For tax purposes, the first step in a restructuring is to determine which companies will continue to exist, cease to exist or be newly formed. In a change of legal form, the same company generally continues to exist; nevertheless, the effects of the new legal form on its tax account, filings and future taxation must be assessed. In a merger or division, each transferred asset must be recorded at both its accounting and tax value. Accounting book values must not be adopted as tax values without verification. Receivables, liabilities, provisions, loss positions and existing tax claims must also be assigned transparently to the predecessor or successor company. Depending on the structure, the transfer of assets or a change in activities may affect corporate income tax, VAT and other types of tax. The registration date, any agreed economic effective date and the date relevant for tax purposes must be distinguished from one another. Once the reorganisation takes effect, clarify with the Revenue Service which tax accounts will be continued or adjusted and who will take over outstanding returns and payments. Companies that cease to exist need a clear allocation of reporting periods that have not yet ended and of tax obligations. The reorganisation plan, valuations, accounting records, filings and correspondence with the authorities should provide a clear and continuous audit trail for tax purposes.
Tax consequences of a corporate reorganisation in Georgia
The tax consequences of a corporate reorganisation in Georgia depend on the restructuring chosen, whether the companies involved continue to exist, and the assets and liabilities transferred. A change of legal form, merger or division must not be treated as tax-neutral without an assessment.
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A reorganisation should never be assumed to be tax-neutral across the board. The tax consequences depend on the type of reorganisation, the legal entities that continue to exist, the positions transferred and whether the relevant requirements are met. The registration date, economic effective date and date relevant for tax purposes must be determined separately and then aligned.