According to the decision of the Ministry of Finance, the transfer of assets by a person to an enterprise established under Georgian legislation in exchange for 50% or more of an ownership interest (shares) in the enterprise shall not be regarded as a supply of assets. This rule applies both where an ownership interest is acquired for the first time and where an existing 50% or greater ownership interest is increased as a result of the contribution. The threshold may also be met through a transaction carried out jointly by several persons. The value of the transferred asset is determined based on its original value, while the partner’s contribution is considered to be the value of the asset less any related liabilities.
At the same time, since such transaction does not constitute a supply of assets, the personal income tax exemption applicable to gains derived by an individual from the disposal of an asset owned for more than two years does not apply. The decision also separately clarifies the tax treatment of in-kind distributions to an individual partner, including transfers of immovable property, upon the liquidation of an enterprise, reduction of capital, or redemption of shares/interests. Subject to the applicable conditions, where the individual partner has held the ownership interest for more than two years, the resulting gain is exempt from personal income tax.
Georgia Updates VAT Rules for Barter Transactions in Construction
