Changing the Classification of a Business Transaction based on its Form and Substance in Tax Law Relations


  • Grigol Chkhaidze



Tax, Tax System, Directive, Tax Code, CJEU, Substance and form, Georgian Court System


Tax law relations are known by their complexity. Generally, tax law-related relations always derive from civil relations, where people participate. Income tax is due when a person is employed, or is self-employed and conducts economic activities. Value Added Tax is due when a taxpayer conducts economic activities and such economic activities are based on different types of contracts. The taxpayer supplies goods or services to the end-users and therefore, is obliged to pay Value Added Tax.

There are many cases when parties conduct a contractual agreement, which does not reflect economic reality. Article 73 (9) of the Georgian Tax Code gives Georgian Tax Authorities the possibility to change the form when the substance does not collide with the form. But the legislation is very general and does not include any indication or legal prerequisites on how this should be done.

This article will serve a purpose to define in which cases tax authorities are allowed to change the form of the business operation, especially when the parties conducted completely different contracts and will evaluate the risks, which might be in presence if the tax authorities will use the norm in a wrong way.

This article will review tax authority’s practices and the Georgian Court approach towards the issue.

Author Biography

Grigol Chkhaidze

Doctor of Law, LLM, Lund University, Visiting Lecturer at Ivane Javakhishvili Tbilisi State University, Faculty of Law.


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How to Cite

Grigol Chkhaidze. (2021). Changing the Classification of a Business Transaction based on its Form and Substance in Tax Law Relations. Journal of Law, (2), 216–230(GEO),197.