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Taxes on Renting Apartments, Apartments, and Hotel Rooms

Answering current questions about taxes on income from renting apartments, apartments, and hotel rooms
March 15, 2024
Giorgi Zhuzhunashvili, Senior Lawyer, Barister
The tax calendar reminds us — by April 1, individuals must submit an income tax declaration for the year 2023 and pay the tax.
And this is a good reason to talk about the taxation of income that individual owners receive from renting out their real estate. Today, we will answer current questions related to renting real estate FOR RESIDENTIAL PURPOSES (apartments, hotel rooms, apartments). We will talk about commercial real estate next time.

Do non-resident property owners pay income tax in Georgia?

Yes, they do. Income from renting out real estate is considered as income from a source in Georgia, so it must be declared and income tax must be paid.

What are the tax rates for rental income for residential real estate in Georgia?

The income tax rate depends on registration in the List of Landlords (accessible through the tax portal) and is:
  • 5% of the rental income if the tenant is an individual
  • 5% of rental income if the tenant is a company and the owner is registered in the register of landlords,
  • 20% of the difference between income and property maintenance expenses (see Tax Code) in all other cases.

Does the income tax rate depend on the method of renting out real estate? Direct rental, rental through booking, Airbnb, other aggregators? Through a property management company?

No, it doesn't.

Does the tax rate depend on the duration and frequency of renting out residential premises? Is there a difference for income from daily and long-term rentals?

No, it doesn't.

If the owner receives rent in foreign currency into their account outside of Georgia, are they required to declare this income and pay taxes on it?

Yes, all rental income, regardless of its form and method of receipt, must be declared. Please note that in the tax declaration, income should be stated in Georgia's national currency – lari. If you received income in a foreign currency, it must be converted into lari at the exchange rate set by the National Bank of Georgia on the day of receipt of income.

In what cases is VAT payable when renting out residential real estate?

If the owner’s total income from entrepreneurial activities (including rental income) exceeds 100,000 lari over 12 consecutive months, the owner must register as a VAT taxpayer and pay VAT on the amount of income exceeding 100,000 lari at a rate of 18%.

How often is VAT declared and paid?

VAT declaration must be submitted monthly by the 15th of the following month, even if no income was received in the reporting month. The tax is paid within the same deadlines.

Does the tax rate change if the owner rents out property for residential purposes to a legal entity?

If a legal entity rents out property for residential purposes, for example, for its employees, the tax obligations remain unchanged — the owner pays income tax at the rate of 5% if he is registered in the register of landlords or 20% in the absence of such registration and VAT, if necessary.

 Who is responsible for paying the tax if the owner rents out property for residential purposes to a legal entity?

By default, the tenant company acts as the tax agent for the owner and is responsible for withholding and paying income tax on their behalf. The tax is paid by the company simultaneously with the rent payment. However, the Parties may agree otherwise in the lease agreement, and the owner may assume the obligation to pay income tax. VAT, in any case, is paid by the owner independently.

 How can tax declaration be submitted?

Tax declaration can be submitted through the owner's tax account on rs.ge. No other options are provided. The deadline for filing the income tax declaration for individuals is April 1st.

How to access the tax account on rs.ge to submit the declaration?

To do this, the owner needs to obtain a tax identification number. This can be done personally in Georgia or delegated to someone by power of attorney. More details about this process can be found here

 How can JUST Advisors specialists help property owners?

  • Based on power of attorney, we can obtain a tax identification number
  • Activate the tax account
  • Register the owner in the List of Landlords
  • Draft a lease agreement
  • Calculate taxes
  • Prepare and submit the tax declaration
At JUST Advisors, we understand the complexities of Georgia's tax system and offer not only deep expertise but also an individual approach to each client. Our goal is not only to help you meet current obligations but also to ensure optimal tax planning for the future. We invite you to JUST Advisors for consultations and support in managing your real estate and taxes. Let's make this process as simple and beneficial for you as possible together.

Table: Taxes on Renting Apartments, Apartments, and Hotel Rooms in Georgia

First comment: It is necessary to conclude a lease agreement, and it is also important that the owner be registered as the lessor. Special attention should be paid to the terms of the agreement: it should clearly state that the residential area is provided exclusively for residential purposes. This is important because, according to the legislation, income received by an individual from renting out residential space to organizations, legal entities, or other individuals for residence, without deducting expenses from this income, is subject to a 5% tax rate. It should be noted that such information is provided by tax consultants. Regarding VAT, if the total income exceeds 100,000 lari within 12 months, the taxpayer is required to register as a VAT payer.
Second comment: *If the income is distributed as dividends, then the total tax burden will be 20% = 15% profit tax and 5% dividend tax. Regarding VAT, if the total income exceeds 100,000 lari within 12 months, the taxpayer is required to register as a VAT payer.

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MARIA GUSEINOVA
Leading Manager of Commercial Department