This article will study the possibilities of investing in the real estate of Georgia. We are not referring to the state of Georgia in the United States. In this article, we are talking about the country Georgia in Eastern Europe.
Georgia is a country located in the Caucasus region of Eurasia. It has an area of 69,700 square miles. Georgia has 5.7 million people. It’s the oldest wine country for export. Recently, this country gains popularity because of its low tax environment and the government initiative in offering frameworks for cryptocurrency-related business. Its friendly business environment can even compare with well-known international financial centres like Singapore or Hong Kong.
If people want to invest in properties in Georgia, it is important to learn more about its economy and government policies first.
Economy of Georgia and why people invest there
Georgia has become a friendly jurisdiction for global entrepreneurs who want to set up entities to manage their business in recent years. Corporate profit tax is 15% for resident companies. On top of that, no corporate income tax will be levied on retained and reinvested profit. No capital gains, wealth or inheritance tax. It has double taxation avoidance treaties with 56 countries. Non-resident companies are not taxed as well.
According to our recent research in August 2021, corporate income tax can be reduced to 1% or even 0. We will go on to talk a little bit more in this article. According to the World Bank Group, Georgia ranks as the 3rd least tax burdened country globally, with a 9.9% total tax rate.
According to the World Bank Group, Georgia ranks as the 3rd least tax burdened country globally, with a 9.9% total tax rate.
Georgia offers a special regime for IT companies
If people do not plan to live and work in Georgia, they choose to set up an offshore company in Georgia to claim the virtual zone status. It is prevalent for IT business. With a low tax structure and friendly policy, Georgia becomes one of the top digital nomads who want to incorporate an IT business.
Georgia becomes one of the top digital nomads who want to incorporate an IT business.
Benefits of Digital Company in Georgia
If a company is registered as digital and virtual, a Georgian company can claim extra benefits in tax. It is possible that digital company tax can be reduced to zero. It means that IT businesses incorporated in Georgia can pay no taxes at all. Furthermore, this type of business does not require to charge VAT and profit tax.
Georgia offers a simplified tax regime
Among all former Soviet Union countries, Georgia seems to offer the most streamlined tax regime and efficient government service. You can compare its simplified tax regime to financial centres like Hong Kong and Singapore.
Georgia offers the following tax structure and benefits:
- Corporate profit tax. (0% or 15%, depending on the business of the company. Digital and virtual companies can enjoy a tax-free status) It is even lower than Hong Kong and Singapore;
- No corporate income tax on retained and reinvested profits. It is similar to Estonian company which is famous for its friendly environment for digital nomads;
- Profit tax in Georgia applies only to distributed earnings;
- Value-added tax is 18%;
- Property tax up to 1%;
- Personal income tax is 20%;
- Excise (on few selected goods like cigarettes, alcohol, etc.) and Import tax are 0%, 5% or 12%;
- Dividend income tax is 5 %.
Among all former Soviet Union countries, Georgia seems to offer the most streamlined tax regime. You can compare its simplified tax regime to financial centres like Hong Kong and Singapore.
After you read these numbers, you can see that Georgia offers an excellent environment for business. You will also be surprised that it is much more friendly and convenient than many European countries and financial centres like Hong Kong and Singapore. You won’t be surprised why the property markets in Georgia have become a hot very commodity. With this good structure, it’s good to pay attention to the future development of Georgia. It is also nice to study the development of properties in Georgia.
Friendly to Small Businesses
The Georgian government introduced new regulations to simplify the tax regime and streamline many processes for small enterprises. For companies with less than USD 151,000 annual turnover, corporate tax is reduced to even 1%. Companies can file VAT electronically. The government is also actively promoting strategic economic development plans with different organizations.
Georgia’s ambition is to become a major global player in the tech scene. It has strong ambitions to develop the economy of the country with a long-term mindset.
Georgian Government Program 2021-2024
In 2020, the Georgian Government launched a program called “Georgian Government Program 2021-2024 Toward Building a European State). It focuses on the commitment to property rights protection and various policies to develop the country to become a European State. It also focuses on its future development, positioning the country as a hub between Asia and Europe. The US embassy in Georgia also indicated the business and investment conditions of Georgia are sound.
In 2020, the Georgian Government launched a program called “Georgian Government Program 2021-2024 Toward Building a European State).
European Union and Free Trade Agreement
The country also signed different free trade agreements with many countries. Georgia formed a free trade agreement with the European Union and the European Free Trade Association countries. It also signed a free trade agreement with China in 2018. Of course, as a former Soviet Union country, it also has a free trade agreement with the Commonwealth of Independent States. The country also signed a free trade agreement with India and Hong Kong. The US and Georgia have also shared a Bilateral Investment Treaty since 1997. Georgia is also preparing to apply for EU membership in 2024 formally.
All trade agreements indicated that Georgia is very ambitious to develop its economy. It is actively promoting itself as a business hub in the region between Asia and Europe. Overall speaking, its direction is making positive development to its economic growth in the future.
All trade agreements indicated that Georgia is very ambitious to develop its economy. It is actively promoting itself as a business hub in the region between Asia and Europe. Overall speaking, its direction is making positive development to its economic growth in the future.
