On 3 July 2026, the Minister of Finance of Georgia published Public Ruling No. 208, clarifying how the Georgian Tax Code treats two closely related transactions: contributing assets to a company in exchange for shares, and receiving assets back from a company on liquidation or capital reduction. The ruling took effect on 4 July 2026. For shareholders restructuring a business, bringing real estate into a corporate vehicle, or planning an exit, the details matter.
The core mechanism sits in Article 151 of the Tax Code. Where a person transfers assets, with or without attached liabilities, to a legal entity in exchange for a 50% or greater interest in that entity, the transfer is not treated as a supply of assets at all – meaning no VAT-style supply event is triggered.
This treatment is available only where the contributor already holds, or comes to hold as a result of the contribution, at least a 50% interest.
A shareholder contributing a warehouse for a 30% stake, for example, falls outside Article 151 entirely, and the transfer is valued at market price for tax purposes.
The ruling also addresses joint contributions. Where several co-owners transfer a jointly held asset in exchange for shares, the transaction is treated as a single transfer, provided that control over the asset substantially remains with the same group and that group collectively receives 50% or more of the entity’s interests.
Valuation follows the contributor’s own book value at the time of transfer, not market value – an important distinction from ordinary sales. Where the asset carries a liability, both the shareholder’s deemed contribution and the value of the interest received are calculated net of that liability. Article 151 does not apply at all, however, where the liability exceeds the asset’s value – an impaired asset cannot benefit from this regime.
Two further limits are worth noting.
First, Article 151 does not extend to assets contributed to a foreign-incorporated entity.
Second, it does not apply where a party to the transaction is subject to corporate income tax on the “Estonian model” bases under Article 97(1) or (3) – except where an individual contributes assets to that entity for a 50%+ interest.
On the reverse side, Article 82(1)(z) exempts a shareholder from income tax on the surplus received when real estate is distributed on liquidation or capital reduction, provided the shareholder has held the underlying interest for more than two years. This exemption is narrow: it applies only to immovable property. Movable property distributed on liquidation carries no equivalent relief. Separately, any distribution exceeding the value of the partner’s original contribution is treated as a dividend, attracting both corporate income tax and income tax regardless of the two-year test.
Illustration: a shareholder contributing an office building for a 60% stake falls under Article 151, with no supply event triggered. The same building contributed for 25% is a taxable supply at market value. On liquidation two years later, that shareholder receives the building back tax-free up to the value of the contribution; anything above it is a dividend!
Conclusion
These rules reward careful sequencing – of ownership percentages, holding periods, and asset types – before a transaction closes, not after.
Nomos Georgia advises shareholders, investors and companies on structuring contributions, liquidations and capital reductions under Public Ruling No. 208.
For a review of your transaction, contact our corporate and tax team
