First meeting of Business Club REVERA Georgia
The first meeting of Business Club REVERA Georgia took place on the 13th of July. We thank all the guests for their interest and active participation in the discussion! At the meeting we discussed many issues and shared our insights:
Funding of LLC operations by making a contribution to the authorised capital.
Contribution of funds or property as payment for the authorised capital is an effective way of financing the company's activities, as it does not entail tax costs and is simple to execute. At the same time, there are no risks in case the amount of net assets of the LLC becomes less than the amount of the authorised capital. It is due to the fact that Georgian legislation does not contain any requirements for the formation of the authorised capital of an LLC.
Company director's power limitation tools: Articles of Association or internal documents of the company?
According to Georgian legislation, it is possible to limit the powers of a director at the level of the Articles of Association. However, in practice, banks have a negative attitude towards the limited competence of the director, which can be expressed in blocking accounts or refusing to open accounts.
An alternative way of control over a director is an agreement on the requirement to coordinate certain decisions with the supreme management body, which provides for the director's liability for breach of the agreement. The document is executed and signed by all partners of the company and the director, is an internal document of the company, and is not submitted to the public register and banks.
This measure does not protect against the risk of challenging the transaction due to the director's exceeding the limits of his authority, however, it is possible to impose personal liability on the director.
Tax risks in transactions with LLC shares
The sale of an LLC share must be at market value in order to avoid claims from the tax authority (additional profit tax/income tax). After the expiry of two years of ownership of a share in an LLC, the transaction for its sale will not be subject to profit tax/income tax, and therefore control of the price of transactions by the tax authority loses its significance.
Accounting for employee expenses
It would be advisable to engage an external event/catering company to optimise the process of accounting for employee expenses.
The event also recalled once again the requirement to notify the Migration Service of the employment of foreigners and discussed the penalties for failure to fulfill this obligation.
In cooperation with the participants of the meeting, we also decided to prepare several collective appeals and have already sent them to:
- the tax authority with a question as to whether it is possible not to confirm the tax residence of a counterparty whose place of business is publicly disclosed;
- The National Bank of Georgia regarding the approaches chosen by banks to open accounts for companies, in case of limitation of director's authority;
- the tax authority of Georgia and the Parliament of Georgia on the issue of initiating amendments to the tax legislation in terms of submission of income tax returns not on the day of relevant payments, but with a certain frequency (once a month).
We will publish answers to these appeals in our Telegram channel. Stay tuned!
The next meeting of the Club is planned for the middle of September. We will be glad to see you!
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