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Amendment of the Tax Law of Georgia, according to which selling 4 apartments by individuals is not explicitly exempted from VAT anymore

Amendment of the Tax Law of Georgia, according to which selling 4 apartments by individuals is not explicitly exempted from VAT anymore

Amendment of the Tax Law of Georgia, according to which selling 4 apartments by individuals is not explicitly exempted from VAT anymore


The Republic of Georgia offers multiple tax incentives/exemptions for individuals and legal entities. One such incentive was applicable for natural persons selling up to 4 apartments within 48 months. In particular, according to article 49 of decree #996 of the Ministry of Finance of Georgia, if individuals sell up to 4 apartments within 48 months such transactions were not considered as “economic activity” for VAT purposes, thus were not taxable by VAT. That clause is not in force anymore, starting since January 2021.

How and why the exemption applied

The real meaning of the mentioned article 49 was to provide VAT exemption to individuals who had to sell their apartments for their personal purposes. The lawmaker decided to rely on the objective criteria of the exemption and set the threshold of the sold apartments in a certain period of time. The assumption was that individual might sell 4 apartments within 4 years purely for non-business purposes (e.g. change the living place).

Notwithstanding real meaning of the above-mentioned legislative norm, such exemption applied to transactions (selling up to 4 apartments) conducted for both, personal and business purposes. The exemption did not have any other precondition refereeing to the purpose of the sale, only precondition was the numbers of sold residential properties in certain period of time. In other words, even if an individual would sell up to 4 apartments in Georgia within 48 months for business purposes, he/she would not have any VAT obligations.

In fact, tax administration knew that the VAT exemption should not be applicable to transactions conducted for business purposes, however, the wording of the clause was formed in such a way that the tax inspectors did not have any legislative base to challenge sales of apartments for business reasons.

Notably, the threshold for VAT registration is 100 000 Georgian Lari (approx. 30 000$) transactions within 12 consecutive months. The last transaction by which the threshold was passed, is taxable by VAT (full amount of last transaction is taxed not only part, above 100 000).

For example, if a company conducts the first operation of a value of 150 000 Gel, full 150 000 Gel will be taxed by VAT instead of 50 000 (above the threshold). But if a company conducts the 5 operations each of a value of 22000 Gel, only last 22 000 GEL transaction will be taxed by VAT (by which 100 000 was passed).

If a natural person would sell more than 4 apartments within 48 months, calculation of the VAT threshold would start from the 5th sold apartment. If the value of 5th apartment would be more than 100 000 Gel, the whole value of 5th and next sold apartments would be taxed by VAT.

Example 1

A person sells 6 apartments within 6 years, sale’s price of each flat was 120 000 Gel.

In that case, only 5th and 6th apartments will be taxed by VAT. In total 240 000 GEL (VAT will not be added on top but extracted from the price: 240 000/1.18*0.18).

Example 2

A person sold 6 apartments within 4 years, sale’s price of each apartment was 95 000 Gel.

In that case, first 5 apartments would not be taxed by VAT because the price of the 5th one did not exceed the VAT threshold. Only 6th apartment would be taxed (full amount).

Tax Law in Georgia

Amendment to the Georgian tax law

The above-mentioned article #49 (paragraphs “a” and “b”) is deleted since January 1, 2021. VAT exemption of selling the apartments now are linked to the new definition of “economic activity” provided in the newly amended VAT chapter of the Tax Code of Georgia.

According to the Georgian tax law, VAT applies to sale of goods/services within economic activities. So, if sale of goods or services is not conducted within economic activity, such sale is not considered as VAT taxable operation. Thus, it is crucial to know the definition of “economic activity” for determination of VAT obligations.

Definition of economic activity:

“For the purposes of VAT section, economic activities are considered to be: the activities of persons carrying out supply of goods/ services, other than one-time / irregular activities;”

So, for the purposes of VAT exemption of sales of residential properties, it is crucial to analyze whether such sales of apartments have irregular and/or one-time nature.

It is quite obvious that selling only one apartment will be considered as one-time and irregular operation, therefore will not be considered as taxable by VAT, however, it is not clear whether selling for example, 2-4 flats would also be considered as irregular operations (for sure they are not one-time transaction).

In my opinion, there is no one criterion to determine whether the operation was irregular or regular and the numbers of sold apartments do not solely decide the outcome of the case. (I don’t speak about selling 5 and more apartments, but up to 4).  Besides the number of sold flats, many other factors should also be considered for such determination. For example: real purpose of sales, business activity of a seller, if a seller was living in the apartment before selling it, etc. So, each case needs to be analyzed by individual bases.


Since January 1, 2021, individuals in Georgia are not explicitly exempted from VAT if they sell up to 4 apartments within 48 months. However, deleting such exemption clause from the decree #996 does not mean that natural persons will be taxed by VAT for each and every sale of their residential properties. They will still be exempted from VAT if such sale will be considered as one-time and/or irregular transaction.

It is easy to determine which one is one-time transaction but when a person sells more than 1 apartment, we will need to use subjective criterions whether the sales had regular or irregular nature, the law does not provide any further definition the word “regular/irregular sale”. Therefore, if you decide to sell more than 1 flat within certain period of time, please, analyze VAT issue very carefully.

About the author: Gela Barshovi is an international and Georgian tax consultant, former Georgian tax inspector, founder and a managing partner of Tbilisi-based accounting/consulting firm TPsolution. Regarding business incorporation, tax consultation, and/or accounting services, you can directly reach out to him at  or fill up the contact form bellow: