The Deceased Person’s Tax Debt and the Heir’s Obligations
Receiving an inheritance in Georgia is not only a matter of property: the Tax Code imposes on the heir the payment of the deceased person’s tax arrears in proportion to his or her share in the inherited estate, from the day of receiving the certificate of inheritance. The tax arrears of the deceased are understood as the arrears existing as of the date of death, which is why a preliminary assessment of the deceased’s tax position is an essential part of estate planning. The heir must notify the tax authority about receiving the certificate of inheritance if the existence of the deceased’s tax arrears is known to him or her, and the tax authority is obliged, no later than thirty days from the day it learned of the receipt of the certificate, to send the person a notice concerning the tax arrears.
The tax debt burdens the heir only up to the limit of the share: the heir is answerable in proportion to his or her share in the inherited estate and not for the entirety of the deceased’s obligations.
When the Tax Debt Is Written Off
The law provides three cases in which the tax arrears are written off: when the deceased person has no heir; when the heir has renounced the inheritance; and when the amount of the deceased’s tax arrears exceeds the value of the property received through inheritance — in that case the debt is written off to the extent of the remaining amount. The last case effectively establishes that the heir can never end up in a worse position than the value of the property received, which is the main reference point for assessing the risks of accepting an inheritance.
Continuing the Deceased’s Economic Activity
If the heir continues the economic activity of the deceased natural person, he or she must inform the tax authority thereof, register as a taxpayer before starting the economic activity — and as a value added tax payer if the deceased was one — pay the deceased person’s tax arrears, and fulfill the other obligations of a taxpayer. At the same time, the tax authority is obliged to merge the personal record cards of the deceased person and the heir.
The heir who continues the activity also holds significant rights: to demand the refund or offset of the tax or sanction, including a customs sanction, overpaid by the deceased; to use the deceased person’s primary tax documents when reporting; to submit tax declarations, including corrected ones, for the period of the deceased’s activity; and to continue the tax dispute started by the deceased. Where a refund or offset of an overpaid amount is requested, the tax authority must, no later than three months from the submission of the request, reflect the amount on the heir’s personal record card and verify its compliance with the legislation, including through a tax audit.
Exemptions for Property Received by Inheritance or Gift
The central issue of estate planning within the income tax system is the set of exemptions. Property received by way of gift or inheritance from heirs of the first and second lines is exempt from income tax during the tax year, while for heirs of the third and fourth lines the value of property received by gift or inheritance is exempt within one hundred and fifty thousand lari per calendar year. These thresholds define the room for planning: transfers to close relatives carry no tax burden, while for remoter lines the distribution of amounts across years and persons can be justified from a tax perspective.
In addition, property received by gift worth up to one thousand lari per tax year is exempt, except for property received by an employee from the employer. The holding periods for sold property also matter: exempt for a natural person is the gain from the sale of a residential apartment or house with the land attached to it, owned for more than two years; the gain from the sale of a motor vehicle owned for more than six months from the registration of ownership; and the gain from the supply of any other asset owned for more than two years. The timing of disposing of inherited property is therefore itself part of tax planning.
Frequently Asked Questions about Estate Tax Planning
Who pays the deceased person’s tax arrears?
The heir, in proportion to his or her share in the inherited estate, from the day of receiving the certificate of inheritance; the arrears are measured as of the date of death.
When is the debt written off?
When the deceased has no heir, when the heir renounces the inheritance, or when the arrears exceed the value of the property received through inheritance — in the latter case, to the extent of the remaining amount.
What rights does an heir who continues the business have?
He or she may demand the refund of the deceased’s overpaid tax or sanction, use the primary documents, submit declarations for the deceased’s period, and continue the pending tax dispute; registration as a taxpayer is required before starting the activity.
Which heirs are exempt from the tax?
Property received by first and second line heirs by inheritance or gift is fully exempt; for third and fourth line heirs the exemption applies within one hundred fifty thousand lari per calendar year, and a separate exemption covers gifts up to one thousand lari.
How We Help on Legal.ge
The Legal.ge team will assist you with every component of estate tax planning: we assess the deceased’s existing tax arrears and the proportional burden of the heirs, determine the optimal scenario for applying the exemptions, plan the timing of transfers and disposals of property, and represent your interests in dealings with the tax authority. Contact us through the Legal.ge website for an individual solution to protect your family’s property.