Reverse Charge VAT in Georgia: Examples and Calculation

Reverse charge VAT in Georgia is the 18% VAT you owe on services bought from suppliers outside the country, and it applies with or without a VAT registration. Foreign software subscriptions and overseas contractors are where it is missed most often, and an undeclared amount accrues daily interest from the deadline. This post covers which purchases trigger it, who pays it, how to calculate it in lari with worked examples, and how it is declared.

What Reverse Charge VAT Is in Georgia

Reverse charge VAT applies to a service bought from a supplier outside Georgia. You, and not the foreign supplier, are the person responsible for the VAT on it. You calculate 18% of the value of the service, declare it and pay it yourself. Reverse charge VAT and reverse VAT are two names for the same obligation.

The standard VAT rate in Georgia is 18%, set in the VAT chapter of the Tax Code of Georgia. A business registered for VAT charges its customers that 18%. Each month it pays the Revenue Service the VAT it charged, less the VAT on its own purchases that it is allowed to deduct.

Which Purchases Trigger Reverse Charge VAT

The trigger is a service bought from a supplier outside Georgia. The usual cases are:

• software subscriptions
• cloud hosting
• work done by a foreign contractor
• services from an overseas marketing agency

Software subscriptions and overseas contractors are missed most often, because the purchase itself does not mention a Georgian tax. Three facts about your own business do not change the result:

• your VAT status, registered or not
• your turnover, including turnover far below the ₾100,000 registration threshold
• your sales, including invoices to foreign clients that carry no Georgian VAT

Who Pays Reverse Charge VAT: Registered and Unregistered Businesses

The buyer pays, and the obligation does not depend on the legal form or the tax regime of the business.

Buyer	Reverse charge VAT owed	Cash effect
Individual entrepreneur with Small Business Status, not VAT registered	18% of the service value	Paid in full, on top of the 1% tax
LLC, not VAT registered	18% of the service value	Paid in full
Virtual Zone company	18% of the service value	Paid in full unless the company is VAT registered
Any VAT-registered business	18% of the service value	Deducted as input VAT in the same return

Individual Entrepreneurs on the 1% Tax

Small Business Status taxes an individual entrepreneur at 1% of turnover up to ₾500,000 a year. That tax is charged on what you invoice. Reverse charge VAT is charged on the services you buy from abroad, so both can be due for the same month.

An entrepreneur who invoices ₾10,000 in a month and buys ₾1,000 of foreign services owes ₾100 of 1% tax and ₾180 of reverse charge VAT. The registration of an individual entrepreneur does not mention this obligation.

LLCs and Virtual Zone Companies

An LLC owes reverse charge VAT on the same terms. A Virtual Zone company is exempt from VAT on its exported IT income, and it still owes reverse charge VAT on the services it buys from abroad.

How to Calculate Reverse Charge VAT in Georgia

Convert the price to lari, then multiply by 18%:

Reverse charge VAT = value of the service in lari × 18%

Declarations are filed in lari, so a price in dollars or euros is converted first. The National Bank of Georgia publishes official exchange rates daily. Expenses are converted at the rate for the reporting period, not at the rate on the day the bookkeeping is done. The exchange rates in the examples below are illustrative.

Example 1: Hosting Invoice in US Dollars

A hosting company outside Georgia bills you 100 USD for the month. At a rate of ₾2.70 to the dollar, the value of the service is ₾270. Reverse charge VAT is 18% of ₾270, which is ₾48.60.

Example 2: Foreign Contractor Paid in Euros

A contractor outside Georgia invoices you 1,500 EUR for a project. At a rate of ₾2.95 to the euro, the value of the service is ₾4,425. Reverse charge VAT is 18% of ₾4,425, which is ₾796.50.

Example 3: Several Foreign Purchases in One Month

This month has the two purchases above and a 50 USD software subscription. Each price is converted to lari, and the 18% is applied to each value.

Purchase	Price	Rate	Value in lari	Reverse charge VAT
Software subscription	50 USD	₾2.70	₾135	₾24.30
Cloud hosting	100 USD	₾2.70	₾270	₾48.60
Foreign contractor	1,500 EUR	₾2.95	₾4,425	₾796.50
Total			₾4,830	₾869.40

The declaration for the month reports ₾869.40 of reverse charge VAT. A business that is not VAT registered pays that amount in full.

Reverse Charge VAT Amounts at 18%: ₾100 to ₾10,000

Service value in lari	Reverse charge VAT at 18%
₾100	₾18
₾500	₾90
₾1,000	₾180
₾5,000	₾900
₾10,000	₾1,800

For any other amount, multiply the lari value by 0.18. A business that is not VAT registered and buys ₾1,000 of foreign services every month pays ₾180 a month, which is ₾2,160 a year.

