Author: Gela Barshovi, Tax Consultant and Transfer Pricing Specialist in Georgia.
Note: This article is for informational purposes only, reflects the author’s personal opinion, and does not constitute tax advice or any other type of consultation.
Personal Income Taxation of Capital Gains Received by an Individual from the Sale of an Apartment or House in Georgia: 2026 Legislative Update
On 14 May 2026, the Ministry of Finance of Georgia issued Public Decision No. 143, “On Issues Related to the Personal Income Taxation of Income Received by an Individual from the Supply of an Asset.” The decision clarifies several important tax matters, including issues that had previously been somewhat ambiguous, as well as certain matters that, at first glance, appear to be clearly regulated by law but are interpreted differently in the Public Decision.
For example, in addition to Articles 82(1)(f.a) and 82(1)(f.c) of the Tax Code of Georgia — the provisions granting a tax exemption for capital gains derived from the sale of an apartment, house, or other assets after a two-year holding period — the Public Decision also explains the application of Article 81(3) of the Tax Code, which provides for a 5% tax rate and, at first glance, does not appear to leave much room for interpretation.
Article 81(3) states:
“Capital gains received by an individual from the supply of a residential apartment/house and the land attached to it, as well as from the supply of a motor vehicle, shall be taxed at 5%.”
The new Public Decision clarifies that the 5% personal income tax rate does not apply to all cases involving the sale of an apartment or house.
In this article, we discuss several important issues arising from the new Public Decision, including the taxation of capital gains from the sale of residential property in Georgia, and highlight certain practical issues that still remain unclear.
Looking for Tax Advice on the Sale of an Apartment or House in Georgia?
The taxation of income received from the sale of an apartment or house in Georgia is not always as straightforward as it may seem. As discussed in this article, the applicable tax treatment may depend on various factors, including the holding period, the use of the property, the nature of the transaction, and the specific facts of the case.
If you are planning to sell residential property in Georgia or have already completed a transaction and would like to understand its tax implications, feel free to contact us. We provide objective tax consultation based on the applicable provisions of Georgian tax law, relevant tax authority practice, and the specific circumstances of your case.
For tax consultation, please contact us at [email protected] or complete the contact form on our website: TPsolution Contact Form.
Georgian Tax Code Provisions on the Taxation and Exemption of Income Received by an Individual from the Supply of Assets, Including Residential Apartments and Houses
Under Article 82(1)(f.a) of the Tax Code of Georgia (the “Code”), if an individual has owned a residential apartment or house for more than two years, the capital gain received from the sale of such apartment or house, including the land attached to it, is exempt from personal income tax in Georgia, regardless of whether the property was used in economic activity before selling it.
In addition, under Article 82(1)(f.c) of the Code, if an individual has owned an asset other than a residential apartment or house for more than two years and has not used that asset in economic activity during at least the last two years before its sale, the capital gain received from the sale of such asset is also exempt from personal income tax in Georgia.
At the same time, if an individual sells a residential apartment or house after owning it for less than two years and realizes a capital gain, such income is generally subject to personal income tax at the rate of 5% under Article 81(3) of the Code.
These are the legislative provisions interpreted in the Public Decision.
However, as follows from the Public Decision, the above exemptions and the application of the 5% tax rate do not apply in all cases involving the sale of a residential apartment or house.
Criteria for Treating an Asset as a Residential Apartment or House for Personal Income Tax Purposes in Georgia
According to the Public Decision, in order to qualify for a personal income tax exemption or apply the 5% tax rate upon the sale of an apartment or house, it is first necessary that the asset being sold be treated as a residential apartment or house. In addition, the asset must not be intended for, or used in, entrepreneurial activity.
The requirement relating to entrepreneurial activity in the context of a residential apartment or house is not expressly stated in the Tax Code. Rather, it is an interpretation clarified by the Public Decision, which had also previously been applied in practice.
For the purpose of determining whether an asset qualifies as a residential apartment or house, the classification of the asset in the extract from the Public Registry is important, but not decisive. The Public Decision states:
“When determining the type of immovable property, the relevant entry of the registration authority is important; however, for the final assessment, the actual functional purpose of the property is decisive.”
