one bought at home.
Does reverse charge VAT apply if I am not VAT registered?
Yes. The tax agent definition applies whether or not the person is registered. Registration changes only what happens next: a registered buyer credits the tax in the same return, an unregistered one pays it and cannot recover it.
Do I owe reverse charge VAT on the 1% small business regime?
Yes. An individual entrepreneur is a tax agent, and the 1% is charged on your income under the regime rather than on what you buy. Foreign advertising, software and contractor services carry 18% on top of the price.
Does a micro business holder pay reverse charge VAT?
Yes, even though a micro business holder is not a tax agent for services received. The order governing the status charges VAT at 18% under the reverse charge rules on services received from a non-resident, and the income tax exemption does not change that.
Can I claim back reverse charge VAT in Georgia?
Only if you are registered as a VAT payer and the purchase is used in taxable transactions. The assessed amount shown in your VAT return is itself the document that grounds the credit, so the tax is charged and credited in one return. A buyer outside the register has no right of credit.
Does a private individual pay reverse charge VAT on a foreign subscription?
No. A non-entrepreneur individual is excluded from the tax agent definition, so no reverse charge arises on a purchase made privately. Where electronically supplied services go to a Georgian consumer, the duty to account for the VAT falls on the foreign supplier instead.
Are all foreign services reverse charged?
No. Exempt services are outside it, whether the exemption carries the right of credit or not, and a service whose place of supply is not Georgia is not caught at all. Land and buildings, events and transport have place of supply rules of their own.