In recent years, Georgia has emerged as a rapidly growing economy with several industries and business sectors on the rise. The real estate market, in particular, has been highly active and has presented lucrative investment opportunities for many foreign investors.
One of the main attractions of property investment in Georgia is the favorable tax treatment across all property‑related activities, whether selling, holding, or renting. We covered general information about property‑related taxes in one of our articles last year.
However, due to the non-specific nature of tax regulations in this area, there remained some uncertainties, particularly regarding the taxation of property sales. That has now changed.
On 14 May 2026, the Ministry of Finance of Georgia issued Public Ruling No. 143 “On the Issues of Taxation of Revenue Received as a Result of the Supply of an Asset by an Individual.” The ruling clarifies how income tax applies when individuals sell property and other assets.
This article will provide a breakdown of the new rules and explain what they mean for prospective property sellers. This is especially relevant for those who are selling property in Georgia in 2026
Clarifications on the Taxable Object
Taxation of an asset sale generally hinges on three factors: what you’re selling, how long you’ve owned it, and whether you’ve been using it as a business asset.
Residential property owned for more than two years is fully tax-exempt. If sold within 2 years of ownership, however, a capital gains tax of 5% applies.
Notably, in the case of the sale of residential property, it is irrelevant whether the property was used in economic activity. Such a restriction is provided only in the case of the supply of other assets. However, whether the property in question will be treated as residential for the purpose of the sale is another matter.
The ruling makes an important clarification in this regard. It establishes that property will be treated as residential if it is:
- an independently identifiable registered unit,
- designed for residential use,
- capable of being connected to basic utilities, and
- not structurally integral to a non-residential operation.
Furthermore, the ruling clarifies what won’t be treated as residential for the purpose of the property sale tax exemption/reduction. Namely, property development activity, real estate trading, and other organized, consistent business activities involving the sale of property will no longer be classified as the sale of residential property, and consequently, will not enjoy the aforementioned tax breaks.
Notably, an unfinished or under-construction property doesn’t automatically lose its residential status, as long as the project designates it as residential and all essential ownership rights are transferred to the buyer.
Also, renting your apartment out before selling also doesn’t automatically strip its residential classification, provided you’re not systematically flipping properties as a business.
Calculation of the Taxable Gain
The calculation of the taxable base in an asset sale is fairly straightforward: sale price minus purchase price. However, the ruling also makes an important clarification here. It states that the purchase price can include documented costs that directly increased the property’s value. Examples include renovation or construction work.
This stands in contrast to the previous tax practices. Previously the gains would occasionally be calculated as simply the difference between the sale and acquisition prices. No regard used to be given to the additional expenses incurred by the seller for improving the property.
Additional Considerations
Property inherited or received as a gift from the heir of the 1st degree is generally tax-free. According to the ruling, in transfers like this, the previous owner’s holding period can be added to the recipient’s. This can push the current owner over the 2-year threshold sooner.
Splitting property into two cadastral units, the ownership clock for the new units runs from when you first owned the original. If you merge two properties, each component is assessed independently. In case one piece was owned for less than two years, the exemption won’t cover that share of the gain.
If you are selling property in Georgia in 2026, to discuss these topics, you can schedule a session here.
