Tax on renting out a flat: what to do under Georgian law

What to do

1. Qualification: renting residential space for living (to an organisation, a legal entity or an individual) is taxed at 5% of the income if the owner claims no expense deductions (Tax Code of Georgia, Art. 81). The benefit covers only housing for residence, without deductions. Otherwise the general rate of 20% applies, for example to an office, shop or other non-residential use, or when expenses are deducted (Art. 81).
2. Who pays if the tenant is an individual: the tax agent (who withholds tax at source) is only a legal entity, enterprise, organisation or individual entrepreneur. A tenant who is an individual does not withhold tax (Art. 154). So the owner pays personally: a resident individual whose income was not taxed at source files the declaration (Art. 153). The annual declaration is due by 1 April of the year following the reporting year (Art. 153), and the tax is paid by the declaration deadline (Art. 62).
3. Tenant is a company or entrepreneur: the register of residential landlords and the procedure for applying the benefit when renting to legal entities are set by order of the Minister of Finance (Art. 81). Register on rs.ge before any payments and check whether the tenant withholds tax, so that you do not pay twice.
4. Owner who is a non-resident: rent paid to a non-resident individual is taxed at source by the tax agent at the personal income tax rates (Art. 134). If a non-resident receives rent from a party that is not a tax agent (for example, from an individual), they are taxed themselves (Art. 80). A non-resident files a declaration if their income from a Georgian source was not taxed at source (Art. 153). Citizenship and residence do not exempt, because the source of income (the flat) is in Georgia.
5. Sanctions: late declaration carries a fine of 5% of the tax for up to 2 months and 10% for longer (Art. 274). Late payment carries penalty interest (საურავი) for each day of delay (Art. 272). If the owner has not declared for years, file for past years before an audit.
6. Where to apply: Revenue Service (rs.ge) for the register of landlords, the declaration and tax payment.
7. Evidence: lease agreement (purpose: residence), records of rent receipts, extract from the Public Registry on ownership, registration data in the landlord register on rs.ge.
8. Traps: applying the reduced rate to renting an office, shop or warehouse (the benefit covers only housing for residence); deducting expenses such as repairs or furniture and still paying the reduced rate (the benefit applies only without deductions); expecting an individual tenant to withhold tax (an individual is not a tax agent, so the owner declares); assuming that a non-resident foreigner pays no tax on renting a flat in Georgia; confusing this with selling a flat or with renting a flat abroad (foreign income).

Be sure to check

• renting residential property without deductions: 5%; other use or deducting expenses: 20%
• an individual tenant does not withhold tax: the owner declares by 1 April of the following year and pays by the same deadline
• renting to a legal entity: the register of landlords and the benefit procedure set by order of the Minister of Finance; check withholding at source
• non-residents also pay, either through withholding by the agent or through their own declaration
• penalty for late declaration and penalty interest