The Public Decision further establishes that all of the following criteria must be met for an asset to be treated as a residential apartment or house:
- it constitutes an independent unit;
- it is intended for residential use;
- it is provided, or may be provided, with basic utility infrastructure;
- it does not constitute a functional part of another activity.
Several aspects of these criteria are worth noting:
- Unfinished apartments and future apartment units: According to the Public Decision, even an unfinished apartment, including a so-called “air apartment” (when a person bought apartment on 9th floor while only 5 floor is built so far) or future apartment unit, may be treated as a residential apartment, subject to certain conditions.
- Auxiliary space may form part of a residential apartment or house (so, the tax incentives may apply on such assets too): Auxiliary space is also treated as part of a residential apartment or house: “Auxiliary space functionally connected to an apartment/house, including an attic, basement, or other space, if it ensures or improves the conditions for using the apartment/house for residential purposes and is not used independently for non-residential or economic purposes.”
- Co-ownership does not prevent qualification as an independent unit: An apartment, or a co-owner’s share in an apartment, may also be treated as an independent unit even if it is held in co-ownership.
In addition, the Public Decision also states that: “Temporary use of a residential apartment/house for another purpose, including renting it out for the purpose of receiving income, or using a residential apartment/house as the registered legal address of an entrepreneurial company, does not in itself change its residential character, provided that, based on its technical and functional features, the object constitutes a residential unit.”
At What Personal Income Tax Rate Will an Individual Be Taxed in Georgia if They Are Systematically Engaged in Purchasing and Selling Apartments for Profit?
The Public Decision identifies exceptional cases in which the 5% personal income tax rate does not apply to the sale of a residential apartment. In such cases, it appears that the individual may also be unable to benefit from the tax exemptions applicable to capital gains derived from the sale of a residential apartment or house after to years. In other words, the 20% personal income tax rate may apply.
One such exception is where an individual is engaged in Georgian real estate trading.
I use the word “may” deliberately in relation to the two-year exemption because, in cases involving entrepreneurial activity, Article 82(1)(f.c) of the Georgian tax code applies instead of Article 82(1)(f.a). Article 82(1)(f.c) still provides a tax exemption for the sale of an asset after two years of ownership, but only if the asset was not used in economic activity during at least the last two years before its sale.
For example, assume that in 2023 I purchased five apartments for resale purposes and did not lease them out. (If the apartments had been leased before their sale, the 20% tax rate would apply.) If I then sold those apartments in 2026 (after owning them for more than 2 years), one could argue that the apartments were not used in economic activity before their sale and that the resulting capital gain should therefore qualify for exemption under Article 82(1)(f.c).
However, since the apartments were acquired with the intention of resale for profit, there is a risk that the tax authority could treat the ownership of those apartments itself as use in economic activity and therefore apply the 20% tax rate, even if the apartments are sold after more than two years of ownership.
This issue is not entirely clear to me. What does appear clear from the Public Decision is that where apartments acquired as part of real estate trading are sold within two years, the 20% tax rate will apply instead of the 5% rate. Likewise, if such apartments are sold after two years but had been leased out before their sale, the 20% rate may also apply.
There is also uncertainty regarding what should be regarded as real estate trading. For example, if I purchased and sold three apartments over a five-year period, would this be considered real estate trading and, consequently, result in the loss of the available tax exemptions?
Based on the wording of the Public Decision, it appears that an individual will not be able to benefit from the relevant exemptions/incentives where the purchase, sale, or leasing of apartments is carried out as part of entrepreneurial activity, meaning activity conducted in an organized and systematic manner. However, it remains a matter of judgment how many apartment sales, and over what period of time, would be sufficient for the activity to be treated as organized and systematic and, therefore, as real estate trading.
In my view, where a person purchases a single apartment and sells it several years later, such activity should not be regarded as organized or systematic, and the relevant tax exemptions should generally remain available, even if the apartment had been leased out on a long-term basis before its sale. However, as the number of apartments bought and sold by an individual increases, so does the risk that the tax authority may treat the activity as entrepreneurial and apply the 20% personal income tax rate.
The law does not establish a specific threshold for the number of apartments that may be sold before the activity is regarded as entrepreneurial. Each case must therefore be assessed individually. In addition to the number of apartments sold, other factors should also be considered, including the purpose for which the apartments were acquired or sold (for personal (e.g. relocation) or business reasons (they were intended for resale)), residential use, or leasing, whether a person already has a status of entrepreneur (e.g. is registered as individual entrepreneur of Georgia) and other relevant circumstances.
