VAT for a Georgian Company That Sells Services Abroad: Place of Supply and the Reverse Charge
Most foreign-owned Georgian companies sell services to customers outside Georgia, and most of them assume VAT does not concern them. Half of that is right. Where the customer decides the place of supply, exported B2B services carry no Georgian VAT; but the same company pays VAT on the foreign services it buys, through the reverse charge, whether registered or not. The rules, the threshold and the mistakes.
Value added tax in Georgia is a single 18% rate with a registration threshold, and for a company that sells goods in Georgia it behaves like VAT anywhere. For a company that sells services to customers abroad it behaves differently in a way founders find either delightful or alarming depending on which half they hear first. The delightful half: services supplied to a business customer abroad are taxed where the customer is, so no Georgian VAT is charged on the invoice. The alarming half: services the company buys from abroad, from cloud providers to foreign contractors, are taxed in Georgia, and the Georgian company is the one that pays.
18%
Standard rate
One rate; exemptions and zero-rating are the exceptions
GEL 100,000
Registration threshold
Taxable turnover in any twelve-month period triggers mandatory registration
Monthly
Returns once registered
Filed through rs.ge with the month's output and input VAT
The place-of-supply rule that saves exporters
VAT applies to supplies whose place is Georgia. For services, the Code sets the place of supply by rules that turn mainly on who the customer is: for a business customer, most services are supplied where that customer is established; for a private individual, the rules vary by service type, with electronically supplied services taxed where the consumer is. A Georgian software company invoicing a company in Germany is supplying a service whose place is Germany; no Georgian VAT is charged, and if the company is registered it may still recover the input VAT on its Georgian costs that relate to those supplies. This is the position most consultancies, agencies and IT companies with foreign clients rely on, and it is worth confirming for each type of service the company sells.
| Customer | Where the service is supplied | Georgian VAT on the invoice |
|---|---|---|
| Business established abroad | Where the customer is | None; supported by the contract and the customer's business status |
| Business in Georgia | Georgia | 18% if the supplier is registered |
| Private individual abroad, electronic service | Where the consumer is | None in Georgia; the consumer's country may tax it |
| Private individual abroad, other services | Depends on the service type | Confirm case by case |
| Services connected with property in Georgia, events in Georgia | Georgia regardless of customer | 18% if registered |
The reverse charge: the VAT you pay on foreign services
When a non-resident supplies a service to a Georgian business and the place of supply is Georgia, the Georgian recipient accounts for the VAT as tax agent under the reverse charge. The company calculates 18% on the fee it pays the foreign provider, declares it and pays it to the budget. A VAT-registered company deducts that same amount as input VAT in the same return, so for a registered exporter the reverse charge is a bookkeeping entry with no net cost; for an unregistered company it is a real 18% surcharge on every foreign service it buys, with nothing to deduct it against.
Cloud hosting, software subscriptions, advertising platforms, foreign freelancers and consultants are all services supplied by non-residents. A Georgian company that buys them and is not VAT registered owes reverse-charge VAT on each one, filed and paid monthly, and the Revenue Service sees the outbound payments. The reverse charge is the most common VAT surprise in a foreign-owned company's first audit.
Registering: when it is mandatory and when it pays
- 1
Track taxable turnover on a rolling twelve-month basis; registration is mandatory once it exceeds GEL 100,000, and the obligation arises immediately, not at the year end.
- 2
Check which of your supplies count towards the threshold. As we read the Tax Code at the time of writing, it counts supplies made in the territory of Georgia, so a service whose place of supply is outside Georgia is not in the count; the doubt is usually the place of supply of each service, which your accountant should confirm, since the answer affects when you must register.
- 3
Consider voluntary registration if you buy significant foreign services: registration turns the reverse charge into a neutral entry and lets you recover Georgian input VAT related to exports.
- 4
Once registered, file monthly through rs.ge, keep the customer evidence that supports non-Georgian place of supply, and claim refunds of excess input VAT through the procedure the Code provides.
- 5
Review annually: a company whose customer base shifts towards Georgia, or which starts selling to consumers, can find its position changing without any change in what it sells.
Where a non-resident supplies services whose place of supply is Georgia to a person registered or carrying out economic activity in Georgia, the recipient is treated as the tax agent and assesses and pays the VAT on the value of the services; a registered VAT payer is entitled to credit the tax so assessed in the same reporting period.
- Charging Georgian VAT to a foreign business customer because the invoice template had it: the customer cannot recover it and the supplier has overpaid.
- Ignoring the reverse charge because the company is unregistered: the obligation exists regardless of registration, and the arrears accrue penalties.
- Registering late because a service was wrongly taken to be supplied abroad: an exported service stays out of the threshold only if its place of supply is really outside Georgia, so check the place of supply before assuming.
- Losing the customer evidence: a foreign business customer's status and location are what make the supply non-Georgian; keep contracts, registration numbers and addresses on file.
The agency that was fine on sales and wrong on purchases
A Tbilisi marketing agency with clients in the EU and the UK invoices without Georgian VAT, correctly, and stays unregistered because its Georgian sales are nil. It spends heavily on foreign advertising platforms and foreign freelancers.
- 1Every foreign platform fee and freelancer invoice is a service received from a non-resident with its place of supply in Georgia; reverse-charge VAT of 18% is due on each, monthly.
- 2Unregistered, the agency cannot deduct what it pays, so the reverse charge is a real cost of 18% on a large share of its expenses, and it has not been filing it at all.
- 3It registers voluntarily: from then on the reverse charge is assessed and credited in the same return, and the Georgian input VAT on its office and local suppliers becomes recoverable against its export activity.
- 4The arrears for the earlier months are settled with the penalties the Code applies; the accountant's first question at the next review is whether any supply has become Georgian.
The agency's sales were treated correctly from day one; its purchases were not, and the missing registration turned a neutral mechanism into a cost. For a service exporter that buys abroad, VAT registration is usually a saving, not a burden.
Illustrative. Whether registration is advantageous depends on the mix of Georgian and foreign costs and customers; model it before deciding.
Next step
VAT position for an exporting company
Our monthly accounting plan tracks the threshold, files the reverse charge and the returns, and advises on voluntary registration when it pays; for a company already trading, we review the position and settle any arrears cleanly.
See the monthly planGeneral information, not tax advice. VAT rates, the registration threshold, place-of-supply rules and the reverse-charge mechanism are set by the Tax Code of Georgia and change; confirm the current rules for your services before relying on any statement here.