In fact, only a handful of countries remain as prime real estate investment locations, making them attractive for investors seeking stable income from real estate with maximum profitability and minimal taxation.

Our topic for today is the country, which has a Gross Rental Yield of 8.1%. Moreover, the relatively low taxes on property ownership here surprises many Expats. If this is new to you, then this article is a must-read!

The point at issue is about Georgia, a country with the most advantageous geographical position at the crossroads of Europe and Asia. As a country with a rich cultural heritage and strategic geographic location, Georgia has become an appealing destination for foreign investment.

The increasing popularity of Georgia for real estate investment by foreigners stems from its combination of financial benefits, lifestyle advantages, and relative ease of acquiring property.

Despite the current hostilities in the region (ongoing conflict between Russia and Ukraine), Georgian investment market remains steady and in certain cases, demand has even increased.

High-yield profit and low taxes - that’s key factors, why Georgia is catching the attention of savvy investors from all over the world, while the tax systems of European countries are complex and have many nuances. For example, Spain is about to introduce a 100% tax on property purchases made by buyers outside of the EU, in an effort to manage the country's growing housing crisis by decreasing foreign purchases. Opponents of the plan argue that such restrictions could have a major impact on the country's tourism sector which is a major contributor to the country's economy.

According to Numbeo, an online database of user-contributed data on cost of living around the globe, and The Global Property Guide (GPG) - the premier resource for real estate investors and analysts worldwide, Georgia ranks first in the list of countries such as mentioned below:

Gross Rental Yield City Centre by City

● Kyrgyzstan 8.5  
● Georgia 8.1
● Kazakhstan 7.8
● Ireland 7.7
● Turkey 6.7
● Saudi Arabia 6.3             
● United Arab Emirates 6.2                          
● Spain 5.3
● Azerbaijan 5.0
● Belgium 4.6

Gross Rental Yield Outside Of Center

● Georgia 8.8
● Uzbekistan 8.7 
● Kazakhstan 8.2
● Ireland 8.1
● Turkey 7.6
● United Arab Emirates 7.6            
● Ukraine 5.4
● Spain 5.3
● Saudi Arabia 7.4             
● Azerbaijan 5.2

To gain a better understanding of the tax costs that foreign citizens incur on real estate in Georgia, let's go deeper into the numbers.

According to the report given by the Georgian Revenue Service to Kedaro News, foreign individuals and entities can acquire immovable property under the Law on Ownership with the same entitlements as Georgian citizens, with the exception of agricultural land. Even so, there are some limited workarounds that make purchasing feasible, thereby allowing foreign citizens to buy and own non-agricultural land for their purposes.

The only condition is that the investment amount must exceed 40,000 GEL, which approximately equals to 15,000 USD.

Residential properties are among the most popular choices for foreign buyers. A foreign citizen who owns a property is required to pay a 10% monthly income tax on the amount received from the lease, unless their annual income falls below 100,000 GEL (on average 35,000 USD). In case the annual income surpasses this limit, an additional VAT (value added tax) of 18% will be added.

Low tax rates are one of the numerous advantages Georgia offers to its potential and current investors. However, the mandatory tax rates are determined by the type of property owned and the purpose for which it is rented.

To give a brief overview of the types of profits, that investors can obtain in Georgia, especially in Tbilisi, let's consider a 3-room apartment in the heart of the city, in Mtatsminda, as an illustration. The average price for a renovated apartment of 80-100 square meters in this area is 300,000 USD. Renting this property will yield a monthly rental income of roughly 2,000-2,500 USD, which represents an annual profit of 8.8%.

Moreover, it is important to comprehend the additional conditions of property ownership laws in Georgia, which potential investors should take into account. Selling property (an apartment, house, etc.) for a higher price than the initial payment within 2 years from the date of purchase will result in the investor being charged 18% of the profit tax. After two years have elapsed, there is no tax charged if you decide to sell.

This tax system allows foreign individuals to gain profit from the subsequent sale of the apartment, since the prices of Georgia's real estate market are growing up impressively over the years.

Authoritative sources:

www.geostat.ge
Statistical information according to the Georgian legislation
www.rs.ge
Reports and surveys across Georgia
www.kedarogroup.ge
The Real Estate Market, providing a wide range of properties in Georgia
www.euronews.com
Tax system update in Spain
www.globalpropertyguide.com
Real estate analysts worldwide
www.numbeo.com
 Real estate analysts worldwide

Prepared by:

Ekaterine Tchigladze
Qristine Phangani