Georgia’s Ministry of Finance has changed its approach to VAT taxation of barter transactions in the construction sector, a move expected to increase tax costs for real estate developers.
Previously, when a developer exchanged apartments for a land plot, the VAT base was generally determined by the market value of the land received. Under the new approach, taxation will be based on whichever asset has the higher market value - the land received or the apartments transferred to the landowner.
David Papiashvili, Managing Partner at Kreston Georgia, told BM.GE that the change addresses a flaw in existing practice but will result in higher tax liabilities for many developers. He noted that the value of the apartments transferred is often higher than the value of the land, increasing the taxable amount.
Papiashvili also warned that frequent changes in tax interpretation create uncertainty for businesses. He called for greater involvement of the private sector and tax professionals in the policymaking process, noting that even small errors in high-value real estate transactions can lead to significant tax risks.
