Income from renting out commercial space — an office, retail, industrial or storage area — falls under the Georgian Tax Code into income from economic activity: the Code's relevant norm lists income from property granted under leasing, usufruct, lease, rent or any similar form in exactly that category. At the same time, commercial leasing fundamentally differs from residential letting: the preferential 5 percent rate is tied by law to renting for residential purposes, so a physical person letting commercial space reports under the general rule. The second key dimension is the 100 000 GEL VAT threshold, exceeding which triggers a registration obligation within 2 working days. Below we explain each element and show what tax support for commercial leasing on Legal.ge includes.
The 20 Percent Rate and Declaring Lease Income
The first part of the rate article of the Tax Code taxes a natural person's taxable income at 20 percent, unless otherwise provided by the Code. The 5 percent preference under the second part of the same article applies only to income from renting out residential space to an organisation, legal entity or individual for residential purposes — it does not extend to commercial-purpose space. Consequently, the lease income of a physical person letting commercial space is taxed at the general 20 percent rate, unless the Code provides a special rule for the case.
Being classified as economic-activity income places the lessor under a reporting obligation: lease income must be reflected in the annual income tax declaration. The format and deadlines for the declaration are determined by other provisions of the Code and by orders of the Minister of Finance, so the specific calendar dates must be re-checked each year. Where deductions are applied, the computation becomes more involved: the 20 percent is calculated on the base that remains after the deductions allowed by law, and properly documented expenses play the decisive role here.
The 100 000 GEL Threshold and the 2-Working-Day Obligation
For commercial leasing, the mandatory VAT registration threshold is the most visible source of risk. Under the first part of the VAT registration article of the Tax Code, a taxable person is obliged, from the day the total amount of his or her VAT-taxable operations over any continuous 12 calendar months exceeds 100 000 GEL, to apply to the tax authority for VAT registration no later than 2 working days. This is not a calendar-year threshold — the continuous 12 months can start at any moment, so the dynamics of lease income must be monitored at a monthly level.
Moreover, the obligations to report and pay VAT arise precisely from the moment of the operation by which the total exceeded 100 000 GEL — the payer becomes accountable inclusive of that operation. When computing the threshold, operations exempt from VAT under the Code are not counted, with exceptions: among them, exempt operations related to financial or immovable property where carrying them out is the person's main activity, and the export of goods. This nuance matters precisely for persons dealing in leases, and miscalculating it frequently leads either to over-registration or to delay. At the same time, the law allows voluntary registration — in that case the person is treated as a payer from the day of application, but no later than the mandatory registration deadline.