Pension Contributions in Georgia: Rates, Rules and Examples

The pension contribution in Georgia is 2% of gross salary from the employee and a further 2% from the employer, and the state adds up to 2% on top. If you apply it to the wrong staff or calculate income tax in the wrong order, your payslips and declarations are wrong, and a late declaration brings automatic penalties and interest. This post covers the rates, the salary bands, who is covered, worked examples and how contributions are declared and paid.

How the Funded Pension Scheme Works in Georgia

Georgia runs a mandatory funded pension scheme under the Law of Georgia on Funded Pension. The Pension Agency has collected contributions since 1 January 2019.

The funded pension scheme has three contributors: the employee, the employer and the state. It is often called 2+2+2, because the employee pays 2% of salary, the employer pays 2% and the state adds up to 2%.

The contributions are collected in the same order every month:

1. The employer withholds 2% of the employee’s gross salary.
2. The employer adds a further 2% of gross salary from its own funds.
3. The employer declares both amounts on rs.ge and pays them to the Revenue Service.
4. The contributions reach the Pension Agency through the Revenue Service.

The state share comes from the budget, so neither the employee nor the employer pays it. The contributions build up in the employee’s own pension account and are not available as cash until retirement.

Pension Contribution Rates: Employee, Employer and State

Contributor	Rate	Calculated on	Who bears the cost
Employee	2%	Gross salary, no ceiling	The employee, withheld from pay by the employer
Employer	2%	Gross salary, no ceiling	The employer, on top of gross pay
State	2%, 1% or 0%	Annual salary, by band	The state budget

Employee and Employer Contribution Rates

The employee’s 2% is withheld from gross salary by the employer. The employer’s 2% is a cost of its own on top of gross pay, and it is not deducted from the employee. Both shares apply to every lari of salary, with no ceiling.

The employee’s 2% contribution is deducted from gross salary before income tax is calculated. The flat 20% income tax on salary is then charged on what is left.

State Contribution by Salary Band

Part of annual salary	State contribution rate
First ₾24,000	2%
₾24,000 to ₾60,000	1%
Above ₾60,000	0%

The rates apply to slices of the annual salary. An employee earning ₾30,000 a year receives 2% on the first ₾24,000 and 1% on the remaining ₾6,000, which is ₾480 plus ₾60, or ₾540 for the year.

Who Is Covered by the Pension Scheme

Person	Status in the scheme	Contributions
Employee who is a Georgian citizen	Mandatory	2% employee, 2% employer, state share
Foreign or stateless employee with a permanent Georgian residence permit	Mandatory	2% employee, 2% employer, state share
Foreign employee without a permanent residence permit	Outside the scheme	None
Self-employed person, including an individual entrepreneur	Voluntary	Only after opting in
Person who had reached 60 (men) or 55 (women) when the law took effect	Voluntary	Only after opting in

Pension Contributions for Foreign Employees

A foreign employee is in the scheme only with a permanent Georgian residence permit. A temporary residence permit or a visa-free stay does not bring the employee in, and such an employee generally cannot join voluntarily either.

Self-Employed People and Individual Entrepreneurs

Self-employed people, including individual entrepreneurs, are not in the mandatory scheme. The law lets them join voluntarily, and no employer withholds anything on their behalf.

An individual entrepreneur does not need to pay themselves a salary. The money in the business account already belongs to the entrepreneur, and a salary run through payroll adds paperwork without reducing the tax on turnover.

An entrepreneur who hires staff is an employer. An entrepreneur with Small Business Status can have employees and then owes the employer’s 2% for each employee in the scheme. Hiring does not change the 1% tax on turnover the entrepreneur pays on their own income. Micro Business Status does not allow employees.

LLC Owners and Directors on Salary

An owner who takes a salary from their own LLC is treated like any other employee. The company withholds the 2% employee contribution and pays the 2% employer contribution. A foreign owner without a permanent residence permit is outside the scheme, like any other foreign employee.

Georgian law does not require an owner to take a salary, and many owners take only dividends. A dividend carries 15% corporate tax and 5% withholding, both declared monthly as part of LLC accounting, and it adds nothing to a pension account.

On ₾100,000 of total company cost paid as salary, the gross salary is about ₾98,039. About ₾1,961 is withheld as the employee contribution and the company pays about ₾1,961 as its own, so about ₾3,922 goes into the owner’s pension account. The owner receives about ₾76,863 in hand, against ₾80,750 for the same amount paid as a dividend.

Pension Contributions for Contractors

A genuine contractor is normally a registered individual entrepreneur who bills the business and handles their own declarations and tax. The business has no withholding obligation, so it owes no pension contribution for that person.