How Will an Individual Be Taxed in Georgia if They Rent Out an Apartment on a Long-Term Basis (Rather Than as a Short-Term/Daily Rental) and Then Sell It?
With respect to renting out, it can be stated with a reasonable degree of confidence that the mere fact that an individual rent out an apartment on a long-term basis under a long-term lease agreement, rather than as a short-term or daily rental, should not in itself be treated as entrepreneurial activity. In such a case, both the two-year tax exemption and the 5% personal income tax rate (where the apartment is sold before two years of ownership) should apply to the capital gain received from the sale of the property. Provided that the apartment was not subsequently sold as part of real estate trading activity.
In my opinion, where a non-entrepreneur individual rents out an apartment or house on a long-term basis, such activity should not be regarded as organized and systematic activity. This is also consistent with the current approach of the Georgia Revenue Service. Accordingly, such an individual should generally be able to benefit from the relevant tax reliefs upon the sale of the apartment or house. This conclusion can be inferred, at least to some extent, from the wording of the Public Decision.
A more interesting case arises where a person has the status of an individual entrepreneur due to another business activity and, at the same time, rents out an apartment on a long-term basis. In my opinion, the relevant tax benefits — namely, the 5% tax rate or the two-year tax exemption — should also apply in such a case. Although the person has entrepreneur status, the renting of the apartment itself is not carried out as part of organized and systematic activity and therefore should not automatically prevent the application of the relevant tax benefits.
When assessing this issue, other factors may also be taken into account. For example, whether the person in question, as an individual entrepreneur, reflected depreciation expenses related to the rented apartment in their personal income tax return, assuming, of course, that the 5% tax rate was not applied to the rental income.
How Will an Individual Be Taxed in Georgia if They Rent Out an Apartment or House on a Short-Term/Daily Rental Basis and Then Sell It?
On the other hand, if a person rents out an apartment or house — and especially several apartments or houses — on a short-term or daily rental basis, there is, in my opinion, a risk that such activity may be treated as organized and systematic activity and, therefore, as entrepreneurial activity.
This is because the daily rental of an apartment, and particularly the daily rental of multiple apartments, inherently involves a degree of organization and regularity. It typically requires receiving guests or arranging their check-in, cleaning the property or arranging cleaning services on a regular basis, carrying out repairs or organizing repairs when necessary, communicating with prospective guests, managing bookings, and performing other recurring activities.
When assessing this issue, one of the most important factors will likely be the number of apartments rented out on a daily basis.
This issue was discussed during the process of adopting the Public Decision. Unfortunately, however, the Public Decision does not provide a clear answer as to whether the daily rental of an apartment or multiple apartments should be regarded as organized and systematic activity.
With respect to the renting of apartments, the Public Decision states:
“The ownership of a residential apartment/house, its leasing, or its subsequent disposal shall not be considered entrepreneurial activity if such transactions do not have a systematic and organized nature.”
This wording may be interpreted in at least two different ways.
- Both renting and resale may need to be organized and systematic
Under this interpretation, organized and systematic activity would need to exist in relation to both components — renting and resale.
For example, if I rented out three apartments on a daily basis but then sold only one apartment after a long period of ownership, the leasing activity itself might be regarded as organized and systematic. However, because the resale element does not display the characteristics of entrepreneurial activity or real estate trading, the relevant tax benefits might still remain available.
- It may be sufficient for only one component to be entrepreneurial
Under a stricter interpretation, it may be sufficient for only one component — for example, the leasing activity — to be regarded as organized and systematic for the individual to lose the right to apply the relevant tax benefits upon the sale of the apartment, even if the sale itself would not be treated as real estate trading.
In my opinion, the first interpretation is considerably more logical. It would not be very logical to justify denying a person the right to apply the relevant tax exemption or the 5% tax rate solely because the apartment had been rented out on a short-term or daily basis before its sale, provided that the purpose of the purchase was not resale as such.
However, this is only my understanding of the issue. The Public Decision does not expressly support this interpretation, but it does not expressly reject it either.
At What Personal Income Tax Rate Will an Individual Developer Be Taxed in Georgia When Building and Selling Houses or Apartments?
