Succession tax planning in Georgia is a complex legal and financial process aimed at optimizing the transfer of assets from one generation to the next. Although property inherited by heirs of the 1st and 2nd classes is exempt from income tax in Georgia, "planning" is a much broader concept that involves considering future tax liabilities. Specifically, the subsequent disposal of inherited property often triggers a significant tax burden (Capital Gains Tax) if certain timelines and conditions are not met. Furthermore, when dealing with business assets, company shares, or property located abroad, the situation becomes even more complicated and requires knowledge of international tax norms. Proper planning ensures that family wealth is protected from unnecessary financial losses and transferred to heirs in the most beneficial form.
What Does Succession Tax Planning Cover?
Specialists on Legal.ge offer a complete succession planning package that considers nuances of both civil and tax law. The service includes:
- Tax Impact Analysis: Comparing the tax consequences of different scenarios (gifting during lifetime vs. transfer by will) to select the most financially beneficial option for the family.
- Planning Future Disposals: Considering and optimizing expected taxes in case of a potential sale of inherited property (e.g., managing the 2-year ownership rule).
- Structuring Business Succession: Planning the transfer of company shares to ensure business operations are not disrupted and no unexpected tax liabilities arise regarding dividends.
- International Succession: Analyzing double taxation risks and applying international treaties if the heir or property is located abroad.
- Tax Filing: Preparing tax declarations for the heir if necessary (if the heir does not belong to a tax-exempt class).
Common Situations and Scenarios
In practice, lack of planning often creates problems. For example, a parent gifts a commercial space to a child during their lifetime. The child decides to sell the space after 6 months. In this case, selling gifted property before 2 years have passed is subject to income tax, which can be substantial. If the property had been inherited after death instead of gifted, the timeline calculation and tax regime might have been different. Another scenario is business transfer: if company shares pass to an heir and the company has retained earnings, it is crucial to determine how these earnings will be taxed when distributed as dividends to the new owner. A complex situation also arises when the heir is a tax resident of a foreign country—inheritance tax of that country might apply, even though the tax in Georgia is 0%.
Georgian Legal Framework
The field is regulated by two main acts: the Civil Code of Georgia and the Tax Code of Georgia. The Civil Code defines the order of heirs (Classes I, II, III, etc.) and rules for accepting inheritance. The Tax Code establishes tax exemptions. Specifically, under the Code, property received by heirs of the 1st and 2nd classes (both in cash and in kind) is exempt from income tax. For heirs of the 3rd and 4th classes, certain limits apply (e.g., property valued up to 150,000 GEL is exempt). Correct interpretation and joint analysis of these norms are essential for effective planning.
Step-by-Step Service Process
Collaboration with a specialist on Legal.ge begins with a detailed study of the family's assets and structure. In the first stage, asset inventory and identification of potential heirs take place. In the second stage, the specialist prepares a "tax map"—identifying what taxes arise under different transfer methods (will, gift, sale). The third stage is developing a specific action plan and preparing necessary documents (draft will, gift deed) for notarization. The final stage involves post-transfer consultation for the new owner regarding future tax obligations.
Why Choose Legal.ge?
Succession planning requires not just a lawyer, but a tax expert as well. Legal.ge offers you the unique opportunity to find specialists who combine both competencies. Experts on our platform will help you avoid hidden tax traps and ensure the safe transfer of your property to future generations. Trust verified professionals on Legal.ge to protect your family's financial future.
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