The Republic of Georgia has joined the list of European countries paving the way for friendly crypto regulation. The state has recently announced that any cryptocurrency transaction or trade won’t be liable to pay any Value Added Tax (VAT) to the government. The bill was proposed earlier this year and came into force in June.
This is a major step forward in regulating the use of cryptocurrencies in the country, given VAT collection forms a major chunk of tax collection for the government. Almost every goods and service is liable to VAT, thus the decision to exempt crypto transactions surely shows how bullish the government is on cryptocurrencies.
The bill also defines what cryptocurrencies are, and it states,
“Cryptocurrencies are digital assets that are exchanged electronically and based on a decentralized network. Their exchange does not require a reliable intermediary and they are managed using distributed ledger technology.”
How VAT exemption affects the crypto community in Georgia
The bill states that any kind of transaction, whether it is initiated by an individual trader or a company won’t be subjected to any kind of VAT. However, the exemption of VAT on the crypto transaction should not be seen as the legalization of crypto as a medium of exchange in the country. The finance minister Nodar Khaduri made it clear that the national fiat Georgian lari would be the only legal tender of use in the nation.
The exemption of VAT is only applicable to trading cryptocurrencies or exchanging it against the fiat and not any other activity related to cryptocurrencies like mining. Georgia has become a hotspot for crypto mining activities, mainly because of the abundance of clean energy available at dirt cheap prices when compared to other countries. However, the VAT is only applicable to those companies whose headquarters are located in Georgia.
The mining companies are planning to register their firms outside the country while maintaining their mining activity within the country.