Property Taxes

Real Estate Taxes in Georgia: The Ultimate Investor FAQ

1. General Real Estate Taxes in Georgia

What are the main tax rates related to property in Georgia?

VAT (Value Added Tax): 18% on taxable supplies and economic activities.

Corporate Profit Tax: 15% under the Estonian Model (only paid upon profit distribution/dividends).

Dividend Withholding Tax: 5% when distributed to individuals or non-resident entities.

Personal Income Tax (Standard): 20% on general rental income (commercial) or standard personal income.

Personal Income Tax (Concessionary/Surplus): 5% on the capital gains from selling residential property held for less than 2 years, or from renting out residential property exclusively for living purposes.

Property Tax: Up to 1% annually on the value of the property (depends on household income for individuals, or average book value for companies).

2. Physical Persons (Individuals) FAQ

Does a property buyer pay any tax at the time of purchase in Georgia?

No. Buyers do not pay any state transfer taxes or stamp duties. There are only minor National Agency of Public Registry (NAPR) registration fees ranging from 150 GEL to 400 GEL depending on processing speed.

Is gifting property between family members taxed in Georgia?

No, gifting property between first and second-degree heirs is 100% tax-exempt.

Under the Georgian Tax Code, receiving real estate as a gift from a first and second-degree relative—which explicitly includes officially married spouses, children, parents, and siblings—is completely free from Personal Income Tax, regardless of the property’s market value or how long it was held.

How much tax does an individual pay when selling a property held for less than 2 years?

Residential Property: 5% tax on the surplus value (Selling Price minus Acquisition Cost).

Land or Commercial Property: 20% tax on the surplus value.

Over 2 Years: If a physical person holds residential property for more than 2 years before selling, the transaction is 100% tax-exempt.

Assignment of Rights (Pre-construction Flipping)

It may be taxed at 20%, not 5%. If an individual sells/flips their rights to a new buyer before construction is completed, the Revenue Service may view this as “providing a service.” The surplus profit may be subject to a 20% Personal Income Tax flat rate.

The “4 Properties in 4 Years” Rule: When does an individual automatically trigger full VAT?

Selling more than 4 properties within a 4-year period triggers mandatory VAT and 20% Income Tax.

Under the definition of systematic economic activity, if a physical person sells more than 4 residential units within 4 calendar years, the Revenue Service ceases to view them as a casual seller.

The Consequence: The individual must officially register as a VAT payer, and the transactions become fully subject to 18% VAT on the total revenue, alongside a retroactive 20% Personal Income Tax on the net profit instead of the preferential 5% rate.

How much tax does an individual pay when renting out a property?

Residential Rent (for living purposes): 5% tax on gross rental income. No deductions for expenses are allowed under this regime.

Commercial Rent (or if not registered for the 5% regime): 20% tax on net rental income (gross income minus documented maintenance/property expenses).

3. Buying & Operating Through a Georgian Company (LLC)

Are injections or reductions of corporate capital taxed?

No, increasing or decreasing a company’s capital using monetary funds is not taxed.

Monetary Capital Increase: Introducing monetary funds into a company via an equity/capital increase does not trigger Corporate Income Tax or VAT.

Monetary Capital Reduction: A subsequent reduction of corporate capital and the repayment of the original contributed monetary capital back to the shareholder is 100% tax-exempt.

How does VAT Recovery (Input Credit) work for a Georgian LLC?

The Mechanism: When a Georgian LLC buys a residential unit from a developer, it can recover/input-credit the 18% VAT charged by the developer. This significantly lowers the actual cash outflow or creates a tax credit.

The Sale: When the LLC later sells the unit (or thins/assigns its construction rights), it will charge 18% VAT on the full sales proceeds and offset it against the input VAT credit.

How can an investor inject money into a Georgian LLC?

Equity/Capital Contributions: Investors fund the company as registered capital.

Shareholder/Investor Loans: Investors issue a formal loan to the company.

What are the tax implications of withdrawing money via Equity vs. Loan?

Equity Repayment: A capital reduction to repay the original contributed capital back to the shareholder is 100% tax-exempt.

Loan Principal Repayment: Repaying the core principal amount of a genuine loan is 100% tax-exempt.

Loan Interest Repayment: If the company pays interest to a lender, it is subject to a 5% withholding tax. The interest must reflect market arms-length rates to avoid being recharacterized as a profit distribution.

When does a company pay Corporate Profit Tax and Dividends?

Estonian Model: Reinvested or retained profits are 0% taxed as long as they stay inside the company.

Distribution Tax: Corporate profit tax becomes payable only when profits leave the company (e.g., via dividends).

Combined Rate: When distributing dividends to an individual shareholder, the company pays 15% Corporate Profit Tax, and the recipient faces a 5% Dividend Withholding Tax (Effective total tax load on distributed net cash is roughly 20%).

4. Special Exemptions: Vacant Land & Company Shares

Is there VAT on the sale of vacant land?

No, the sale of vacant land is completely exempt from VAT without the right to deduct.