The Public Decision states that an individual who constructs apartment buildings or houses for subsequent sale — referred to in the Public Decision as a “developer” — may not be entitled to apply the preferential 5% personal income tax rate upon the sale of such property within 2 years.
Where the property is sold after more than two years of ownership, the same considerations discussed above in relation to real estate trading are likely to apply.
(H3) How Is the Two-Year Holding Period Calculated When Selling a House Built by an Individual?
The Public Decision states that where an individual builds a house themselves and subsequently sells it, the two-year holding period is calculated from the date on which ownership of the house is registered in the Public Registry.
If the house is sold within two years of registration, the capital gain is subject to personal income tax at the rate of 5%. If the house is sold after more than two years from registration, the capital gain is exempt from personal income tax in Georgia.
It should be noted that this interpretation applies to houses built by individuals for their own purposes and does not relate to real estate developer activity.
At What Personal Income Tax Rate Is Capital Gain Received from the Assignment of Rights Under a Preliminary Sale and Purchase Agreement Taxed in Georgia?
The transfer or assignment of rights arising under a preliminary sale and purchase agreement for an apartment or house is not treated as the supply of a residential apartment or house for personal income tax purposes.
Accordingly, the preferential 5% personal income tax rate does not apply to capital gains received from the transfer of such rights. Instead, if the transfer takes place within two years, the capital gain is generally subject to personal income tax at the rate of 20%.
At the same time, the “two-year tax exemption” may apply in the same manner as it applies to non-residential immovable property. In particular, if the asset being transferred — namely, the right under the preliminary sale and purchase agreement — has not been used in economic activity during at least the two years preceding its transfer, the resulting capital gain may be exempt from personal income tax.
In this context, whether the right has been used in economic activity should be assessed based on the specific facts and circumstances of the case. In particular, where the resale of such rights is not carried out as part of organized and systematic activity, there may be grounds for applying the tax exemption.
How Will Capital Gain Received from the Resale of an Apartment in a Building Under Construction (i.e., an Unfinished Apartment) Be Taxed in Georgia?
As noted above, the Public Decision states that the tax benefits — exemption on sale after more than two years of ownership and the 5% tax rate in the case of sale within two years — also apply to an unfinished apartment registered in your name.
In other words, if you purchased an apartment in an unfinished building under a sale and purchase agreement, meaning that ownership of the apartment has already been registered in your name (so, this is not a preliminary sale but actual sale agreement), even though the building itself has not yet been completed, and you sell it within two years — assuming that you are not doing so as part of entrepreneurial activity — you will tax the capital gain at 5%.
By contrast, if you assign a preliminary sale and purchase right in respect of an apartment under construction or a completed apartment within two years and receive a capital gain from doing so, that gain will be taxed in Georgia by personal income tax at 20%.
Will Renovation Expenses Incurred After the Purchase of an Apartment Be Taken into Account When Calculating Capital Gain from Its Sale for Georgian Tax Purposes?
The Public Decision states that, when calculating the capital gain received from the sale of an apartment or house, an individual may also take into account documented expenses incurred in relation to that property after its acquisition, provided that such expenses increased the value of the asset.
Personally, I read this provision as follows, taking into account both its wording and underlying logic: any expense incurred for the improvement of an apartment or house — whether construction works, modifications, or even cosmetic renovation — may be added to the acquisition cost of the property when calculating capital gain, provided that the expense is supported by documents and increased the value of the asset.
For example, if I built a wall and subsequently demolished it, thereby restoring the apartment to its original condition, such expense could hardly be regarded as having increased the value of the asset and therefore should not be taken into account when calculating the capital gain.
As said above, two important conditions must be satisfied for such expenses to be considered. First, the expense must have increased the value of the apartment or house. For example, converting an apartment from a frame condition into a renovated condition would generally increase its value. Second, the expense must be supported by appropriate documentation.
In my view, this provision is not limited solely to capitalizable expenses. It may also extend to certain current expenses, provided that they increased the value of the property and satisfy the documentary support requirement.
For example, assume that an individual purchased an apartment in a green-frame condition for GEL 200,000, subsequently incurred documented renovation expenses of GEL 50,000, and sold the apartment after 1.5 years for GEL 320,000.
