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Asset Sale Tax Optimization

Is selling a company car subject to VAT?

Yes, if the company is a VAT payer and claimed VAT credit upon purchase, it must charge VAT when selling the car.

What is a "Going Concern" sale?

It's the sale of assets as a functioning business unit. Under Georgian law, this can be exempt from VAT with the right to deduct input VAT.

How to avoid Profit Tax on asset sales?

In Georgia, Profit Tax (15%) is only paid upon distribution. If you reinvest the proceeds or keep them in the company, no tax is due.

Is land sale VAT exempt?

Yes, the supply of land is generally VAT exempt, unless there is a building attached to it.

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Asset sales are significant events for a business that often trigger substantial tax liabilities. Unlike share sales, which are often exempt from VAT, selling an asset (building, machinery, inventory) is typically taxed with both VAT (18%) and Profit Tax. However, Georgian tax legislation provides certain exemptions and structuring methods that allow businesses to legally reduce or defer these taxes. The Asset Sale Tax Optimization service on Legal.ge helps you plan the transaction to maximize retained revenue. Our tax lawyers and experts analyze your specific situation and offer an optimal tax strategy.

What Does Tax Optimization Service Cover?

Our service covers all tax aspects related to asset sales:

  • VAT Analysis: Determining if the transaction is subject to VAT. For example, land supply is exempt, while buildings are taxed. Also, supplying "all assets of an enterprise" (Going Concern) may be exempt from VAT.
  • Profit Tax Planning: Utilizing the "Estonian Model." If proceeds from the asset sale remain in the company and are not distributed as dividends, profit tax (15%) is not paid.
  • Reinvestment Relief: Consulting on how to reinvest revenue into new assets to defer tax.
  • Purchase Price Allocation: Correctly allocating price across different assets (land, building, goodwill), which has differing tax consequences.
  • Cross-Border Taxation: If the buyer or seller is non-resident, applying Double Taxation Avoidance Treaties.

Real-World Scenarios When You Need This Service

Optimization is critical in the following cases:

  • Real Estate Sale: Selling commercial space involves large sums. Adding VAT (18%) makes the price uncompetitive. Proper structuring (e.g., contributing asset to capital and then selling shares) can save tax.
  • Selling Business as a Complex: If you sell a restaurant with inventory and staff, it may qualify as "supply as an independently functioning unit," which is VAT exempt.
  • Disposal of Obsolete Equipment: Selling amortized assets may generate a profit relative to book value, which is taxable.
  • Leasing Out: Leasing the asset instead of direct sale, spreading the tax burden over time.

Georgian Legal Framework and Regulations

The main regulator is the Tax Code of Georgia. For VAT, Article 168 (Exemptions) and Article 18 (Supply) are crucial. regarding Profit Tax, the distributed profit model applies, offering unique opportunities for capital retention. Also important are Revenue Service Situational Manuals, clarifying specific tax issues. A professional tax lawyer ensures your optimization is legal and not considered tax evasion.

Service Process

The tax optimization process on Legal.ge includes:

  1. Transaction Analysis: What is being sold, at what price, and who are the parties.
  2. Tax Modeling: Calculating tax effects of different scenarios (direct sale, capital contribution, reorganization).
  3. Structure Selection: Choosing the most efficient and safe path.
  4. Documentation Preparation: Drafting agreements to reflect the chosen tax structure.

Why Choose Legal.ge?

An improperly planned transaction can cost you 20-30% of the deal value in taxes. Tax experts on Legal.ge will help you legally reduce this cost. We offer strategies fully compliant with the law that will withstand tax audits, not "schemes."

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