BDO Tax & Legal Newsletter / April 2021 No.2
07 April 2021
Amendment to the Order
Value Added Tax
By the order №46 (05.03.2021) of the Minister of Finance of Georgia, an amendment has been made to the Order №996 of 31 December 2010 on Tax Administration. In particular, paragraph 10 has been added to the Article 73, which determined the rules of VAT deduction according to the expenses incurred for the repair of fixed assets (building or structure). The rules are determined according to the corresponding amendments made into VAT section of the Georgian Tax Code, adopted from 1 January 2021.
The order came into force from 10 March 2021.
The same order was also amended by the order №47 of the Minister of Finance of Georgia (05.03.2021), In particular:
Paragraph 3 has been added to the article 482, according to which If the amount is fully or partially reimbursed before the delivery of goods / services and the recipient at the time of reimbursement is not registered as a VAT payer, in relation to the remuneration received before registration as a VAT payer, the moment of the VAT taxation is considered the moment of delivery of goods / services after registration as a VAT payer.
According to the amendment, paragraphs 46, 47 and 48 have been added to the article 112:
- According to the paragraphs 46 and 47 it has been clarified that in case of exchange of goods/services (barter), when the supply of goods/services has taken place before 1 January 2021, and the supply of exchanged goods/services is implemented on 1 January 2021 or later, for each party of this transaction the amount of taxable VAT is determined by the market price of the goods/services supplied under this transaction, excluding VAT, and in the moment of VAT taxation is delivery of the goods/services. In this case, if the both parties of the transaction are VAT payer taxable persons and the transaction is subject to VAT, each party is entitled to deduct the amount of VAT accrued on the goods/services supplied by it and reflected in the relevant VAT return at the time of receipt of the exchange goods/services. In this case, the basis for VAT deduction is the amount of VAT accrued on this transaction and reflected in the VAT return for the relevant period when tax invoice shall not be issued.
- Paragraph 48 clarifies that if the transfer of the title on the real estate has been registered with the registration authority until 2021 and the construction, installation and / or repair services were completed by the real estate supplier in 2021 or later on the same property, the mentioned service is considered as a part of delivery of real estate, and at this transaction the moment of VAT taxation is the moment of putting the real estate into service, If the amount is not fully or partially reimbursed before the delivery of goods / services. However, if the supply of the said immovable property is taxed with VAT until 2021, putting it into the service is a circumstance of adjustment of VAT taxable amount and is subject to adjustment at the moment of putting into the service of the relevant real estate.
The order came into force for legal relationships arising from 1 January 2021.
Methodological reference on value added tax
By the order №7536 of the Head of the Revenue Service, on 17 March 2021, the methodological guidelines on value added tax has been approved to the following important issues, in the form of examples:
- Annex №1 - Registration / cancellation of registration as a VAT payer
- Annex №2 - Transactions that are not considered as delivery of goods or services
- Annex №3 - Transactions carried out through vouchers
- Annex №4 - Taxable persons
- Annex №5 - VAT deduction.
Each appendix discusses practical examples relevant to the existing topic.
The order came into force from 17 March 2021.