Georgia has long attracted foreign investors with one of the most liberal tax regimes in Europe. However, even in this favorable environment, there are legitimate ways to further optimize the costs of buying, owning and selling real estate.
Choosing the Right Form of Ownership
To minimize taxes, many sophisticated investors register a company in Georgia that becomes the formal owner of the property. This approach is especially advantageous if the property will be used for commercial purposes. Local LLCs (Limited Liability Companies) pay only 15% income tax, and this rate can be reduced if funds are reinvested in business development.
It is important to note that for residential properties, this method only works if the property is rented. If the house or apartment is used as a personal residence, the tax authorities may reclassify the scheme.
Using the grace period when selling
Georgian tax law provides for a complete exemption from income tax on the sale of real estate if the property has been owned for more than three years. This rule applies to residents and foreigners alike.
Many investors deliberately hold out for this period, even if there is a favorable purchase offer in the second year of ownership. The difference is significant: if you sell early, you will have to pay 5% of the transaction amount, which would be $10,000 for a $200,000 property.
Property Tax Optimization
The annual property in Georgia tax ranges from 0.1% to 1% of the assessed value. At the same time, the assessed value is often 2-3 times lower than the market value. However, there is a nuance: if you buy a property at a price much higher than the cadastral value, the new owner may face a reassessment.
Experienced buyers check the cadastral value in advance and sometimes challenge it in court, especially for older properties. A successful downward revision can save hundreds of dollars annually.
Special Programs for Investors
Investments of $300,000 or more in real estate may qualify for Georgia tax residency. This provides access to unique tax treatment:
- Zero tax on income earned outside Georgia
- Preferential tax rates for certain types of businesses
- Eligibility for residency for the entire family
Many investors use this program in conjunction with the purchase of rental properties, creating a legitimate tax optimization scheme for global income.
Architectural features as a way to save money
An interesting lifehack has to do with remodeling design. Georgia has special incentive programs for the rehabilitation of historic buildings. Owners of properties recognized as cultural heritage can receive
- Partial tax exemption for 5-10 years
- State grants for restoration
- Simplified licensing for hotel operations
Seasonal tax tricks
For properties located in resort areas (Batumi, Kobuleti, Gudauri) there is an interesting opportunity to reduce the tax burden. If you officially register a dwelling as “seasonal” (used less than 6 months a year), you can achieve a reduction in the cadastral value and, accordingly, a reduction in the property tax.
Important Cautions
When using these methods, it is important to strike a balance between optimization and abuse. Georgian tax authorities are loyal, but keep a close eye on blatant tax evasion schemes. All of the above methods are perfectly legal, but require proper documentation and sometimes consultation with a local attorney.
A competent use of Georgian tax legislation allows you to reduce the cost of owning real estate by 15-30% without violating any laws. The main thing is to think about the strategy in advance and take into account all the nuances, starting from the choice of the property to the timing of its sale.
