Assessing Eligibility for Input VAT Deduction for a Planned Business in Georgia

A right to deduct may exist where a purchase serves taxable business transactions, an exemption that carries a right to deduct input VAT, or an activity outside Georgia for which the right to deduct is preserved by law. Merely paying Georgian VAT or classifying something as a business expense is not sufficient. Depending on the transaction, appropriate evidence may include a properly issued tax invoice, an import declaration, or evidence of the reverse-charge procedure. The evidence must be attributable to the registered business and reflect the actual transaction. Generally, no deduction is available for private expenses, purchases made for someone else, or transactions exempt without the right to deduct input VAT. For mixed use, directly attributable costs are first assigned to deductible or non-deductible transactions. Input supplies used jointly must be apportioned according to the statutory ratio rules. If the share of non-deductible transactions that are inseparably linked is less than five percent of total turnover, check whether the statutory rule allowing a full deduction applies. Changes in the use of capital goods may trigger a later adjustment; the adjustment period is generally ten years for immovable property and five years for other capital goods. Accordingly, eligibility to deduct input VAT should be documented for each purchase, including its tax status, purpose of use, supporting evidence, and allocation.