Property Transfer Tax in Georgia is a critical consideration for both individuals and companies engaged in real estate transactions. When selling an apartment, house, land plot, or commercial space, a tax liability on the generated income typically arises. Georgian legislation provides different taxation regimes depending on the seller's status (individual vs. legal entity), the duration of property ownership, and the purpose of its use. Often, citizens and investors lack complete information regarding exemptions (such as the 2-year ownership rule) and when they are liable to pay the surplus income tax. Incorrect declaration or failure to pay taxes can lead to significant fines and penalties, drastically reducing the profit from the property sale. Therefore, qualified legal and tax consultation is essential for properly planning the transaction.
Services related to property transfer tax include comprehensive support to help clients accurately determine their liabilities and utilize all statutory exemptions. The service covers the following key components:
- Surplus Income Calculation: Calculating the 5% tax for individuals, which is based on the difference between the sale price and the purchase price.
- VAT Analysis: Assessing the risk of VAT (18%) liability when selling commercial spaces or newly built apartments, especially in cases of continuous economic activity.
- Identifying Tax Exemptions: Applying rules for exemption from income tax when selling a residential apartment owned for more than 2 years.
- Declaration and Reporting: Preparing and submitting the relevant declaration to the Revenue Service within statutory deadlines (e.g., by April 1 of the following year or by the 15th of the month following the transaction).
- Non-Resident Taxation: Determining specific tax obligations for foreign citizens selling real estate in Georgia.
In real-world scenarios, professional intervention is often necessary. For example, an individual bought an apartment in a building under construction 3 years ago, but the ownership title was registered in the Public Registry only 1 year ago. When selling, the question arises: does the 2-year period count from the purchase contract or the registration? The answer is decisive for tax exemption. Another example involves selling commercial space. The owner might assume that owning it for over 2 years exempts them from tax, but the law often treats commercial assets used in economic activity differently. A third scenario is the sale of inherited property, where determining the "acquisition cost" is crucial to minimize the tax burden on the surplus income.
Georgian legislation, specifically the Tax Code of Georgia, regulates this area in detail. Articles 81 and 82 define the conditions for income tax exemption for individuals (e.g., the 2-year ownership rule). Under the same Code, surplus income is taxed at 5% if the property is residential, whereas a 20% rate may apply in other cases if the transaction qualifies as economic activity. Regarding VAT, Article 161 is significant as it regulates the taxation of supply. The Civil Code of Georgia determines the moment of transfer of ownership rights, which establishes the date the tax liability arises.
The process of working with a specialist begins with an audit of documentation: purchase agreements, cadastral extracts, and proof of costs. A lawyer or tax consultant analyzes the transaction history and calculates the exact tax due. If there are grounds for an exemption, appropriate justification is prepared for the tax authority. The final stage involves electronic submission of the declaration on the RS.ge portal and preparation of payment orders, protecting the client from future disputes.
Legal.ge is the premier platform for finding experienced tax lawyers and consultants in the real estate sector. Our specialists will help you avoid unnecessary taxes through legal means and ensure your transaction is fully compliant with Georgian law. Do not risk financial penalties—get professional advice on Legal.ge before selling your property.
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