Here’s a comprehensive breakdown of taxes in Georgia

  1. relevant to real estate, investors, and general business.

    Understanding Taxes in Georgia (Country): A Guide for Real Estate Investors and Businesses

    Georgia, known for its business-friendly environment, offers attractive tax policies, particularly in the real estate sector. This guide will outline the key taxes you need to know if you’re considering buying, selling, or investing in real estate, as well as general business operations.

    Real Estate Taxes

    Georgia’s real estate tax system is designed to encourage long-term investment.

    Tax on Real Estate Purchase: There is no tax on the purchase of real estate in Georgia. You will only pay a small registration fee (typically $20 to $200).

    * Tax on Selling Real Estate (Capital Gains Tax):

    After 2 Years of Ownership: If you sell a residential property that you have owned for more than two years, you pay 0% income tax on the profit. This makes Georgia highly appealing for long-term real estate investments.

    Before 2 Years of Ownership: If you sell a property within two years of purchasing it:

    * Residential Property: You pay 5% income tax on the profit (the difference between the buying and selling price).

    * Commercial Property: You pay 20% income tax on the profit.

    * Property Tax (Annual Property Ownership Tax):

    * This is a local tax paid annually, regardless of residency.

    * For Individuals: The rate depends on the owner’s household income and the location of the property.

    * For families with incomes below 100,000 GEL, the rate is between 0.05% and 0.2% of the property’s market value.

    * For families with incomes of 100,000 GEL or more, the rate is between 0.8% and 1% of the property’s market value.

    * For Legal Entities/Companies (Commercial Properties): The annual property tax rate can be up to 1% of the residual balance of the taxable property’s value.

    * Land Tax: Varies based on land type (agricultural/non-agricultural) and municipality, with basic rates per square meter/hectare that can be multiplied by a territorial coefficient.

    * Real Estate Transfer Tax: This is a one-time fee paid upon property registration, typically ranging from 0.05% to 0.1% of the declared property value.

    Taxes for Real Estate Investors (Profit-Related)

    * Residential Rental Income Tax:

    * Individuals renting out residential property (if registered as landlords) pay a fixed 5% on gross rental income. There are generally no deductions for expenses under this simplified regime.

    * If the property is rented to an organization, legal entity, or another individual for residence, the 5% tax rate applies without deducting expenses from this income.

    * If you are not registered in the landlord register, the general personal income tax rate of 20% on net profit (income minus documented expenses) may apply.

    * Commercial Rental Income Tax:

    * Income from the rental of commercial property is generally subject to a 20% income tax rate on the difference between the rent and real estate expenses (repairs, maintenance, etc.).

    General Business Taxes

    * Personal Income Tax (PIT):

    * The standard rate for individuals is 20% on taxable income (total income minus deductible expenses). This applies to employment income and non-registered freelancer income.

    * Small Business Status: For individual entrepreneurs (IEs) with a turnover up to 500,000 GEL per year, a reduced rate of 1% on turnover applies. If annual income exceeds 500,000 GEL twice within three years, this status is revoked, and the 20% rate applies.

    * Tax Residency: Georgian tax residents generally do not pay tax on most types of foreign-sourced income (e.g., dividends from foreign companies, rental income abroad, capital gains on foreign securities).

    * Corporate Profit Tax:

    * The standard corporate income tax rate for legal entities (e.g., LLCs) is 15%. However, Georgia has a unique “Estonian model” of corporate tax. Profit is only taxed when it is distributed (e.g., as dividends) or when certain non-business-related expenses are incurred. Reinvested profits within the company are generally not taxed.

    * Special Tax Rates:

    * 5% for companies with International Company status.

    * 0% for companies with Virtual Zone Entity status.

    * 0% for companies registered in a Free Industrial Zone.

    * Value Added Tax (VAT):

    * The standard VAT rate is 18%.

    * Businesses must register for VAT if their taxable turnover exceeds 100,000 GEL in any continuous 12-month period.

    * VAT applies to the supply of goods and services within Georgia.

    * Certain services (e.g., financial services) and goods are VAT-exempt.

    * Sales Tax (General Consumption Tax):

    * Georgia does not have a separate “sales tax” in the way some countries do. Instead, the 18% VAT acts as a consumption tax applied to the supply of most goods and services.

    * The state sales tax rate in the US state of Georgia is 4%, but this is not applicable to Georgia the country.

    * Excise Tax: Applied to specific goods such as tobacco, alcohol, and fuel.

    * Import Tax (Customs Duty): Applicable to goods imported into Georgia. The rates vary depending on the type of goods.

    Summary of Key Taxes for Your Blog:

    * Real Estate Acquisition Taxes (Minimal!)

    * Real Estate Sale Taxes (The 2-Year Rule is Key!)

    * Annual Property Ownership Taxes (Based on Income/Type)

    * Rental Income Taxes (Different for Residential vs. Commercial)

    * General Business Taxes (PIT, Corporate Profit Tax, VAT)

    Important Note: Tax laws can change, and specific situations may have unique implications. It’s always advisable to consult with a local tax advisor or legal professional in Georgia for personalized advice before making any significant financial decisions.

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Mike Lee

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