Purchases directly attributable to a specific product, contract, or business area are assigned to it first. If they serve taxable supplies or exempt supplies that carry a right to deduct input VAT, the related VAT may generally be deductible if the requirements are met. This may also apply to activities outside Georgia if the statutory rules preserve the right to deduct. Purchases for supplies exempt without the right to deduct input VAT are assigned to non-deductible use. Private or non-business use must also be recorded separately. If a purchase is used jointly for deductible and non-deductible activities, any possible direct allocation must be made first. Only the remaining shared portion is apportioned according to the legally relevant ratio. If inseparably linked non-deductible supplies account for less than five percent of total turnover, it should be checked whether the Georgian rule for full input VAT deduction applies. The cost centre, transaction category, purpose of use, allocation key, and supporting document should be linked for each purchase. If the use of a capital asset changes later, the original allocation may need to be adjusted during the statutory adjustment period.
Allocation of Business Purchases for Input VAT Deduction in Georgia
For input VAT allocation in Georgia, each business purchase must be assigned to a specific type of transaction based on its actual business use. Whether it is fully deductible, partly deductible, or non-deductible depends on whether the purchase serves deductible, non-deductible, or mixed purposes.
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