The Tax Calculation of an Asset Sale
Tax optimization of an asset sale in Georgia is a calculation under the Tax Code: the supply of an asset enters the net of value added tax, while securities operations are exempt financial operations; profit tax applies to the enterprise's base, but under the distribution model the timing of taxation is deferred to the moment of payout. One must not rely on the foreign-law doctrine of a going-concern transfer relief: the list of exempt operations is closed by the Code, and argumentation must proceed from that list. This page covers the asset-disposal side of the calculation.
Supply of Goods and Value Added Tax
Supply of goods is the transfer of the owner's right to dispose of material property. It also includes transfer of ownership for consideration by decision of a state or municipal body or by law; actual transfer under a lease, leasing or similar contract with a buyout condition; and transfer under a commission contract. The supply by a co-owner of his share in common property is treated as supply of the immovable, and the joint supply of a land plot and a building attached to it is treated as supply of the building. This last rule is critical for real-asset packages: joint transfer of land and building determines the tax fate of the whole package.
The exclusion rules matter as well: supply of goods does not include a taxable person's supply of all assets or a part thereof — an independently functioning division — to another taxable person; the contribution of an asset into the capital of an enterprise or a cooperative; and the transfer of an asset between parties to a reorganization of an enterprise. The conditions for applying these norms are determined by the Minister of Finance of Georgia; structuring a transfer of business falls into a regime different from an asset disposal.
Financial Operations and the Closed List of Exemptions
A financial instrument is any agreement creating a financial asset for one person and a financial liability for another; it includes money, loans, bills and securities such as equity shares, stocks, bonds and derivatives. Financial operations include the issue, acquisition, circulation and supply of these securities, including support of their circulation. Financial operations/financial services are exempt from value added tax without the right of credit — it is on this norm that the exit through equity securities is built. The supply of a land plot is also exempt — together these exceptions allow land and equity-security elements to remain outside the tax net.