For an audit, reconcile transactions end to end: contract, primary record, invoice, settlement, accounting entry and tax return. Tax-code treatment depends on the actual transaction. Revenue Service situational guidance No. 0104 presents a specific example involving a founder loan, contributed capital and liquidation; it should not be generalized to every shareholder payment.
Applicable legislation: Tax Code of Georgia, General Administrative Code
Applying the rule in practice
If a shareholder receives GEL 70,000 booked as a loan, inspect the loan agreement, basis for interest, actual repayments and any liquidation plan. The ledger label “loan” does not conclusively establish tax character. Check whether the facts genuinely resemble the conditions in Revenue Service guidance No. 0104.
Start with a document map
Business evidence is often spread across accounting software, employee emails, contract folders and banks. That fragmentation undermines tax explanations. Link major revenue and expense transactions to agreements, invoices, acceptance and payments. Identify original record locations and responsible staff.
Documents versus actual performance
A contract may say 'consultancy', but that label does not necessarily evidence deliverables. Reports, outputs, correspondence, meeting records and handover materials may matter. Inconsistencies among records should be explained lawfully. Preparation does not mean fabricating evidence after the event; it means presenting authentic records coherently.
Identify higher-risk transactions
Related-party dealings, cross-border services, cash transactions, reimbursements and major asset acquisitions may require particular review. Tax consequences can depend on the parties' relationship and transaction substance. Document the issue, law, evidence and action for each material risk.
When a formal inquiry arrives
Record the service date, requested material and response deadline. Identify authorised company representatives. Provide organised records without alteration. If a request is unclear or third-party records are needed, assess whether clarification or additional time may lawfully be requested. Verify deadlines under current procedure.
What a useful internal review produces
A useful internal review produces a prioritized register of material exposures, documentation gaps, process changes and accountable staff. Coordination among legal, accounting and operations teams is valuable. Periodic review is preferable to hunting for evidence as an appeal deadline expires.
Example: a foreign consultancy invoice
A cross-border consulting invoice raises questions beyond payment: what was actually delivered, who benefited, where the service was performed, and which tax rules apply. Keep the contract, assignment, reports, correspondence, acceptance and bank evidence. Evaluate any withholding or other cross-border obligations under current law instead of assuming a universal treatment. Internal review should detect gaps before an official audit does.