A VAT invoice issued in Tbilisi today follows a logic largely written in Brussels, even though Georgia is not a member of the European Union. In 2014, Georgia signed an Association Agreement with the EU, committing to bring its legislation gradually into line with European law, including the common VAT system set out in Council Directive 2006/112/EC. That commitment reached the Georgian Tax Code in earnest from January 2021, when Parliament rewrote the VAT chapter almost entirely. The result is not a transplant of EU law: Georgia sits outside the customs union, and the Directive does not bind Georgian taxpayers directly. But the concepts, definitions, and structural logic are unmistakably European, and understanding that lineage explains rules that might otherwise look arbitrary.
Economic Activity and the Real Estate Exception
The revised chapter introduced definitions used only for VAT purposes, sitting alongside the Tax Code’s general definition of economic activity. Occasional, one-off supplies generally fall outside VAT, an EU-style narrowing of the taxable base, though the supply of non-residential real estate is treated as taxable regardless of frequency. For sales of residential property by individuals, the question is no longer how many units changed hands but whether the transaction reflects a genuine business pattern. A one-off disposal typically remains outside scope; a sale structured as the first step of a property business generally will not, and the line between the two is drawn on the facts, not on a fixed count.
Non-Residents and the New Fixed Establishment Test
The reform also closed a long-standing gap for foreign suppliers. Historically, only a non-resident’s Permanent Establishment counted toward the GEL 100,000 registration threshold, so a foreign company trading in Georgia without one could operate largely outside VAT.
The threshold now applies uniformly to residents and non-residents, and the Tax Code adds the EU-derived concept of a Fixed Establishment: a place with sufficient permanence and resources to supply or receive services, which arises more readily than a Permanent Establishment and carries its own registration consequences. Foreign investors structuring a Georgian branch, warehouse, or dependent agent should treat this test as a genuine compliance trigger rather than a formality.
Destination-Based Place of Supply and Digital Services
Perhaps the most consequential shift concerns place of supply. Georgia moved from a rigid, category-based system to a destination-oriented one: for business-to-business services, VAT generally follows the recipient; for services to consumers, it generally follows the supplier, subject to listed exceptions, including professional and electronically supplied services, which follow the consumer instead. The practical effect reaches non-resident digital suppliers, whose services to Georgian consumers can fall within the Georgian VAT net even without any Georgian office. Businesses selling software, streaming, or e-learning services into Georgia should reassess customer classification and invoicing rather than assume reverse-charge relief applies by default.
What This Means for Your Business
None of this is self-executing. Contracts, invoices, and VAT-registration analysis drafted for the pre-2021 regime, or borrowed from an EU jurisdiction’s playbook, rarely transfer cleanly onto Georgian rules.
NOMOS GEORGIA advises Georgian companies, foreign investors, and non-resident suppliers on VAT registration, contract structuring, and cross-border compliance, testing each position against current Revenue Service guidance before a filing choice hardens into a dispute.
The direction of travel is clear. The details, as always, decide the outcome.