In my opinion, the capital gain should be calculated as follows:
GEL 320,000 – GEL 200,000 – GEL 50,000 = GEL 70,000
Accordingly, the taxable capital gain would be GEL 70,000, and the individual would pay personal income tax at the rate of 5% on that amount (provided that the apartment was not sold as part of entrepreneurial activity).
How Will the Sale of a Room or Apartment in a Hotel-Type Building Be Taxed in Georgia?
The Public Decision states that the sale of a room within hotel infrastructure is taxed under the general rule, meaning that the 20% personal income tax rate applies instead of the preferential 5% rate. If the property is sold after more than two years of ownership, the capital gain may be exempt only if it has not been used in economic activity during at least the last two years before its sale.
An interesting question is what types of buildings should be regarded as hotel infrastructure. For example, it is not entirely clear whether the same approach would apply to so-called “apart-hotels.”
The Public Decision describes a room within hotel infrastructure based on the following criteria:
- it is used for temporary accommodation;
- it operates exclusively within the hotel system.
Based on this wording, it may be assumed that if you own a room or apartment in a complex intended primarily for investment and daily rental purposes — rather than for long-term residential use — there is a risk that income received from the sale of such property will be taxed under the general rule at the 20% rate.
Examples may include complexes with a reception desk, centralized guest services, rental arrangements managed by a management company, and other features typically associated with hotel operations.
An exception may apply if the property is sold after more than two years of ownership and has not been used in economic activity during at least the last two years before the sale. In practice, this would generally mean that the property had not been rented out during that period.
In my opinion, this issue requires further clarification, particularly with respect to which types of buildings should be treated as falling within the definition of “hotel infrastructure.”
VAT Treatment in Georgia of the Sale of an Apartment/house by an Individual
Please also note that, in the exceptional cases discussed above — where an apartment, or a right arising under a preliminary sale and purchase agreement, is sold as part of entrepreneurial activity — there may be a VAT risk in addition to personal income tax implications.
This issue is beyond the scope of the present article and may be discussed in more detail in a separate article in the future.
Other Issues Discussed in Public Tax Ruling No. 143 of the Ministry of Finance of Georgia (14 May 2026)
In addition to the matters discussed above, the Public Decision also addresses several other issues, including the division or merger of assets, inheritance cases, and the calculation of the two-year holding period in relation to an apartment received from a development company in exchange for land, etc.
Summary of the Ministry of Finance of Georgia’s Public Decision on the Personal Income Taxation of the Sale of a Residential Apartment or House by an Individual
On 14 May 2026, the Ministry of Finance of Georgia issued Public Decision No. 143, “On Issues Related to the Personal Income Taxation of Income Received by an Individual from the Supply of an Asset.” The Decision explains the conditions for applying Articles 81(3), 82(1)(f.a), and 82(1)(f.c) of the Tax Code of Georgia in relation to the taxation of capital gains received by individuals from the sale of residential apartments and houses.
The Public Decision clarifies that, in the case of the sale of an apartment or house by an individual, the 5% personal income tax rate does not always apply. It also clarifies that capital gains received from the sale of residential property after more than two years of ownership are not always unconditionally exempt from personal income tax.
Note: This article is provided for informational purposes only and should not be regarded as tax advice or any other form of professional consultation. The tax consequences of a property sale depend on the specific facts and circumstances of each case. If you would like an individual analysis of your situation, you may contact the author for a personal tax consultation.
About the Author: Gela Barshovi is a Tax Consultant and Transfer Pricing Specialist in Georgia and the founder of TPsolution, a Tbilisi-based tax and accounting consulting firm. He has gained professional experience in taxation both at the Georgian tax authority and in the private sector in Georgia, as well as in Austria and Germany. Gela holds a Master’s degree in International Taxation from the Vienna University of Economics and Business (WU).
Need Tax Advice on the Sale of Property in Georgia?
The taxation of capital gains from the sale of an apartment or house in Georgia is not always straightforward and depends on the specific facts of each case.
If you are planning to purchase or sell residential property in Georgia and would like to assess the tax implications in advance, before the sale or purchase, feel free to contact us for an individual tax consultation.
Email: [email protected] or complete the contact form on the company’s website: https://tpsolution.ge/ka/contact-2/.