Banking and Cryptocurrency Activities in Georgia
Georgia is one of the few countries which issued Payment Services Provider license to cryptocurrency exchange activities business. The country has a legal framework to issue electronic money licenses. The banking sector is surprisingly robust and efficient. Banks do welcome foreigners to open bank accounts in the country.
Georgia is one of the very few countries which are not under the Common Reporting Standard (“the CRS”). It means that the government and banks in Georgia are not required to determine the tax residency of the account holders. No information is shared with the tax authority of Georgia or other countries/jurisdictions. That increases the interest of many foreigners living in a high tax country to manage the wealth and business setup in Georgia.
How Efficient is Georgia?
Our research team keeps receiving positive feedback about Georgia. One of them is from Ukraine who’s living in Batumi now. Where is Batumi? Batumi is a city in the Black Sea region of Georgia, on the coast of the Black Sea. It is located between the cities of Poti and Kobuleti and is the capital of the Samegrelo-Zemo Svaneti region. It was once a very sleepy city. Now is full of casinos, high rise buildings and hotels.
Batumi is a resort city in Georgia where many Ukrainian citizens live. One of our research partners from Ukraine plans to buy a property in Batumi and use it as a second residence. It took less than 1 hour to open a company in Batumi. He can get a residence permit in Batumi in 4 days. The craziest feedback we heard are he can buy real estate in Batumi on an instalment basis at 0% interest. He doesn’t have to buy properties in Georgia through banks or mortgages. Even no lawyer is needed. He simply by the properties from the property developer directly.
The place attracts many buyers from Ukraine, Lithuania, Latvia, Russia, Belarus and Kazakhstan.
What People Are Concerned About
Most are concerned about the country’s judiciary system. It remains one of the greatest concerns, as indicated by OECD. There are concerns regarding the integrity of the judicial appointment process and the capacity of the courts to deliver quality outcomes. The Georgian government is making reforms about this issue. Civil disputes remain a very lengthy process. It can hinder the confidence of international investors.
The Georgian government continues to address these issues. Despite these remaining challenges, Georgia still ranks high in the region as a good place to do business.
Should you make a Real Estate Investment in Georgia?
With the growing number of Westerners interested in buying property in Eastern Europe, many are turning to Tbilisi as an investment opportunity. Known for its beautiful architecture and bustling nightlife, the Georgian capital is a great place to find a home away. There are a lot of construction projects in Batumi. Although Covid-19 hit hard in Georgia, it is still one of the most popular destinations for global entrepreneurs. Real estate prices in Georgie didn’t go down much. Of course, it doesn’t come without any risk.
Should you buy properties in Georgia?
There are few questions you should ask yourself before you move to buy or invest in properties in Georgia.
- Are you going to buy it for yourself?
- Are you going to take it as an investment, buy it and rent it out?
- Which city in Georgia do you plan to buy properties?
- If not Georgia, where would you like to go to buy or invest in properties?
Comparing Property Investment in Georgia and Other Countries
It depends where you would like to compare. Do you compare investment properties in London or New York? Do you compare the real estate markets in Italy, Spain or Thailand? We analyze the prospects of the real estate market based on the economic development of the countries.
If you want to compare buying properties in Georgia or Italy, Thailand, Georgia offers better prospects. Why?
Georgia doesn’t have natural resources like its neighbours Azerbaijan or Russia. However, Georgia can offer other benefits for global entrepreneurs, such as a friendly tax environment and ease of managing companies. These characteristics are quite unlike what you can do in Italy, Spain or Thailand, where incorporating a company is usually troublesome and has limitations on foreign ownership.
These characteristics are quite unlike what you can do in Italy, Spain or Thailand. I where incorporating a company is usually troublesome and has limitations on foreign ownership.Georgia population is young, skilled and competitively priced. More than 60% of the young population know English. The average salary is still competitive. So, Georgia offers good reasons for investors to find opportunities based on its future economic development. However, there must be something you need to pay attention to when it comes to buying properties.
Buying Properties in Tbilisi or Batumi?
Tbilisi is the best choice. The capital city Tbilisi offers the highest number of job opportunities. If you take a look at the list of startups in Georgia, most are based in Tbilisi. It is where the jobs are based.
There is an oversupply issue in the seaside city Batumi. Batumi’s economy relies mostly on tourism and gambling. Covid-19 has slowed down the development of tourism. Batumi’s tourism market is relatively small.
Georgia does make it a lovely place to do business: low cost with running a business, cheap labour relative to other countries. It is good to continue observing the economic development and its real estate market.
The weather in Batumi is not an all year sunshiney seaside cities like what you can see in Thailand or Mexico. It’s only a summer market. If you bet on tourism and buy properties in Batumi to rent through Airbnb, you may only generate income for a few months.
Overall speaking, the business environment in Georgia is strong. It offers good prospects. If you compare Georgia with other European countries, Georgia does have a reform mindset. Georgia may have an oversupply issue, which is similar to Italy, Spain and Thailand.
Georgia does make it a lovely place to do business: low cost with running a business, cheap labour relative to other countries. It is good to continue observing the economic development and its real estate market.