For a Company: A Georgian LLC does not charge 18% VAT when selling an empty plot of land. However, it cannot claim input VAT credit for any expenses tied directly to that land plot.

For an Individual: An individual never pays VAT when selling vacant land. The individual will only face a 20% Personal Income Tax on the profit if the land is sold within 2 years of purchase.

Important Exception: If the land has any buildings or structures attached to it, this VAT exemption does not apply, and the transaction is taxed as a standard building supply.

What happens if you sell 100% of the company’s shares instead of selling the property?

The 2-Year Share Exemption Rule: If an individual or foreign entity holds shares in a Georgian company for more than 2 years, the capital gains from selling those shares are 100% tax-exempt from Personal Income Tax.

The Economic Activity Exception: This exemption holds true as long as the shares themselves were not actively used in economic activity. Merely holding shares as a passive investor to receive future dividends or long-term growth does not count as economic activity.

5. Annual Property Tax (The Cost of Holding Assets)

How is the annual Property Tax calculated and when is it paid?

Property tax must be calculated annually and submitted by November 1st of each calendar year for the preceding tax year. The calculation rules differ sharply:

For a Company (LLC): The company pays a flat tax of up to 1% on the average annual net residual book value of the property. Because real estate depreciates on paper corporate books, this tax base can gradually lower over time unless renovations raise the value.

For an Individual (Physical Person): Under the latest Georgian tax amendments, the tax is tied strictly to the individual’s annual global household income:

Income under 100,000 GEL: 0% (Exempt from tax and filing).

Income above 100,000 GEL: 0.8% to 1% on the market value of the property.

6. Non-Resident & Foreign Investor Specifics

I am a non-resident individual/foreign investor. Does the 100,000 GEL property tax exemption apply to me?

Yes, but you must actively claim it. Georgia operates under a strict “Source of Income” principle. Any income derived from real estate located geographically in Georgia is treated as Georgian-sourced income. Non-resident individuals enjoy the exact same 100,000 GEL exemption rule as locals.

The Catch: Because the Georgian Revenue Service cannot automatically see your foreign/global income, they operate under a maximum tax presumption. If a foreign owner fails to submit a declaration, the state assumes your household income exceeds 100,000 GEL and will levy the maximum 0.8% to 1% tax. To enjoy the 0% exemption, foreign owners must proactively file a property declaration by November to declare their income level.

7. Advanced Investor & Operational FAQs (Payment Methods & Foreign Exchange)

Can I buy property using cash in Georgia?

Yes, cash payments are completely legal and unrestricted. Buying real estate, including from major developer corporations, using physical cash faces no general legislative volume caps in Georgia. Many foreign investors finalize transactions by bringing physical cash into a local bank to deposit it directly into the developer’s/seller’s Georgian bank account on the spot.

What is the best way to transfer foreign currency (USD/EUR) to minimize currency exchange losses?

Direct International Wire in foreign currency is best. Real estate contracts in Georgia are almost always pegged to USD or EUR. To avoid double conversion losses, you should wire USD or EUR directly from your foreign bank account to the developer’s/seller’s Georgian bank account. Most developers and sellers maintain multi-currency bank accounts, allowing them to receive your foreign currency directly without losing money on mandatory exchange spreads.

Real estate in Georgia is priced in USD/EUR, but taxes are calculated in GEL. How does this impact me?

Currency Fluctuations Risk: The Revenue Service calculates all tax liabilities using the official National Bank of Georgia exchange rate on the exact day of the transaction. If the GEL depreciates significantly against the USD between the time you buy and sell, you might show a massive taxable “profit” in GEL even if your USD selling price didn’t change at all.

Can I buy real estate directly using Cryptocurrency (Bitcoin, USDT, etc.)?

Officially, no. Real estate cannot be legally bought directly with crypto. Georgian law stipulates that the official legal tender for transactions within the country is the Georgian Lari or bank-to-bank foreign currency wires.

The Solution (Crypto Exchange Offices): Investors can easily liquefy their crypto assets in Georgia. You can bring your cryptocurrency to a licensed local crypto exchange office. After completing standard identity checks (KYC/Know Your Customer forms) to prove the source of funds, the exchange office will convert your crypto into physical cash. Once converted, the funds can immediately be used to execute the property purchase legally.

Are there any currency control restrictions when transferring my profits out of Georgia?

No. Georgia has zero currency control restrictions. Once the corporate profit tax and dividend withholding tax are cleared, you can legally wire USD or EUR anywhere in the world instantly without extra state exit fees.

Summary Matrix: Individual vs. Georgian LLC

(For an investment horizon under 2 years)

Legal Disclaimer

The information provided in this document is for general informational and educational purposes only. It does not constitute legal, financial, or tax advice, and should not be relied upon as such. Tax laws and regulations in Georgia are subject to change and interpretation by the tax authorities. Every real estate transaction has unique circumstances that may affect its tax treatment. Readers are strongly advised to consult with a certified public accountant, qualified tax advisor, or legal professional before entering into any transaction or making business decisions based on this content. The authors and publishers accept no liability for any financial losses or legal actions resulting from the use of this information.