Payroll and Pension Declarations in Georgia

An employer in Georgia withholds 20% income tax from every salary and, for staff in the pension scheme, a 2% pension contribution, then pays a further 2% from its own funds. All of it is declared and paid by the 15th of the following month. Employers go wrong on the order of the calculation, the scope of the pension scheme and the line between an employee and a contractor.

Payroll Tax Rates in Georgia: Income Tax and Pension

Georgia taxes employment income at a flat 20%. There are no brackets, no personal allowances, no deductions for dependents and no lower band for small salaries. The employer withholds the tax at source and pays it to the Revenue Service, so an employee generally has no separate annual income tax return to file for that salary.

Item	Rate	Who pays	Calculated on
Personal income tax	20%	Employee, withheld by the employer	Gross salary minus the employee pension contribution
Employee pension contribution	2%	Employee, withheld by the employer	Gross salary
Employer pension contribution	2%	Employer, on top of gross pay	Gross salary
State pension contribution	2%, 1% or 0%	State budget	Annual salary, by band

The 20% applies to the salary after the employee’s pension contribution is deducted, not to the full gross figure. On a gross monthly salary of ₾3,000:

• employee pension contribution at 2%: ₾60
• taxable base: ₾2,940
• income tax at 20% of the base: ₾588
• net pay to the employee: ₾2,352
• employer pension contribution at 2%: ₾60
• total cost to the employer: ₾3,060

Pension Contributions in Georgia: Rates and Who Is Covered

The funded pension scheme runs under the Law of Georgia on Funded Pension, and contributions have been collected since 1 January 2019. It is often called 2+2+2: 2% from the employee, 2% from the employer and up to 2% from the state.

The employee and employer shares apply to every lari of gross salary, with no ceiling. Only the state share tapers:

• 2% on the first ₾24,000 of annual salary
• 1% on the part between ₾24,000 and ₾60,000
• nothing above ₾60,000

An employee on ₾8,000 a month earns ₾96,000 a year. The state adds ₾480 on the first band and ₾360 on the second, ₾840 in total for the year.

Participation is mandatory for Georgian citizens and for foreign citizens or stateless persons who hold a permanent Georgian residence permit. It is voluntary for self-employed people, individual entrepreneurs included, and for anyone who had already reached 60 (men) or 55 (women) when the law took effect.

A foreign employee without a permanent residence permit is outside the mandatory scheme. No employee contribution is withheld, no employer contribution is owed and no state contribution is earned. A temporary permit or a visa-free stay does not bring them in, so each foreign hire is worth confirming case by case.

Payroll and Pension Declarations: Deadline and Filing Rules

Payroll is declared through rs.ge by the 15th of the month after the salary was paid. A business with employees files it alongside the monthly tax declaration it already owes, and the date is the same for one employee or fifty.

Every month runs in the same order:

1. Gross pay, the employee’s pension contribution and the income tax are calculated for each employee.
2. The withholding declaration for the previous month’s salaries is filed on rs.ge.
3. The withheld tax and both pension contributions are paid to the Revenue Service by the 15th.
4. The Revenue Service forwards the pension part to the Pension Agency.

Pension contributions are collected through the same monthly rs.ge process as the income tax, so there is no second portal and no second deadline. Filing and paying are separate actions. Submitting the declaration moves no money, and the payment is made in lari from a Georgian bank account.

There is no separate employer registration. The rs.ge profile created when the business was registered is the one used for payroll, and the obligation starts with the first salary payment. An individual entrepreneur with Small Business Status can have employees, and hiring does not change the 1% on the entrepreneur’s own turnover. Micro Business Status does not allow employees.

Payroll Records and Employment Contracts

The filing relies on three records: the signed contract, a monthly payslip showing the gross-to-net breakdown, and a running log of who was paid what and when. You use them to answer a Revenue Service question about a specific month.

The Labour Code allows an oral employment agreement, with one exception. A contract with a probationary period has to be in writing, and the probation cannot exceed six months. A written contract covers at least the start date, the end date if it is fixed-term, working hours and rest periods, the workplace, the position and type of work, and the pay and how it is paid, in a language both sides understand.

Contractors vs Employees: Reclassification Rules

Paying a Georgian individual entrepreneur as a contractor is legal and common. A genuine contractor invoices you, declares their own turnover and pays their own tax, and the business paying them has no withholding obligation.

