How to Optimize Taxes When Investing in Georgian Real Estate
- Tinatin Tolordava
- May 29
- 8 min read
Table of contents
Introduction
Buying property in Georgia isn’t just a lifestyle move. For many international buyers, it’s a tax strategy. With no restrictions on foreign ownership, no annual property tax for most, and the ability to register income under a flat 5% rate, Georgia makes real estate investing simple and rewarding, if you understand how the system works.
In this guide, we break down exactly how real estate tax in Georgia is structured, what exemptions you can claim, and how to avoid common traps that cost investors more than they expected.
Why Georgia Is a Smart Place to Invest in Real Estate
Georgia’s real estate market has grown rapidly over the past decade. Property in Tbilisi, Batumi, and Kutaisi is still affordable compared to Western Europe. And the returns?
Some investors earn up to 10% gross yields annually from short-term rentals. But what truly sets Georgia apart is its low tax burden on both rental income and capital gains.
Here’s what makes the Georgian real estate system attractive:
No restriction on foreign buyers
Simple property registration process
Residential rental income taxed at only 5%
No capital gains tax if held for 2+ years
VAT only kicks in after 100,000 GEL in revenue
Whether you’re buying a flat in Tbilisi, land in Kakheti, or a rental unit in Batumi, tax optimization starts with knowing what applies and what doesn’t.
Understanding Real Estate Taxes in Georgia
Georgia doesn’t impose an annual property tax on residential real estate unless your annual income exceeds 40,000 GEL. That means if you own and use the property personally, or don’t exceed that income threshold, you may never pay annual property tax at all.
The main taxes to focus on are:
Rental income tax
Capital gains tax on resale
VAT (only in certain conditions)
Let’s break each of those down.
Residential Rental Income Tax: How the 5% Rule Works
If you’re renting out your apartment in Georgia for residential purposes, your rental income is taxed at a flat 5%. But this rate is only available if you register your rental activity in advance with the Revenue Service.
No registration? Then the default rate is applied: 20% on your net income (after expenses). That’s a huge difference.
Here’s what the process looks like when done right:
You register your property as a residential rental
Each month, you report the gross rental income
You pay 5% of that amount as tax
No deductions, no complex paperwork
This model works great for long-term landlords and Airbnb owners alike. But only if you’ve officially declared the activity.
Commercial Rentals and the 20% Rule
Renting out your space for business use? That’s classified as commercial rental. In this case, you’ll pay 20% tax on your net profit: income minus documented expenses. This is where detailed recordkeeping becomes important.
If you’re not sure whether your property is residential or commercial in the eyes of Georgian tax law, get clarity before you list. Many owners assume they’re safe with the 5% model, only to discover their property was reclassified based on zoning, usage, or tenants.
Capital Gains Tax: The 2-Year Rule
Selling your property at a profit within two years of purchase? You’ll pay 5% capital gains tax on residential property and 20% on commercial.
But hold the property for more than two years, and you’re exempt from capital gains tax altogether.
This simple rule makes Georgia highly appealing for long-term investors. You can buy, rent out your property at a 5% rental tax rate, then sell tax-free after two years — a combination few countries offer.
Here’s a practical example:
You buy an apartment in Tbilisi for $80,000
You rent it for two years at $800/month (5% rental tax)
After two years, you sell it for $100,000
Because you held it for more than two years, you pay 0% capital gains tax on the $20,000 profit
Compare that to most countries where capital gains tax is 15–30%, and the advantage becomes clear.
VAT and Real Estate: When Does It Apply?
VAT in Georgia is 18%, but it generally doesn’t apply to residential rentals unless your total rental income across all properties exceeds 100,000 GEL (around $36,500) in a 12-month period.
If you cross that threshold, you must register for VAT and start charging it to your tenants or absorbing it as cost.
VAT also applies in cases like:
Selling new property within your business
Running a real estate development or agency
Renting commercial spaces above the income threshold
And don’t forget reverse VAT. If you purchase services from abroad related to your Georgian property — think cleaning software, design services, or Airbnb tools — you may be required to file a reverse VAT declaration, even if you’re not VAT registered.
How to Register a Rental Property for the 5% Tax Rate
This is where investors often get things wrong. They assume the 5% tax applies automatically. It doesn’t.
You must:
Obtain a Georgia Tax ID Number
Log in or work with a tax representative to register your rental activity
Declare income monthly through the Revenue Service’s online portal
Pay 5% of the declared income by the 15th of the following month
Failing to register means paying 20% by default, plus interest and potential penalties.
Owning Property as a Person vs Through a Company
Foreign investors can own property directly as individuals and most do. But if you’re building a real estate portfolio in Georgia, it might be worth registering a local LLC.
