A claim has circulated in Georgia during 2026 that apartment resales are now subject to a new 20% tax. That description is too broad. Georgia did not introduce a separate 20% tax for every property marketed as an apartment. The Ministry of Finance clarified how existing rates apply to different types of assets.
Public Decision No. 143 of 14 May 2026 distinguishes residential apartments from hotel rooms, rights acquired under preliminary agreements and assets sold as part of an entrepreneurial activity. Public Decision No. 175 of 8 June then clarified the test for systematic property trading. For an investor, the result depends on what is being sold, how long it has been held and how it was used before the sale.
This article covers personal income tax for an individual seller, including a non-resident. Corporate transactions, VAT and any other obligations require a separate review.
01
What changed in 2026
The underlying rates were already in the Tax Code. Article 81 sets a general personal income tax rate of 20% and a special 5% rate for gains from the sale of a residential apartment or house. Article 82 exempts the gain on a residential apartment or house once the holding period exceeds two years.
Decision No. 143 did not raise those rates. It explains which features allow a property to qualify as residential, how an unfinished unit may be treated, why a hotel room is a different type of asset and how an assignment under a preliminary agreement is taxed. That classification determines whether the 5% residential rate and the residential two-year exemption are available.
02
Identify what is being sold
Listings often use apartment, studio, hotel apartment and hotel room interchangeably. Marketing language does not decide the tax treatment. The legal and functional nature of the asset at the time of sale does.
| Asset being sold | Tax classification | Starting position |
|---|---|---|
| Residential apartment or house | Residential property | 5% of the gain until the holding period exceeds two years, then 0% |
| Unit within hotel infrastructure | Other asset | 20% of the gain if the separate exemption for other assets is unavailable |
| Right under a preliminary agreement | Property right | General regime: usually 20% if no exemption applies |
| Unfinished residential unit with the core ownership rights transferred | May qualify as residential property | 5% or 0% depending on the holding period |
| Asset sold through systematic property trading | Entrepreneurial activity | General regime; private residential relief is unavailable |
The table is a starting point. The final result depends on the registration, permitted use, contracts, holding period, actual use and the nature of the seller's activity.
A residential apartment and a hotel unit may look alike but receive different tax treatment.
03
What qualifies as a residential apartment
The Ministry of Finance gives four cumulative criteria. The property must be an independent unit, be suitable for residential use, have or be capable of having access to essential utilities, and not form a functional part of an activity that is not residential by nature.
- 01The unit can be identified separately and registered in the property register.
- 02Its legal status, design and intended use allow it to serve as a home.
- 03It has or can obtain access to electricity, water, sewerage and other basic services.
- 04It is not an inseparable part of a hotel or another operation whose essential purpose is non-residential.
The public registry entry matters, but the Ministry also looks at the property's actual function. Temporarily renting out an ordinary residential apartment does not by itself change its character. For a residential apartment, economic use also does not remove the 5% rate or the exemption after a holding period longer than two years.
04
Why a hotel apartment may be taxed at twenty percent
A hotel room is normally used for temporary accommodation and operates as part of a wider hotel system. Decision No. 143 therefore treats a room or unit within hotel infrastructure as another asset, rather than as a residential apartment. Where the sale is taxable and no separate exemption applies, the gain is subject to the general 20% rate.
The word apartment in a brochure or contract does not settle the point. One unit may be an independent residential apartment. Another may be a hotel room tied to compulsory management, common services and operation only within the hotel. Two visually similar studios can therefore produce different tax results on resale.
Other assets can also qualify for an exemption after more than two years, but that exemption is restricted. If the seller used the asset for economic activity before the sale, the exemption may be unavailable. The economic use is disregarded only after two years have passed from the end of that use. A hotel management agreement and the payment structure therefore need to be reviewed in the context of the specific unit.
The 20% rate follows from the legal classification and the facts of the sale, not from the label apartment on its own.
05
Resales during construction
An unfinished building does not automatically prevent residential treatment. A unit under construction may qualify as a residential apartment if its design and contract specify residential use and the buyer has received the principal rights needed to possess, use and dispose of it. Formal commissioning of the building is not the only test.
The position changes where the buyer holds only a contractual right to acquire a unit in the future. An assignment under a preliminary agreement transfers a property right, not the real estate itself. The special 5% residential rate does not apply automatically. If the gain is taxable and the separate exemption for another asset is unavailable, the general 20% rate applies.
