Georgia’s Ministry of Finance does not support a proposal to increase the mandatory VAT registration threshold from GEL 100,000 to GEL 300,000, saying the current limit provides a balance between reducing administrative burdens for small businesses and ensuring the effective operation of the VAT system.
The ministry’s position was issued in response to a request from the Free Business Association, which proposed raising the threshold. Under current rules, businesses must register as VAT payers if their VAT-taxable turnover exceeds GEL 100,000 over a 12-month period. Georgia’s VAT rate is 18%.
According to the Finance Ministry, a significant increase in the threshold could create market distortions, as companies operating in the same sector could face different tax conditions. It also warned that keeping more businesses outside the VAT system could reduce incentives for proper documentation and increase the risk of informal transactions.
The ministry noted that Georgia already has a preferential tax regime for small businesses, with entrepreneurs holding small business status paying a 1% tax rate on annual turnover up to GEL 500,000. It also cited international practice, saying several EU countries maintain VAT registration thresholds that are similar to or lower than Georgia’s current level.
Based on these arguments, the Finance Ministry said it does not support raising the mandatory VAT registration threshold to GEL 300,000 at this stage.