Here’s a comparison:
If you’re running a large-scale rental business or planning to buy and flip multiple units, the LLC route can offer cleaner accounting, better structure, and access to corporate bank accounts in Georgia.
Tax Benefits for Foreign Investors
Georgia makes it easy for non-residents to invest:
You don’t need to be a tax resident
You can open a local bank account for rent collection
No restrictions on foreign property ownership
No inheritance tax or annual wealth tax
Low transfer fees (usually around 0.05% of sale price)
If you do become a Georgian tax resident (by spending 183+ days per year in the country), you may unlock access to Georgia’s double tax treaty network, which includes Germany, France, UK, UAE, and others.
This helps avoid paying tax on the same income in two countries. It also strengthens your legal protection if you’re managing cross-border revenue.
When Holding Property Long-Term Makes Sense
Georgia rewards patience. The capital gains tax exemption after two years is a game-changer. But there’s more to gain than just avoiding tax at the point of sale.
If you hold property and rent it consistently, your investment becomes:
Cash-flow positive (with minimal monthly tax)
Low-maintenance in terms of filings
Easier to manage as a non-resident investor
Holding long-term also allows you to avoid high legal and banking costs tied to frequent sales. This is why many investors in Batumi and Tbilisi choose to hold rather than flip.
When Buying Through a Company Makes More Sense
Let’s say you’re not just buying one flat you’re building a portfolio of five or ten apartments. At this stage, personal ownership can create friction:
Harder to separate income and expenses across units
Risk of hitting VAT thresholds
No access to corporate deductions
No formal brand to operate under
Owning through an LLC gives you:
More control
Easier access to bookkeeping
Lower dividend tax if structured properly
A stronger profile for buyers, banks, or tenants
You’ll need to register for corporate income tax and file monthly returns. But Gegidze handles this for most of our property investor clients and helps you stay compliant without the stress.
Beware of These Costly Mistakes
Even experienced investors get caught off guard in Georgia. These are the most common issues we see:
Not registering your rental property
If you rent out a flat without registering it as residential income, you forfeit the 5% rate. The default 20% applies. And the tax office can backdate that decision.
Crossing the 100,000 GEL mark without VAT registration
Many Airbnb landlords exceed this threshold, especially during summer. If you miss this detail, you may be liable for VAT and fines.
Not filing reverse VAT on foreign services
If you use foreign-paid tools like Smartbnb, PriceLabs, or paid cleaning platforms, those services may require a reverse VAT report even if you’re not registered for VAT. Skipping this can raise red flags.
Flipping before the 2-year window
Holding a property for 23 months and selling? That profit is taxable. Missed it by one month. Plan your exit around this window if capital gains are a concern.
Failing to keep clean documentation
While Georgia’s tax system is simple, it’s also serious. If you can’t prove your expenses, or if your property classification isn’t clear, you could lose exemptions or get reclassified at audit.
Foreign investors trying to 'stay under the radar'
This is a common rookie mindset but Georgia has automatic information exchange agreements. Eventually, that rental income will surface. Better to stay compliant and only pay 5% than risk a bigger bill.
How Tax Residency Can Enhance Your Strategy
Most real estate investors remain non-residents of Georgia. But some choose to become tax residents to access:
Double tax treaties
Residency permit pathways
High-net-worth individual benefits
You become a Georgian tax resident by spending 183 days in-country within a rolling 12-month period. If you qualify, you can request a tax residency certificate, useful for avoiding double taxation in your home country.
This is especially valuable if you’re from a high-tax jurisdiction like Germany, France, or the U.S. (if not subject to worldwide tax). Residency can also help secure longer-term visas, bank relationships, and peace of mind.
Comparing Tax Outcomes: Before vs After Optimization
When to Work with a Local Advisor
You don’t need to navigate Georgia’s real estate tax system alone. In fact, most successful investors delegate compliance from day one. That’s where we step in.
At Gegidze, we help you:
Register your rental property correctly
Choose the right ownership structure
Handle monthly declarations and reverse VAT
Stay below audit radar
Plan sales strategically to avoid capital gains tax
Secure Georgian tax residency when it benefits you
Whether you’re buying a house in Tbilisi, renting apartments in Batumi, or building a long-term income stream through Georgian land we can set it up the right way.
Ready to stop guessing and start investing smart in Georgia?
Let us help you lower your real estate tax burden, stay compliant, and maximize your ROI.
Book a free consultation with Gegidze today. No pressure. Just answers.
Frequently asked questions (FAQ)
What is the rental income tax rate for property in Georgia?
If your rental is registered for residential use, you pay just 5% of gross income. If unregistered or used commercially, you pay 20% on net profit.
