Payroll taxes from an employer in Georgia
Taxation of personal income is regulated by the Tax Code of Georgia (TC G). Under the general taxation system, income tax (PIT) is levied.
The procedure for paying PIT from income under an employment contract depends on two main factors:
- place of employment (on the territory of Georgia or abroad);
- tax status (whether an individual receiving income is recognized as a tax resident in Georgia).
Remuneration for the performance of labor duties in Georgia is income from sources in Georgia (clause 1, article 104 of TC G). And remuneration for performing work duties outside of Georgia is income from sources outside of Georgia. At the same time, the place of performance of labor duties is determined not at the location of the employer or the place of receipt of wages, but at the place of work of the employee himself, taking into account the terms of his employment contract (clause 2, article 104 of TC G).
Recognition of labor remuneration as income from sources in Georgia or income from sources outside Georgia affects the procedure for paying PT.
In Georgia, the territorial principle of taxation of income of individuals is applied. That is, tax residents of Georgia do not pay tax on income received from sources outside Georgia (clause "x", clause 1, article 82 of the Tax Code D). This also applies to income from employment. Tax non-residents also pay tax only on income from sources in Georgia (Art. 134 TC G).
Procedure for declaring and paying tax
According to PN, the reporting period is set - a calendar year (Article 135 of TC G).
As a general rule, the calculation, withholding and transfer of PT from the salary of employees (both tax residents and non-residents), as well as the submission of tax returns, is carried out by the employer, who is recognized as a tax agent (clause 1, article 154 of TC G).
A foreign employer is recognized as a tax agent in relation to the income of employees (both tax residents and non-residents) if it has a branch or representative office in Georgia. At the same time, a foreign organization that does not have a branch or representative office in Georgia, but which carries out economic activity in Georgia, can also be recognized as a tax agent. In this case, a foreign organization is recognized as having a "permanent establishment" in Georgia and is subject to tax registration (clauses 1, 11, article 29 of TC G).
The withheld tax is paid by the employer - tax agent immediately after the payment of income, and in the case of payments in non-monetary form - on the last day of the corresponding month (clause "a", clause 3, article 154 of TC G). The employer submits to the tax authority a certificate for each recipient of income by the 15th day of the month following the month in which the payroll tax was withheld (clauses "c", clause 3, article 154 of the Tax Code G). Also, the employer submits a declaration for each month by the 15th day of the next month (clause 5, article 153, clause 4, article 154 of TC G).
Tax calculation
The object of taxation is the total income for the calendar year.
As mentioned above, deductions may be applied to the income of tax residents, while deductions are not applied to the income of non-residents (Article 80 of TC G). At the same time, deductions are not provided for income under an employment contract.
Income under an employment contract when performing labor activities in Georgia is taxed at a rate of 20%, regardless of the tax status of both the employee and the employer (p. 1 of article 81, subparagraphs "e" of p. 1 of article 134 of TC G).
Thus, the procedure for taxation of income under an employment contract with a Georgian employer is the same for any employee - both for tax residents and non-residents.
For your information, below is a summary of the criteria for tax residency in Georgia. More information is available here.
The procedure for paying PIT from income under an employment contract depends on two main factors:
- place of employment (on the territory of Georgia or abroad);
- tax status (whether an individual receiving income is recognized as a tax resident in Georgia).
Remuneration for the performance of labor duties in Georgia is income from sources in Georgia (clause 1, article 104 of TC G). And remuneration for performing work duties outside of Georgia is income from sources outside of Georgia. At the same time, the place of performance of labor duties is determined not at the location of the employer or the place of receipt of wages, but at the place of work of the employee himself, taking into account the terms of his employment contract (clause 2, article 104 of TC G).
Recognition of labor remuneration as income from sources in Georgia or income from sources outside Georgia affects the procedure for paying PT.
In Georgia, the territorial principle of taxation of income of individuals is applied. That is, tax residents of Georgia do not pay tax on income received from sources outside Georgia (clause "x", clause 1, article 82 of the Tax Code D). This also applies to income from employment. Tax non-residents also pay tax only on income from sources in Georgia (Art. 134 TC G).
