Property tax in Georgia: everything an investor needs to know!

 

More and more often, individuals choose Georgia for their money investments due to its simplicity of legal procedures and low tax rates. What are the property taxes in Georgia and everything an international investor needs to know – will discuss in this article. 

Taxes in Georgia

Taxes in Georgia are levied both at the state and local levels. The most significant taxes are collected at the federal level and include income taxes, corporate taxes, and value-added taxes. On a local level, the property tax is collected as well as other various fees. There are six types of fixed taxes in Georgia:

 

• income tax - 20%;

• profit tax - 15%;

• property tax - 1% of the appraised value;

• VAT - 18%;

• excise - on some goods;

• import tax - 0%, 5%, 12%.

 

The income tax is payable at a fixed rate of 20% from local source income. Personal income from foreign sources is not subject to taxation. Individual income tax on interest, dividends and royalties is 5%. Medical services, exports and education are exempt from VAT. A taxpayer who imports or produces goods has to be VAT registered regardless of the size of annual turnover. Corporate taxes are levied at a flat rate of 15%, which was introduced in 2008. Since 2017, retained earnings are exempt from taxation. This system was established to attract foreign investments. 

 

According to the Tax Burden and Reform Index in 2009 (the ranking has not been published since 2009), Georgia was rated as a country with relatively low taxes and took 4th place in the list, being overtaken only by Hong Kong, the United Arab Emirates and Qatar. The index was formed based on crucial tax rates; the share of special tax benefits was also considered. As for the simplicity and transparency of the tax system, Georgia takes the 22nd place in the world with 87,4 points (Doingbusiness ranking.) This case assessment is not only based on tax rates, but also takes into account the number of tax payments made during the year, the time it takes to pay taxes, and the time it takes to get tax returns and conduct tax audits. 

Tax on the purchase and sale of real estate in Georgia

 

There is no tax on purchase and sales of property for foreign citizens in Georgia. When purchasing property, only the state fee of 51 lari has to be paid. If desired, the buyer can pay a fee of up to 305 lari, and the data on the change of ownership of the property will be entered into the Register within one hour. 

Property ownership costs

 

After the purchase of property, the owner must pay maintenance tax for the building and the surrounding area. The tax is from 0,5 to 2,8 lari per square meter of the property and depends on the region, location, property's status and purpose of use. Other expenses such as water, electricity, gas or heat bills are paid separately, according to meter readings or at a fixed rate.

Property tax

Property tax in Georgia is related to local taxation. It is described in Chapter XXIX Chapter IX of the Tax Code of Georgia. The tax amount is determined on the basis of a previously submitted declaration. The Tax Code of Georgia determines the maximum tax limit; however, the precise amount of the tax is determined by the local government of each municipal formation. For instance, the representative body of Batumi established a property tax for individuals at 0.2% in 2017. 

 

The property tax rate depends on the annual family income:

 

• from 40,000 lari - 0%;

• 40,000 - 100,000 lari - 0.05-0.2%;

• from 100,000 lari - 0.8-1%.

 

If a family's annual income exceeds 40 thousand lari, then the value of their property is determined by the tax office based on market prices. Let's suppose, a market value of the property is valued at 100 000 lari, then at the end of the year, they are obliged to pay property tax of 200 lari. If the family's income exceeds 100,000 lari, then the family will have to pay 0.8% of the market value of the property. 

 

Talking about corporate investors, the annual corporate property tax rate is set at the rate of no more than 1% from the value of the taxable property. The value of the taxable property is the average annual book value of the assets of the company, calculated at the beginning and end of the calendar year. The yearly average carrying amount must be shown in financial statements, not tax statements. 

Tax rates for selling a property

 

The payment of income tax on the sale of the property is required only for tax residents of Georgia. Foreign investors, who do not hold Georgian Residence permits do not pay this tax.

Gift and inheritance tax

 

If the property is inherited by immediate family members, i.e. children, parents or spouse, it is not taxed regardless of its value. Property donated or inherited by relatives of III and IV degrees of kinship is also exempt from taxes but only if its value does not exceed 150,000 lari.

Residential property maintenance in Georgia

 

The costs of maintaining the property in Georgia are not that high, especially when compared to European countries. Even when comparing the maintenance costs to Post-Soviet countries, they remain relatively low. This adds another benefit to Georgian real estate.

Utilities

In general, the prices for utilities in Georgia are the following:

 

• gas - 1 lari per cubic meter;

• water - 0.96 lari per cubic meter;

• electricity - 0.32 lari / kWh;

• waste removal - up to 3.53 lari per person per month;

• internet - about 50 lari per month.

 

The average monthly cost of utilities for a 90 square meters flat is around 240 lari (75 USD). 

 

The purchase of property in Georgia is profitable not only because of the absence of taxation and simplicity of legal procedures but also because it is relatively cheap to maintain and it can be entrusted to the management company. This property maintenance option is convenient for foreigners, who visit the country only during the holiday season, whilst the rest of the time the apartment remains empty.