Buying a property in Georgia is pretty simple. Minimum bureaucracy involved, several hours for registration and you are the owner of the property you like. In fact, easiness of doing business report by the word bank ranks Georgia as N. 5 over the world.
However, is just a registration of the newly acquired property a job done?
No it is not. There is another thing that is inevitable after the stage of purchasing a property. Let’s talk about taxes, particularly the taxes that property owners in Georgia are subject of.
There are some good news and a bad news for you as a real estate owner in Georgia. Let’s start with the bad news.
Bad News: You are subject to multiple possible taxes after you become owner of a real estate property in Georgia.
Good News: Taxes are low and easy to administrate
How does real estate tax work in Georgia?
Property owners in Georgia are subject to the following taxes:
- Property tax
- Income tax
- VAT (in some cases)
Let’s examine them one by one.
1. Property tax
Who pays the property tax and how much is the rate?
If you own a real estate in Georgia (Condo, house, villa, commercial area, land) you are subject to a property tax which amounts to 1% of the market value of the real estate you own. The property tax is paid annually. The market value of the real estate is required to be determined by you. No official audit is required. Revenue services of Georgia trust your evaluation on the market price, but don’t cheat, otherwise they become serious about it.
Exceptions for property tax
- If your total annual income does not exceed 40 000 GEL (around 17 000 USD) then you are exempt from the tax on any property you own in Georgia.
- Land is taxed with a different rate You pay 0.24 GEL (0.08 USD) annually as a property tax for any 1 sq.m non-agricultural land you own in Georgia. (Note: agricultural land ownership is not allowed to foreigners in Georgia)
When and where do I need to pay the property tax?
Property tax declaration deadline is 1-st of October of each year. You need to submit the annual property tax declaration once a year (after the end of the year) on the website of the Revenue Services of Georgia. The access is provided by the Revenue Services, by visiting their branch. You can also be represented by someone else through a Power of Attorney). After the declaration, you can pay the property tax by sending funds from your Georgian bank account to the state treasury account (the account number 101001000).
2. Income Tax
Income tax is paid by the individuals who either rend or sell apartments. So there are two different cases when the income tax can arise. Let’s discuss them both separately
- Income tax for renting a property in Georgia
- Income tax for selling a property in Georgia
How much is the income tax rate from RENTING a property in Georgia?
There are two scenarios with which different rates of income tax are applied. Scenarios are different whether you rent your real estate to an individual (mostly for living purposes) or a business (mostly as office).
Scenario n.1: Rental to an individual
The income received from renting your real estate in Georgia to an individual for living purposes (long term or short term rent) is subject to 5% income tax. You are not able to subtract the expenses in this case.
If for example you spend some amount to maintain your apartment in shape, you cannot expense this and pay tax from the delta. 5% tax is calculated from the whole income you generate by renting your property in Georgia for the living purposes.
Scenario n.2: Rental to a business
The income received by the property owner while renting the apartment to the business is subject to 20% income tax. In this case any expenses you make can be expensed and 20% is calculated from the remaining delta.
Important notice: If you are registered as an individual entrepreneur in Georgia, you have an obligation to pay tax on the income you receive in this scenario (20% tax). However, if you rent the apartment as just a person (no business ownership form), then the business who rents the property from you has to pay and declare tax on behalf of you.
Income tax from SELLING a property
A waiting period of 2 years exempts you from income tax on capital gain. Any property you own for more than 2 years is tax free. Which means that if you buy a property and keep it for at least 2 years you pay 0% income tax after you sell it. Taxes will apply to the difference of the buying and selling price, only if you sell your property within two years since purchasing it.
How much is the income income tax rate for selling a property in Georgia?
If you sell a property within two years of purchasing it, we have again two possible scenarios:
Scenario n.1: Sale of residential property (house or apartment)
The tax rate is 5% and it is calculated from the difference of the buying and selling price of the property. An example will make it easier:
- You bought the real estate for 120 000 USD and
- you sold it for 150 000 within two years
- the tax is calculated from 150 000 – 120 000 = 30 000.
- And 5% of 30 000 USD is 1500 USD.
No additional taxes are imposed.
Scenario n.2: Sale of commercial property (office, land for investment, etc.)
The tax rate is 20%. When you own a commercial real estate property and you sell it within two years, you pay 20% on the difference. Same as previous example:
- You bought the real estate for 120 000 USD and
- you sold it for 150 000 within two years
- the tax is calculated from 150 000 – 120 000 = 30 000.
- And 20% of 30 000 USD is 6000 USD.
No additional taxes are imposed.
When and where do I need to pay the income taxes from selling a property in Georgia?
Deadline for declaring income from renting or selling a real estate is April 1 of each year. Which means that after the year is finished you have 3 full months to declare your income and pay taxes to the revenue services.
As in the case of property taxes described above, you need to send the declaration using your personal page on the revenue services website. You can get access by visiting the branch, or by sending a proxy with a notarized Power of Attorney.
After the declaration is filled and submitted you can pay your tax, and send the exact amount from your Georgian bank account to the state treasury account (the account number 101001000)
3. VAT (Value Added Tax) for real estate owners in Georgia
In general, when a business reaches a threshold of turnover of 100 000 GEL for the last rolling 12-month period, it must register as VAT payer in Georgia.
So is the real estate business different?
Yes, and No at the same time. Let’s again take two scenarios:
Rental
In case your rental income for the last 12 months exceeds 100 000 GEL, then you (as an individual) are subject to mandatory VAT payer registration and will need to pay VAT for the income you generate from the rent.
Sale
VAT on selling apartment is paid only in case you sell as a business. Meaning that buying and selling apartments is your business. For individuals selling their real estate, there’s no VAT registration or pay obligation.
How much is the VAT rate?
The VAT rate in Georgia 18%.
When and where do I need to pay VAT taxes?
Deadline for VAT declaration is 15-th of each month. So unlike property tax or income tax of individuals, VAT is declared and paid on a monthly basis.
And again as in the case of property taxes described above, you need to send the declaration using your personal page on revenue services website. You can get access by visiting the branch, or by sending a proxy with a notarized Power of Attorney.
After the declaration is filled and submitted you can pay your tax, and send the exact amount from your Georgian bank account to the state treasury account (the account number 101001000)
At PB Services we are a team of real estate and tax professionals. We can guide you through the real estate taxation, and structure your taxes to minimize cost and increase your property investment.
Contact us below by booking a free 30 minutes consultation or just send us email. We answer within several minutes.