How to Declare and Pay Reverse Charge VAT

Reverse charge VAT is declared by the 15th of the month after the purchase, which is the same monthly deadline as the other monthly declarations. Services bought in March are declared by 15 April.

For a business that is not VAT registered, reverse charge VAT is not part of the turnover or corporate tax declaration. It is filed separately, alongside the monthly declaration for the same month.

1. Collect the month’s invoices from suppliers outside Georgia.
2. Convert each foreign-currency price to lari.
3. Calculate 18% of each service value.
4. Log in to rs.ge, the Revenue Service portal, and file the reverse VAT declaration for the month. The taxpayer cabinet and the forms are in Georgian.
5. Send the payment by the 15th as well. It goes through a Georgian bank as a treasury payment with treasury code 101001000, your taxpayer name and your tax identification number.
6. After a day or two, open your rs.ge account and confirm that the payment is recorded there.

Filing and paying are separate actions. Submitting the declaration records what you owe, and the payment is made through the bank, outside rs.ge.

A month with no income can still carry reverse charge VAT. A foreign hosting bill worth ₾300 in a month without sales leaves ₾54 to declare and pay. The turnover declaration for that month is filed with a zero figure, and the reverse VAT declaration is filed next to it.

On our accounting packages, reverse VAT is calculated and declared every month with the rest of the filing. The Lite package, for businesses that are not VAT registered, starts at ₾180 a month plus 18% VAT.

Reverse Charge VAT for VAT-Registered Businesses

A VAT-registered business still calculates 18% on services bought from abroad. It reports the amount in its monthly VAT return and deducts the same amount as input VAT in that return, so typically no cash is paid.

This is the effect on a foreign service worth ₾1,000:

	Not VAT registered	VAT registered
Reverse charge VAT declared	₾180	₾180
Input VAT deducted	None	₾180, in the same return
Cash paid	₾180	₾0
Where it is declared	Separate reverse VAT declaration	Monthly VAT return

Plain VAT registration is enough for this deduction. Qualified VAT status is a separate approval, and it is needed only to reclaim VAT paid to Georgian suppliers.

VAT registration becomes mandatory once taxable turnover passes ₾100,000 in any continuous 12 months, and the application is due within 2 working days. A business below the threshold can register voluntarily. An unregistered business pays reverse charge VAT as a cost every month, so the saving from voluntary registration grows with spending on foreign services.

Registration adds obligations of its own:

• a VAT return every month, covering output VAT, input VAT and reverse charge
• 18% VAT added to your prices
• proper accounts of income and expenses for an individual entrepreneur with Small Business Status, in addition to the invoices and receipts

Reverse Charge VAT vs VAT on Your Own Sales

	Reverse charge VAT	VAT on your own sales
Charged on	Services you buy from suppliers outside Georgia	Goods and services you supply in Georgia
Who pays the Revenue Service	You, as the buyer	You, from the VAT collected from customers
VAT registration required	No	Yes, mandatory above ₾100,000 of turnover in 12 months
Rate	18%	18%
Effect of selling only to clients abroad	None, it is still owed on purchases	Those sales are usually not subject to Georgian VAT

The two are separate obligations. An entrepreneur who invoices only clients outside Georgia adds no Georgian VAT to those invoices, because a service sold to a foreign client is usually not subject to Georgian VAT at all. The same entrepreneur still owes reverse charge VAT on a hosting subscription bought from abroad in the same month.

Common Reverse Charge VAT Mistakes and Penalties

These are the mistakes we see most often:

1. Leaving foreign software subscriptions and overseas contractors out of the monthly filing.
2. Assuming that turnover under ₾100,000 means no VAT is owed.
3. Assuming the 1% tax under Small Business Status covers purchases from abroad.
4. Assuming VAT-free invoices to foreign clients cancel the VAT on foreign purchases.
5. Converting a foreign-currency price at the wrong date or rate.
6. Filing the declaration and not making the payment.
7. Entering the payer name or tax identification number at the bank differently from the registration, so the payment is not matched on rs.ge.

Reverse charge VAT follows the same penalty rules as other Georgian taxes, and two charges apply when it is left undeclared. Daily interest is charged on the unpaid amount from the deadline until the day it is paid. A declaration that reports less tax than was due also draws a penalty, added to the missing tax. Both apply automatically.

A declaration that left out reverse charge VAT can be corrected. Correcting it before the Revenue Service finds the error limits the interest, which runs until the balance is paid.