The Tax Code lets the Revenue Service assess a relationship by its actual content, not by the title on the contract. These are the facts it examines:

What is examined	Employee pattern	Contractor pattern
Hours	Fixed schedule set by the business	Set by the contractor, or a project deadline only
Equipment	Provided by the business	The contractor’s own
Supervision	Ongoing, day to day	Based on the deliverable
Exclusivity	One client, full commitment	Free to work for others
Duration	Open-ended	A defined project or term
Integration	Part of the business’s team and processes	Engaged for a discrete output

No single factor decides the classification. A relationship draws scrutiny when it matches the employee pattern on nearly every factor while being invoiced as independent work.

Employment income is taxed at 20% whatever status the worker holds, so a reclassified contractor loses the 1% rate on that income. The paying business becomes liable for the income tax and pension contributions it should have withheld, with interest and penalties counted from the date the withholding should have started.

Director and Owner Salaries: Tax Rules for LLCs

An LLC owner who works in the company can go on its payroll as an employee or director. The salary is treated like any other employee’s: 20% income tax is withheld every month, and for an owner in the pension scheme so is the 2% contribution, with the company paying its own 2%.

Salary is a deductible business expense, so it never triggers corporate income tax. On a dividend, the company pays 15% corporate tax on the distribution, and 5% is then withheld from the dividend itself. On ₾100,000 of company cost, a dividend leaves the owner ₾80,750, and a salary leaves about ₾76,863 in hand plus about ₾3,922 in the owner’s own pension account.

Georgian law sets no minimum salary for an owner, and many take only dividends, which are declared on the same monthly cycle as part of LLC accounting. An individual entrepreneur needs no salary at all. The money in the business account already belongs to the entrepreneur, and a director’s salary for yourself adds paperwork without reducing the 1%.

Penalties for Late Payroll Declarations and Common Mistakes

A late payroll declaration falls under the same automatic penalty and interest regime as any other declaration, with no grace period specific to payroll. Interest accrues daily on the unpaid balance from the deadline until it is settled, and understating the tax carries its own penalty on top of the shortfall.

These are the common payroll mistakes:

1. Applying the 20% to the full gross salary instead of the salary after the 2% pension contribution.
2. Assuming every employee is in the pension scheme, foreign staff without a permanent residence permit included.
3. Leaving the first declaration until later, when the obligation started with the first salary payment.
4. Filing the declaration and not making the payment.
5. Paying a full-time, supervised worker as a contractor.
6. Rebuilding payslips and the payment log after the Revenue Service asks, instead of keeping them month by month.

A filed declaration can be corrected, and the sooner a wrong figure is fixed, the smaller the interest and penalty exposure tends to be. Payroll months that were never declared are filed one at a time through accounting restoration, at ₾270 per month of arrears.

In-House vs Outsourced Payroll

An in-house bookkeeper is an employee, so the cost is a salary plus the employer’s 2% pension contribution on top of gross pay, and it stays fixed in a quiet month. Sick leave, holidays and staff turnover are yours to cover, software is usually an added cost, and liability for a filing error sits with you as the employer.

An outsourced provider charges one fixed or transaction-based fee, and a new hire or a VAT registration usually means a higher band, not retraining or a second hire. For a single entrepreneur or a small LLC, an in-house hire rarely makes sense on cost until accounting is close to a full-time job.

When we run payroll, we calculate the withholding and pension contributions for each employee and file the declarations before the 15th. Liability for a filing error we make sits with us. That does not extend to penalties caused by documents we never received.

Payroll Accounting Prices

Payroll is not sold as a separate service. Employers are on the Business package, which adds pension calculations and declarations to the monthly filing and is priced by transaction count. One bank statement row, invoice, payment or expense is one transaction.

• up to 10 transactions a month: ₾315
• 11 to 30: ₾495
• 31 to 60: ₾855
• more than 60: quoted

Prices exclude 18% VAT. The same package covers VAT registration and monthly VAT returns, mandatory financial reporting to saras.gov.ge and one hour a month of email support for accounting questions. Tax advice is not included and is available separately. Employment contracts are a separately quoted add-on.

One month slightly over your band usually costs nothing extra. If you go over it two months running, or several months in a year, we talk to you about moving up a package.