Foreign Investment in Georgia
Georgia is one of the most foreigner-friendly countries in Europe for foreign investors. As far as the Georgian government is concerned, it views foreign investment as a potential growth engine for its economy. It recognizes that citizens from foreign countries can bring in significant capital that will stimulate various sectors of the Georgian economy such as real estate, business, and tourism.
As a result, Georgia offers various forms of relief, for example in the area of taxation. Georgian tax law favors foreign investors, which naturally attracts them to invest in Georgia across various life domains.
Real Estate Taxes in Georgia
Investments through real estate assets are an example of very common investments worldwide. In Georgia, investing through the purchase of real estate is a popular practice among foreign investors, including Israelis. The low cost of living in Georgia allows for the purchase of a respectable property at a price considered cheap relative to its price in Israel, for example.
In Georgia, there is no purchase tax on the acquisition of an apartment. This means that even if you are buying multiple apartments in order to generate rental yield from real estate – for example by renting them out to local residents – you can purchase the apartments with no purchase tax. There is real estate taxation in Georgia that is relatively negligible, applying to the actual holding of the property and the size of the land on which the property sits.
How to Lawfully Avoid Paying Capital Gains Tax
A real estate tax that does exist in Georgia is the capital gains tax. Decided to sell a real estate property you own in Georgia? The capital gains tax stands at 5% of the profit generated upon sale. Nevertheless, it is possible to sell an apartment or other real estate property without paying capital gains tax. If you sell your apartment within the time frame set by Georgian law, the capital gains tax will be zero. Under Georgian law, this can be done by selling the apartment within two years from the day it was purchased. Selling after this period will require the seller to pay capital gains tax.
Corporate Tax in Georgia
A company, as a legal entity separate from its owners, can generate various profits as a result of its activities. The owners of the company can enjoy these profits when the company distributes dividends to them, or pays them a salary as officeholders in the company, such as CEOs or VPs. Corporate tax is imposed on the profit generated by the company as a result of its activities. Georgia’s corporate tax is considered particularly friendly for foreign companies that wish to invest in Georgia. The tax rate stands at 15%. By comparison, it is lower than the income tax imposed on individuals in Georgia.
Corporate Tax Planning
The central advantage of corporate tax in Georgia is the ability to avoid paying tax on profits generated. A company can generate profits as a result of its activities and still not pay 15% corporate tax in Georgia. Georgian law provides that if a company decides to reinvest its profits back into the company instead of paying out dividends, it does not have to pay corporate tax at all. This allows the company to invest more funds in Georgia on the one hand, and to expand its activity on the other hand.
Professional Assistance
Tax planning in Georgia can be very attractive for various investors. Georgian tax laws naturally lean toward foreign investors, in line with the government’s vision of encouraging foreign investment. Therefore, tax planning can be carried out efficiently with professional assistance from attorneys or other professionals specializing in Georgian taxation.
