Georgian municipalities will continue to receive 20% of value-added tax (VAT) revenues,- according to the draft state budget for 2026. The measure aims to ensure a fairer distribution of income among local governments and strengthen municipal financial stability.
At the meeting of the Parliament’s Finance and Budget Committee, First Deputy Minister of Finance Giorgi Kakauridze explained that the transitional period—during which the VAT distribution principle is gradually being implemented - will remain in effect until 2026.
“Last year, the rule for distributing value-added tax among municipalities changed - instead of 19%, municipalities now receive 20%. The transition period has also been extended. Under the proposed change, the same rule will apply in 2026,” said Kakauridze.
He noted that in 2025, a more balanced approach was introduced for allocating projected VAT revenues. The update removed restrictions for municipalities with projected VAT income below GEL 15 million, while setting that amount as the minimum threshold for others.
The current model, in place since 2019, replaced the previous equalization transfer system. Under the new framework, a share of national VAT revenue is directly allocated to local self-governments, giving them greater fiscal independence.
According to the 2026 draft budget, the Tbilisi municipality will receive the largest allocation, over GEL 667 million. It will be followed by Batumi (GEL 77.9 million), Kutaisi (GEL 75.5 million), Gori (GEL 74.8 million), and Rustavi (GEL 64.6 million).
The smallest allocations are planned for Lentekhi (GEL 8.2 million) and Kazbegi (GEL 7.6 million) municipalities.
