PROPERTY AND REAL ESTATE
Investing in Georgia
When it comes to business and investment, Georgia’s ranking in the World Bank Group’s annual Ease of Doing Business report, which encompasses 190 countries, 7th place in 2019.
Why invest in Georgia’s Real Estate and Hospitality sectors?
The Real Estate and Hospitality sectors are two of the fastest growing sectors benefitting the Georgian Economy. The flourishing years of 2004–2007 were the catalyst for real estate development in Georgia, as growing economy required additional residential and commercial spaces. Booming tourism has been another key contributor to real estate development in recent years.
Georgia is already a popular tourist destination, with tourist numbers exceeding the country’s population by millions every year. Georgia offers significant potential to develop residential, hotel and leisure, and retail and office premises. Have more questions?
Natural and Cultural Resources
Georgia is home to more than 12,000 historical and cultural monuments, four of which are included on the list of UNESCO World Heritage Sites. Georgia’s beach resorts, ski resorts, medical and wellness destinations, cultural attractions, etc. have boosted travel inflows and transformed tourism into a key sector. The travel and tourism industry has generated economic growth by contributing 20% to global GDP.
Some of Georgia’s vast natural resources are forests, hydro-power, as well as copper, gold, and manganese. In addition, Georgia’s coastal climate and soils enable the growth of tea, citrus, and grapes.
Regional Hub Economy
Georgia is a natural transport and logistics hub, bridging Europe with Asia. The shortest route from Europe to China and Asia—approximately 400 km of highways and 600 km of air routes—passes through Georgia. A host of free trade agreements, Georgia has access to an approximately $3 billion market without customs duties, including the European Union (EU) and China. International visitors enjoy easy access to three international airports (Tbilisi, Batumi, and Kutaisi) as well as modern railways. Georgia has a visa-free regime with citizens of nearly 100 countries.
With a strong financial sector, modern institutions, and a government committed to supporting market-based growth, Georgia has substantial opportunities to be positioned as a service hub for European, Asian, and Caucasian regional headquarters.
LOCATION
Strategically located at the crossroad of Europe and Asia
INFRASTRUCTURE
Modern and fast-developing infrastructure
PROFIT
Reinvested Profit: Flat rate, low taxes and no corporate income tax on retained or reinvested profits
BUSINESS
Recognized as one of the easiest countries in the world to do business
LABOR
Skilled labor force with competitive wages
TRADING
Free Trade Agreements with 2.3 bin market EU, China (Including Hong Kong), Turkey, Ukraine, CIS and EFTA
BANKING
The Georgian Banking system is one of the most robust in the region, with its bank now listed on the London Stock Exchange. The share of reinvested earnings in the total FDI was 45.3% in 2018. To compare, that same number stood at 34.7% in 2017.
TOP FDI SECTORS
Financial, Transport and Communication, Manufacturing, Energy, Construction, Real Estate, Hospitality, Electricity, Industry, Import/Export, Regional Logistics, and Business Process Outsourcing
TAX INCENTIVES
Non-residents are not taxed on any foreign source income. International assets of non-residents are completely exempt of any inheritance tax. Neither minimum payments nor differentiation approaches of any kind are applied.
TAXATION SYSTEM – FLAT RATES
Georgia imposes six major taxes, not exceeding 20%: personal income, corporate income, value added tax, import tax, excise tax, property tax.
FREE INDUSTRIAL ZONE
Free Industrial Zone (FIZ) is a type of zone under the Tax Code of Georgia where business-friendly regulations and a favorable tax and customs system apply.
FIZ ENTERPRISE
Four Free Industrial Zones operate in Georgia in the following cities: Poti (seaport), Kutaisi (third largest city), and Tbilisi (capital city).
ECONOMY
Tax Rates for Residents
Individuals are considered tax residents in Georgia for the whole tax year if they are:
- physically present in Georgia for 183 or more successive days during the 12-month period that a tax return covers (the calendar tax year);
- part of the State Security Service of Georgia (SSSG) and live abroad during the calendar tax year;
- Georgian citizens and apply for residency, provided they are not tax residents in any other country; or
- high-net-worth individuals—an individual whose investible assets exceed GEL 200,000. These individuals can become Georgian tax residents if they:
- prove that their Georgian source income amounts to GEL 25,000 or more per tax year; or
- hold a residence permit or local personal ID cord.
Note: Income (including benefits) that is earned by a Georgian tax resident but is from a foreign source is nontaxable.
