Introduction
The relatively low taxes on property ownership in Georgia surprises many Expats. Taxes associated with property ownership is one of the most popular topics we cover in our free consultations. In this article I outline the taxes (and other costs) that you need to know about when buying property in Georgia.
Stamp Duty / Purchase Taxes
Surprisingly for many foreign investors, there is no Stamp Duty or equivalent tax to pay when purchasing Real Estate. Other than the actual purchase price that you pay for the property, other costs associated with the property purchase are extremely low.
The cost of registering a property is only ₾50-200 GEL ($20-80 USD) depending on how quickly you want it processed. There are no hidden costs.
Annual Property Tax
Annual property tax in Georgia is related to the locality (municipality) you purchase in. Outlined in Chapters XXIX & IX of the Tax Code of Georgia, the amount of property tax is 1% of the appraised property value at most. In many cases (depending on the municipality in question, as well as your annual household income) it is much less than that.
Households with annual income below GEL 40,000 are exempt from annual property tax. Where annual income is between GEL40,000 and GEL100,000, the tax is payable at rates ranging from 0.05% to 0.2% of the appraised value of the property. Above GEL 100,000, the rates range from 0.8% to 1%.
Capital Gains Tax (CGT)
If you decide to sell your property within two years of buying it, you incur just 5% income tax on capital gains. There is no tax on capital gains if you decide to sell after two years have elapsed.
If investing in off-plan properties, it’s important to know that you are not the official owner of the property until it’s handed over to you by the developer. For CGT purposes, ownership of the property commences when your name is registered on the property extract.
Rental Income Tax
Rental income is treated at the standard income tax rate of 20%. However, if you register as a landlord, you pay just 5% tax on your gross rental income on residential lettings. It’s 20% on Commercial lettings. If unregistered, you pay at the standard 20% personal income tax rate, but are allowed to deduct expenses. There’s no limit on the number of residential properties you can own to avail of the reduced 5% tax rate, as a registered landlord.
Other Costs
Aside from taxes, there are a few other costs to consider when purchasing property in Georgia.
Legal fees
Legal fees include, but are not limited to:
Due Diligence – Renewing the property extract. Checking the owner’s background: listings in the debtor’s registry, ownership of other immovable property by the seller, ownership of shares in a Georgia company by the seller. Identifying the characteristics of the property (i.e., address, area). Checking registered legal defects (liens, mortgages, restrictions, obligations, etc.) Checking the signatory’s Power of Attorney (if the agreement is signed by a third party). Typical cost is 300GEL.
Preparing/Review Registration Documents – namely deposit/pre-purchase agreement and/or purchase agreement. Typical cost is 600GEL, but can depend on the length of the agreements to be drafted/reviewed.
Representation before the seller – Negotiating terms of the sales agreement on your behalf. Organizing procedure of the payment and property registration. Typical cost is 300GEL.
In-person Assistance with the registration – accompanying the client to the Public Service Hall, bank, or notary. Signing in the capacity of a translator. Government fee for 4 business day transfer of title procedure (same day and 1 business day transfer are extra). Typical cost is 600GEL.
Power of Attorney (PoA) – for many investors, their time may be quite limited, and coming to Georgia in person for many weeks to follow the whole selection and then the purchase process, is simply not practical, making the use of a PoA to complete your purchase an attractive option. A PoA needs to be drafted by a lawyer, translated to English (so you know what you are signing), and notarized at a Notary’s office. Typical cost is 400GEL for a Local PoA, 600GEL for a foreign PoA.
So, depending on the range of services required, Legal fees can cost up to 2000GEL.
Property Inspection & Appraisals
Property Inspections are not commonly used in Georgia, but provide peace of mind to purchasers, particularly Expats. However, costs vary depending on the condition and size of the property. A simple visual once-over by a surveyor can cost 500GEL, whereas a detailed comprehensive inspection and report by an experienced civil engineer can cost up to 1000GEL.
Property appraisals are carried out by accredited & government approved appraisers. The costs vary depending on how quickly the appraisal is required. Costs are usually no more than 100GEL, and the appraisal is received within 24 hrs. Such appraisals are used for property valuations required for the residency through property investment programs.
Sales agent fees
Sales agent fees are by far the largest cost incurred by purchasers. They are a cost paid directly by the seller/owner to a sales agent but ultimately incurred by the purchaser, as these are included in the purchase price. They are a substantial hidden cost that are often unnoticed by purchasers. Typical agents fees in Georgia are 3% of the purchase price.
Our Real Estate Purchase Assistance services are essentially everything you wish would be done by a really good Sales Agent, with the added benefit of doing even more work than any Sell-Side agent in Georgia would, being 100% aligned with your interests and being backed and followed through by a legal team.
Conclusion
When investing in Georgia, taxes on property are an important consideration. The costs of purchasing a property in Georgia are relatively low compared with other jurisdictions. As with any investment, it is important to understand all associated costs before proceeding. There are certain unusual traits of the real estate industry in Georgia, that we cover in some detail in our Comprehensive Buyers Guide.
