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Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.
1. Georgia Amends VAT Taxation Rules for Barter Transactions Involving Immovable Property
Georgia has amended the rules on VAT taxation of exchange (barter) transactions involving the supply of immovable property. The amendment revises the determination of the amount subject to VAT in barter transactions involving immovable property.
Key aspects of this amendment include:
(a) VAT Taxable Amount in Barter Transactions – The amount subject to VAT is the consideration received/receivable in exchange for the supply of goods/services, excluding VAT. This amount also includes a subsidy directly related to the price of goods/services.
(b) Monetary Valuation Requirement in Barter – In barter transactions, the VAT taxable amount is the consideration actually received/receivable in exchange for the supply of goods/services. The parties participating in the transaction are required to determine the value of the subject of barter (goods supplied/services provided) in monetary terms for VAT purposes.
(c) Tax Invoice Issuance in Barter – In barter transactions, each party participating in the transaction is authorised to issue a tax invoice. VAT is calculated on the basis of such a tax invoice, subject to restrictions provided under the tax legislation of Georgia.
(d) Market Price Determination by Tax Authority – The tax authority is authorised to determine the taxable amount in barter transactions of goods/services at the market price. This authority is exercised under the relevant provision of the Tax Code. The conditions and rules for application and non-application of this mechanism are to be determined by the Minister of Finance.
(e) Immovable Property Barter Valuation Rule – Where immovable property is supplied under a barter transaction, the VAT taxable amount for each party is determined based on the market price of the goods/services received. This valuation is applied excluding VAT.
For example, where an individual transfers a plot of land to an enterprise and receives ownership of part of a building constructed on the same land. The VAT taxable amount is determined based on the market price of the plot of land at the time of delivery, excluding VAT.
(f) Cash Component Adjustment in Mixed Consideration – Where a taxable person makes a cash payment in addition to goods/services received, the VAT taxable amount is determined after reducing the value of the goods/services received by the amount of cash paid or payable. This applies where consideration consists of both monetary and non-monetary elements.
For example, where an individual transfers a plot of land to an enterprise and receives a building constructed on the same land along with cash payment, the VAT taxable amount is determined based on the market price of the land received, excluding VAT, and adjusted for the cash component.
(g) Market Price vs Transaction Price Rule – Where the market price of the property received, as determined by a competent appraiser or expert, is lower than the transaction price, the agreed transaction price is used for VAT determination. This applies only where the transaction is concluded under free competition and economic independence of the parties. It also requires the absence of artificial price adjustment.
Source – Public Decision No. 147
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