VAT is the obligation that catches small business status holders by surprise. It is entirely separate from the 1% turnover tax, it arrives at a much lower threshold, and the registration window is measured in days, not months.

The threshold

Registration becomes mandatory once total turnover exceeds ₾100,000 over any 12 consecutive months. Three details make this stricter than it first appears:

  • The window is rolling, not a calendar year. Every day, the previous 365 days are the test period. There is no 1 January reset — that is the ₾500,000 small business limit, a different rule.
  • It applies regardless of tax regime. Holding small business status gives no exemption.
  • Registration is due within 2 business days of crossing. Miss it and the Revenue Service registers you automatically and retroactively, with penalties and back-assessed VAT on transactions you never charged VAT on.

That last point is the expensive one. VAT you failed to charge is still owed — out of your own margin, on revenue already spent.

What changes once registered

  • You charge 18% VAT on taxable supplies.
  • You file a VAT return monthly, by the 15th of the following month — a second return alongside your small business declaration.
  • You may reclaim input VAT on business purchases, which partially offsets the burden.
  • Your invoices and contracts need to state VAT explicitly.

Critically, VAT is paid in addition to the 1%. A small business status holder who is VAT-registered pays both. They are not alternatives.

Status is permanent

VAT-payer status does not lapse when turnover falls. It is kept even if you drop well below ₾100,000 in later years. Deregistration requires a separate application and is only possible under specific conditions — typically at least 12 consecutive months below the threshold.

Plan on the assumption that registering is a one-way door.

Zero-rated supplies

Some transactions are zero-rated rather than exempt. Export of goods qualifies, as do certain services supplied to non-residents — which covers a large share of Georgia's freelance and IT sector.

Two things worth being precise about:

  • Zero-rating sets the rate to 0%. It does not remove the obligation to register, account and file. You still submit monthly returns.
  • Whether a specific service to a specific foreign client is zero-rated depends on place-of-supply rules. This is genuinely technical, and getting it wrong in either direction is costly. It is the single best reason to involve an accountant before you cross the threshold.

Zero-rated turnover still counts toward the ₾100,000 threshold.

Watching the rolling window

Because the window rolls, you can cross the threshold in a month where your income was unremarkable — a strong month twelve months ago drops out, a strong month now drops in, and the sum tips over. Checking only your calendar-year total will not warn you.

The practical routine: each month, sum the last 12 months of receipts in GEL and compare against ₾100,000. Keep entries in the calculator with their dates and it is a matter of reading the running total. Approach the line and it is time to talk to an accountant — not after.

Preparing for the transition

Before crossing, it is worth reviewing how client agreements are worded. Whether your prices are stated gross or net of VAT determines who absorbs the 18% when it starts applying — you or the client. Renegotiating that after the fact is much harder than writing it into the contract in advance.

For businesses whose customers are all non-resident and whose supplies are zero-rated, the transition is mostly administrative. For businesses selling domestically to consumers, it is an 18% price change to absorb or pass on.

Next steps