Before signing, the buyer should establish whether the specific unfinished unit is registered as real estate or whether the investment consists only of a claim against the developer. This affects both the tax position and the mechanics of a future resale.
06
When private resales become a business
The residential relief is intended for sales outside entrepreneurial activity. Where an individual creates, acquires or sells property as an independent principal activity in order to earn regular income, the Revenue Service may treat the transactions as systematic and organised property trading. The sale is then outside the private 5% and 0% residential regimes.
Decision No. 175 narrows that test. The number of apartments owned, the length of ownership, rental and a later sale are not sufficient by themselves to establish entrepreneurial activity. There is no published numerical threshold at which an owner automatically becomes a trader. The assessment considers the pattern of transactions, the way the activity is organised, whether it is a principal independent activity and whether it is intended to produce regular income.
07
How the holding period works
The residential exemption begins only after the holding period is longer than two years. A period of exactly two years does not satisfy the wording more than two years. The clock is measured from the date of the title document used to register ownership in the public registry. The sale date is likewise determined by the document used to register the buyer's title.
| Scenario | Until the period exceeds two years | After more than two years |
|---|---|---|
| Residential apartment or house | 5% of the gain | 0% |
| Residential apartment that was rented out | 5% of the gain | 0% — rental alone does not remove the exemption |
| Hotel room or another asset | Usually 20% of the gain | Potentially 0% if the other-asset conditions are met |
| Other asset used in economic activity | Usually 20% of the gain | Separate review required, including the period after economic use ended |
08
Tax is charged on the gain
The taxable amount is the positive difference between the sale price and the acquisition basis. The acquisition basis may include documented expenditure directly connected with acquiring, creating, completing or improving the asset where that expenditure increases its value. If there is no positive difference, this gain calculation produces no income tax.
The examples below use US dollars only to make the comparison easy to follow. Tax reporting is made in Georgian lari, using the applicable official exchange rate for each transaction date.
| Example | Gain calculation | Tax |
|---|---|---|
| Residential apartment sold before the holding period exceeds two years | $90,000 − $70,000 purchase − $5,000 documented improvements = $15,000 | $750 at 5% |
| Hotel asset where no exemption applies | $90,000 − $70,000 purchase − $5,000 documented improvements = $15,000 | $3,000 at 20% |
| Residential apartment sold after more than two years | $15,000 gain | $0 under the exemption |
09
Filing and payment deadline
An individual, including a non-resident, who makes a taxable gain on a sale outside entrepreneurial activity must file an income tax return by the 15th day of the month following the month of sale. The tax is payable by the same deadline through the Revenue Service account.
If the asset is sold on 20 October, the return and tax are due by 15 November. The seller should not wait for an annual return the following April.
10
Checks to complete before buying
The exit tax should be considered before the purchase agreement is signed. The useful evidence is found in the registration, project and contracts, rather than in the project's marketing name.
- 01
Obtain the public registry extract and confirm how the unit or right is registered.
- 02
Compare the permitted use of the building and unit with the design, permits and purchase contract.
- 03
Establish whether the unit forms part of hotel infrastructure and whether management is compulsory.
- 04
Confirm what can be resold before completion: registered real estate or a right under a preliminary agreement.
- 05
Record the date on which title arose and do not measure the two years only from the reservation or first payment.
- 06
Keep the contracts, payment records and evidence of expenditure on completion and improvements.
- 07
Before a resale, review the actual use of the asset and any indicators of entrepreneurial activity.
- 08
For a borderline case, obtain written advice from a Georgian tax professional or request an advance ruling from the Revenue Service.
The BUC view
Tax classification belongs in the investment model.
The tax classification of a unit belongs in the investment model alongside the purchase price, construction timetable and expected rent. Two studios of the same size may produce different net resale proceeds if one is a residential apartment and the other can operate only as part of hotel infrastructure.
A 20% rate does not make every aparthotel a poor investment, and a 5% rate does not make every residential unit attractive. The problem is an exit calculation that ignores tax and therefore overstates the likely return. This is particularly important where the buyer expects to assign a contract during construction or sell soon after completion.
BUC reviews the legal status and likely resale route before a specific unit is selected. The final tax opinion for an individual transaction should come from a professional who has reviewed the registration, contracts and actual use of the property.
Classify the asset first. Then calculate the return after tax.
This article provides general information and is not a substitute for transaction-specific tax or legal advice.