This holds only while the work is independent in practice. Under the Tax Code of Georgia, the Revenue Service can judge a transaction by what it is in practice and not by what the contract calls it. A worker whose hours are set by the business, who uses its equipment, is supervised day to day, has no other client and has no end date fits the description of an employee.

After a reclassification, the business owes the income tax and pension contributions it should have withheld and paid. Interest and penalties are counted from the date the withholding should have started.

Pension Contribution Examples at Three Salary Levels

The three employees below are in the scheme and earn ₾1,500, ₾3,000 and ₾8,000 gross a month.

Monthly figure	₾1,500 salary	₾3,000 salary	₾8,000 salary
Employee pension contribution (2%)	₾30	₾60	₾160
Taxable base for income tax	₾1,470	₾2,940	₾7,840
Income tax (20% of the base)	₾294	₾588	₾1,568
Net pay to the employee	₾1,176	₾2,352	₾6,272
Employer pension contribution (2%)	₾30	₾60	₾160
Total cost to the employer	₾1,530	₾3,060	₾8,160

With these three employees you pay ₾500 in pension contributions for the month: ₾250 withheld from salaries and ₾250 of your own.

The state share is worked out on the annual salary:

Annual figure	₾18,000 salary	₾36,000 salary	₾96,000 salary
Employee contribution	₾360	₾720	₾1,920
Employer contribution	₾360	₾720	₾1,920
State contribution	₾360	₾600	₾840
Total paid into the pension account	₾1,080	₾2,040	₾4,680

At ₾18,000 a year the whole salary sits in the first band, so the state adds a full 2% and the total is 6% of salary. At ₾36,000 the state adds ₾480 on the first ₾24,000 and ₾120 on the next ₾12,000.

At ₾96,000 the state adds ₾480 on the first band, ₾360 on the second and nothing on the last ₾36,000. The employee and the employer still pay 2% each on the full ₾96,000.

For a foreign employee on ₾3,000 without a permanent residence permit, nothing is deducted for pension. The 20% income tax then applies to the full ₾3,000, which gives ₾600 of tax, ₾2,400 of net pay and an employer cost of ₾3,000.

How Pension Contributions Are Declared and Paid

You do not register again to become an employer. You use the rs.ge profile your business received at registration for payroll. Add the employee’s details before or alongside the first salary payment, and file the first declaration the following month.

Each month runs in this order:

1. Calculate the gross pay, the 2% employee contribution, the income tax on the remainder and the 2% employer contribution for each employee.
2. File the declaration for the previous month’s salaries on rs.ge.
3. By the 15th, transfer the income tax you withheld plus the employee and employer contributions to the Revenue Service.
4. The pension contributions then move from the Revenue Service to the Pension Agency without a further step from you.

Declaration and Payment Deadline

Pension contributions are collected through the same rs.ge process as the income tax withheld from salaries, so there is no second portal and no second deadline. The date is the 15th of the following month, the same monthly filing deadline that applies to income, corporate and VAT declarations. The deadline is the same however many employees you have.

Filing the declaration does not pay the amount due, so you make the payment separately. The withheld income tax is paid under treasury code 101001000, the single code for tax liabilities in Georgia, in lari and from a Georgian resident bank.

Late Declaration Penalties and Interest

Payroll has no grace period, so a declaration filed after the 15th is treated like any other late declaration and the penalty and interest rules apply automatically. An amount still unpaid after the 15th collects interest until it is paid, and declaring less than was owed adds a separate penalty.

Our Business package, from ₾315 a month, covers the pension calculations and files the payroll and pension declarations each month. Payroll months that were never declared are filed through accounting restoration, at ₾270 per month of arrears. Both prices exclude VAT.

Payroll Records to Keep

Keep three records for every month: the signed contract, a payslip showing the gross-to-net breakdown, and a log of who was paid what and when. You need these documents when the Revenue Service asks about a specific month.

Common Employer Mistakes With Pension Contributions

1. Calculating income tax on the full gross salary. The 20% applies after the employee’s 2% contribution is deducted.
2. Deducting the employer’s 2% from the employee’s pay. It is the employer’s own cost on top of gross salary.
3. Withholding contributions for foreign staff who have no permanent residence permit.
4. Stopping contributions once a salary passes ₾60,000 a year. That limit applies to the state share only.
5. Leaving the first declaration until later. The obligation starts with the first salary payment.
6. Filing the declaration and not making the payment.
7. Paying a full-time, supervised worker as a contractor, which leaves you with back contributions, interest and penalties after a reclassification.
8. Rebuilding payslips and the payment log after the Revenue Service asks, instead of keeping them month by month.