Tax Rates for Non-Residents
Non-residents are not taxed on any foreign source income. International assets of non-residents are completely exempt of any inheritance tax. Neither minimum payments nor differentiation approaches of any kind are applied.
Non-residents pay the following taxes:
- foreign sourced income: 0%
- locally sourced income
- dividend income (received from Georgian resident entity): 5% at source
- interest income (in case income is received from licensed financial institutions): 0%
- coupon income (for offshore residents): 5% or 15% at source
- capital gain (bonds, stocks, etc.): 20%
- capital gain (in case of possession for more than 2 years): 0%
- capital gain and interest/coupon income (received from bonds or stocks issued through public offering by Georgian residents and traded on Georgian stock exchange markets): 0%
Economic Status
In the last years, Georgia has implemented a series of progressive reforms related to anti-corruption, labor, and tax codes. Such reforms, predominantly those associated with Georgia’s economic development, have resulted in a large influx of foreign investment. According to the GeoStat—the National Statistics Office of Georgia—the foreign direct investment (FDI) has increased by 21% from 2016 to 2017, recording the highest average over the past 22 years.
Based on the United States’ CIA World Factbook (last updated in November 2018), the breakdown of Georgia’s GDP by sector of origin is as follows:
– 67.9% services manufacturing, construction, …
– 23.7% industry steel, machine tools, mining, wine, …
– 8.2% agriculture citrus, grapes, tea, hazelnuts, vegetables, and livestock.
While Georgia imports nearly all its natural gas and oil products, it is currently privatizing the energy sector: the electricity distribution network was privatized in 1998, and the privatization of hydroelectric stations commenced in 2006. Additionally, the construction of Georgia’s transportation pipelines underscores its strategic location between Europe and Asia, which in turn highlights its role as a transit hub for gas, oil, and other goods, placing it on the trajectory of long-term growth.
Unemployment
The unemployment rate in Georgia inched down from the reported number of 14% in 2016 to 13.9% in 2017, hitting the lowest level since 2004. The labor force participation rate also dropped to 65.8% in 2018 from 66.3% in 2017.
Liberal Tax Environment
COMPANY INCORPORATION
- no requirements on start-up capital
- application of “one-stop-shop” principle
- possibility of obtaining registration documents either in Georgian or English
- registration in 1–2 days
COMPETITIVE LABOR
- availability of skilled, literate workforce at competitive wages
- no restriction on hiring expatriates
- no social tax
COMPETITIVE TRADE REGIMES
- low tariffs
- streamlined border clearance procedures
- limited number of export and import licensing requirements
- deep and comprehensive Free Trade Agreement (FTA) with the EU
- FTA with Commonwealth of Independent States (CIS) countries and Turkey
- Generalized Scheme of Preferences (GSP) with the US, Japan, Canada, Switzerland, and Norway
Government Structure
Georgia is a parliamentary representative democratic republic with a multi-party system. The president of Georgia is the constitutional head of state, and the prime minister is the head of government. While executive power is vested in both the president and the government, legislative power is exerted by the government and the parliament of Georgia.
Legal System
Georgia’s legal system is based on civil law. The court system in Georgia has three branches: Courts of First Instance (District or City Courts), Appellate Courts, and the Supreme Court.
Flat Rates
Georgia imposes six major taxes, none of which exceeds 20%:
- personal income tax: 20%
- corporate income tax (CIT): 15%
- value added tax (VAT): 18%
- import tax (depending on goods imported): 0%, 5%, or 12%
- excise tax (applicable only on selected goods): variable tax amount
- property tax: up to 1%
Free Industrial Zone
Free Industrial Zone (FIZ) is a type of zone under the Tax Code of Georgia where business-friendly regulations and a favorable tax and customs system apply.
FIZ Enterprise
Four Free Industrial Zones operate in Georgia in the following cities: Poti (seaport), Kutaisi (third largest city), and Tbilisi (capital city).
The taxation benefits of FIZ enterprise are:
- no VAT and CIT in the case of supply of goods and/or services between FIZ companies
- 4% tax on supply of goods between FIZ and Georgian companies
- no import tax when importing goods produced within FIZ countries to other Georgian territories
- no import tax and VAT when bringing foreign goods to FIZ countries
- no liability to asses and pay reverse charge VAT (RC VAT)
- no liability to withhold personal income tax upon salary payments to Georgian resident employees
- no property tax on property located within the territory of FIZ countries
- special exemptions from CIT
