Introduction
In Georgia, the taxation of real estate sales follows a simple and transparent framework. Unlike many other jurisdictions, Georgia does not impose a separate capital gains tax. Instead, profits from the sale of assets are taxed as ordinary income under either the Corporate Income Tax (CIT) or Personal Income Tax (PIT) regime, depending on whether the seller is a legal entity or an individual.
Beneath this straightforward structure, however, the Georgian Tax Code provides a range of specific rules and exemptions, especially for individuals, that make the country particularly attractive for long-term property ownership and investment.
Personal Income Tax and Capital Gains
For individuals, income derived from the sale of assets, including real estate, is subject to the Personal Income Tax (PIT). The general PIT rate is 20%, applied to the net gain, the difference between the sales price and the acquisition cost of the property, along with directly related expenses such as renovation costs. This approach ensures that only the actual profit, rather than the total sale amount, is taxed.
At the same time, Georgian tax legislation provides preferential treatment for specific transactions. A reduced 5% PIT rate applies to gains from the sale of residential apartments, making these transactions significantly more tax-efficient. This preferential rate, combined with Georgia’s simple and transparent tax framework, enhances the country’s attractiveness for real estate investors and private property owners alike.
Long-Term Ownership Exemptions
One of the most notable features of Georgia’s tax system is its generous exemption for long-term property ownership. If an individual has held a residential property for more than 2 (two) years, the capital gain realized from its sale is completely exempt from personal income tax.
This rule provides a strong incentive for long-term investment and encourages property stability in the market. It effectively rewards individuals who treat real estate as a long-term asset rather than a short-term trading vehicle.
The “Economic Activity” Test
Notably, the 2-year exemption applies to all assets, not just residential estate. However, there is an important distinction.
If a residential estate has been used, the tax exemption still applies even if it was rented out to other tenants for residential purposes.
However, when applying a 2-year exemption to other kinds of property, a crucial factor in determining whether the exemption applies is the property’s use. Tax legislation distinguishes between passive ownership and active business use through what is known as the economic activity test.
If other property (besides residential estate) was not used for commercial purposes, the sale generally qualifies for the exemption. However, if the property has been used to generate income, for instance, operated as a commercial facility or rented out for commercial purposes, the exemption does not apply, even if the property has been owned for more than two years. The same would apply if a residential estate was rented out for commercial, not residential purposes.
Importantly, the exemption may become available again two years after the termination of the economic activity. This means that once the property is no longer used for income-generating purposes, and a two-year period has passed, the owner may once again benefit from the preferential treatment upon sale.
This distinction is fundamental for investors, as it ensures that passive investment and personal ownership are rewarded with tax neutrality, while active business activity remains taxable under standard PIT rules.
Key Takeaways for Property Owners and Investors
Georgia offers one of the most favorable property taxation regimes in the region. The combination of a reduced 5% tax rate on residential property sales, full exemptions for long-term ownership, and the exclusion of foreign-source capital gains makes Georgia particularly attractive for individuals engaged in wealth management and real estate investment.
For non-resident investors, the simplicity of the Georgian system, alongside the absence of complex capital gains rules, further strengthens the country’s position as a transparent and investor-friendly jurisdiction.
About Andersen in Georgia
At Andersen in Georgia, we assist individuals, investors, and property owners in understanding the tax treatment of real estate transactions in Georgia. Our team guides clients applying exemptions, assessing tax liabilities, and structuring property investments efficiently under Georgian tax law.
For professional advice on the taxation of property sales and related investment strategies in Georgia, contact us.
Disclaimer: This article is based on Georgian legislation and publicly available information as of October 2025. It is intended for informational purposes only and does not constitute legal or tax advice. Readers should seek professional guidance tailored to their specific circumstances before acting on the information provided.