Property-Tax Planning: Lawful Instruments
Planning the property tax means that the payer makes medium-term decisions so that the tax burden decreases within the bounds of the law. For this one must first know who is taxed on what: the payer of the property tax is a resident enterprise and organization — on assets recorded on the balance, uninstalled equipment and unfinished construction, as well as property leased out; a non-resident enterprise — on the same property located in Georgia; a natural person — on immovable property held in ownership, yachts, helicopters, aircraft, and light vehicles determined by code 8703 of the national commodity nomenclature of foreign-economic activity.
The first checkpoint of planning is precisely this circle: the status of the person holding the property and the method of recording the property determine the base on which the object is taxed. Property registered in the name of a deceased person but held or used by another is likewise taxed — except use on the basis of lease, tenancy or usufruct. These details must be taken into account in planning decisions in advance.
Rates and Value Rules
For an enterprise the annual rate is determined at no more than 1 percent of the taxable value, and for leased-out property the same rule is built on the average annual residual book value. For a leasing company, the annual tax on property leased out is determined for the whole leasing period at no more than 0.6 percent of the initial book value at the moment of first leasing — this distinct regime is one of the mainstays of planning leasing structures.
The value-increase rules are also relevant: for assets received before 2000 the value increases threefold, for those received in 2000-2004 — twofold, and for 2004 — one and a half times; exempt from this increase is the enterprise that records immovable property using the revaluation method and has audited statements — the statements being usable for 4 years. An active balance policy, the timeliness of audits and the documentation of asset receipt thus directly influence the tax.
Land Planning: Category and Territory
The mainstay of land planning is the differentiation of categories and territories: for agricultural and forest lands the base rates are established per hectare in lari and vary by territory — for arable land from 100 to 56 lari, for hayfields and pastures from 20 to 5 lari. A municipality may raise the rate up to 150 percent of the established base. For non-agricultural land the base is 0.24 lari per square meter with a territorial coefficient not exceeding 1.5; land for the use of natural resources is taxed at up to 3 lari per hectare. Taking these parameters into account before acquiring land is part of planning.
Exemptions and Reliefs
The circle of exemptions is also a planning instrument. The taxable property of a natural person, apart from land, is exempt where the family's income received during the past year does not exceed 40 000 lari. In addition, public roads, power-transmission lines and cable lines are exempt; the property of an organization, apart from land and property used for economic activity; public green zones and protected areas — apart from the part used for economic activity.
Each condition of exemption is the result of a concrete factual situation — and precisely for that reason planning must be built not on formality but on the real situation: recording family income, documenting the purpose of property and the correctness of categories are decisive. The specialists of Legal.ge will assist you in lawful property-tax planning — from selecting structures to applying exemptions.
Frequently Asked Questions
Below we answer the questions most frequently raised about this field.
Who is taxed with the property tax?
A resident enterprise and organization — on balance-recorded property; a non-resident — on property in Georgia; a natural person — on owned immovable property and light vehicles under code 8703.
What rate applies?
For an enterprise — no more than 1 percent of the taxable value; for a leasing company on leased-out property — no more than 0.6 percent of the initial value.
How does the revaluation method work?
Where the enterprise records immovable property by the revaluation method and has audited statements, the value-increase rule does not apply; the statements are usable for 4 years.
Which property is exempt?
For example, a natural person's taxable property apart from land, where family income in the past year does not exceed 40 000 lari; also public roads, transmission and cable lines, and public-purpose objects.
How is non-agricultural land valued?
The base is 0.24 lari per square meter with a territorial coefficient not exceeding 1.5; the municipal decision may raise the base up to 150 percent.
How We Help on Legal.ge
Property-tax planning is a process continuing from year to year, and its algorithm is repeatable. At the first stage the composition of the property is checked: which assets are on the balance, to which category they belong and in whose ownership they are registered. At the second stage the bases of value are assessed: which year of receipt the asset has, whether the revaluation method is used and for what period the audited statements operate.
At the third stage structural decisions are considered: leasing schemes that use a distinct rate, the transfer of property to a subject covered by a relief, and taking land categories into account on acquisition. At the final stage the applicability of exemptions to the real factual situation is checked. Such a full cycle reduces the tax burden within the boundaries of the law — and every decision remains substantiated by documents.