ON THE ISSUE OF VAT-RELATED AMEDEMENTS TO THE TAX LEGISLATION OF GEORGIA

Important changes have been made to the Georgian tax legislation since 2020. Its part relating to the value added tax has been completely changed. The main reason for these changes is an association agreement with the European Union that committed Georgia to align its tax legislation with EU legal standards. Our attention is drawn to several important innovations that may have differing impacts on both the taxpayers' situation and fiscal interests of the State: • The place of rendering of service has been interpreted differently. The basic rule is that in case of providing services to a non-profit-making natural person, the location of service provider will be considered to be the place of rendering of service, while in all other cases - the location of the recipient of services; • Construction or renovation of buildings and structures by own efforts and for own use will be taxed only if the person has not received the VAT credit in case of the purchase of these goods/services from another person. The aggravating change is that repairs of own fixed assets are also taxable by VAT; • Giving the so-called low-priced gifts (up to GEL 50) will no longer be taxable by VAT - unless the VAT credit was carried out at the time of purchase; • From 2020, a free delivery of goods will be subject to tax only when the taxpayer has received the tax credit at the time of purchase of these goods; • From 2020, a free delivery of services based on the purposes of the taxpayer's business will no longer be subject to tax; • The notion and the terms of use of market price have been defined more softly. For taxation purposes, in some cases, it is permissible to use purchase prices, but not sale prices; • Conveyance of real estate and related construction, installation and repair services will be subject to tax consolidatively at the moment of putting the building into operation; • The adopted special scheme for taxation of a delivery of imported secondary items, works of art, collectibles or antiquities. Only the margin (difference between delivery and purchase prices)will be subject to tax; • The essence of single and multiple vouchers has been interpreted and the issue of taxation of operations performed with them has been regulated;; • Regulations on advance payments will apply to the part related to ცონსტანტ and regular supplies; • Exports and financial and other operations exempted from VAT will be included in the total amount of operations to be taxed by VAT; • Incentives in the medical, education, cultural, sport and social spheres have been enhanced; • VAT credit will no longer be carried out by invoices that could not be credited within 3 years. The abovementioned changes to the Tax Code serve to harmonize the tax legislation with the relevant EU standards, and they will have a positive impact on our country's European integration prospects. So we believe that these legislative changes must be welcomed. The balance must be maintained: it is necessary to implement the Association Agreement with the European Union. On the other hand, there is a need to uphold the principles of fairness, administration simplicity and cost-effectiveness of the taxation system. In addition, since taxes perform the most important fiscal function for the State, the possible consequences of any such kind of change must be assessed in a detailed manner.