Procedure for declaring and paying tax
According to PN, the reporting period is set - a calendar year (Article 135 of TC G).
As a general rule, the calculation, withholding and transfer of PT from the salary of employees (both tax residents and non-residents), as well as the submission of tax returns, is carried out by the employer, who is recognized as a tax agent (clause 1, article 154 of TC G).
A foreign employer is recognized as a tax agent in relation to the income of employees (both tax residents and non-residents) if it has a branch or representative office in Georgia. At the same time, a foreign organization that does not have a branch or representative office in Georgia, but which carries out economic activity in Georgia, can also be recognized as a tax agent. In this case, a foreign organization is recognized as having a "permanent establishment" in Georgia and is subject to tax registration (clauses 1, 11, article 29 of TC G).
The withheld tax is paid by the employer - tax agent immediately after the payment of income, and in the case of payments in non-monetary form - on the last day of the corresponding month (clause "a", clause 3, article 154 of TC G). The employer submits to the tax authority a certificate for each recipient of income by the 15th day of the month following the month in which the payroll tax was withheld (clauses "c", clause 3, article 154 of the Tax Code G). Also, the employer submits a declaration for each month by the 15th day of the next month (clause 5, article 153, clause 4, article 154 of TC G).
Tax calculation
The object of taxation is the total income for the calendar year.
As mentioned above, deductions may be applied to the income of tax residents, while deductions are not applied to the income of non-residents (Article 80 of TC G). At the same time, deductions are not provided for income under an employment contract.
Income under an employment contract when performing labor activities in Georgia is taxed at a rate of 20%, regardless of the tax status of both the employee and the employer (p. 1 of article 81, subparagraphs "e" of p. 1 of article 134 of TC G).
Thus, the procedure for taxation of income under an employment contract with a Georgian employer is the same for any employee - both for tax residents and non-residents.
For your information, below is a summary of the criteria for tax residency in Georgia. More information is available here.
Georgia tax resident criteria
As a general rule, individuals who actually stay in Georgia for at least 183 calendar days during a period of 12 consecutive months ending in the current calendar year are recognized as tax residents of Georgia (Clause 2, Article 34 of the Tax Code of Georgia, TC G). Departure from Georgia for treatment, vacation, business trip, or study does not affect the calculation of the period of stay in the country. On the contrary, staying in Georgia while in transit, for treatment, or on vacation is not taken into account when determining the tax status (clauses 3, 4, article 34 of TC G).
Tax residency is determined for the entire year. That is, if in any 12-month period ending in the current year, a person spent at least 183 days in Georgia, then the person is recognized as a resident of Georgia during the entire current year.
At the same time, the days on which an individual was recognized as a resident in the previous tax period are not taken into account when establishing residency in the subsequent tax period (clause 8, article 34 of TC G). It follows from this that if a person became a tax resident in the current year, then the assessment of his tax residency for the next year should be carried out based on the results of 12 months coinciding with the calendar year.
In addition, the status of a tax resident of Georgia can be assigned to the so-called person secured by a significant property.
Tax residency is determined for the entire year. That is, if in any 12-month period ending in the current year, a person spent at least 183 days in Georgia, then the person is recognized as a resident of Georgia during the entire current year.
At the same time, the days on which an individual was recognized as a resident in the previous tax period are not taken into account when establishing residency in the subsequent tax period (clause 8, article 34 of TC G). It follows from this that if a person became a tax resident in the current year, then the assessment of his tax residency for the next year should be carried out based on the results of 12 months coinciding with the calendar year.
In addition, the status of a tax resident of Georgia can be assigned to the so-called person secured by a significant property.
Algorithm for paying PIT from income from an employer in Georgia
* regardless of the tax status of the employee (resident or non-resident);
**check tax liabilities in the country where you work
If tax status has changed during the year
As noted above, tax residence is determined for the entire calendar year - the tax period for income tax in Georgia. At the same time, the procedure for taxing income under an employment contract for residents and non-residents is the same. Therefore, a change in tax residency during the year does not change tax liabilities.
FOR INFORMATION
The income of employees from the personal use of the employer's car is considered wages, on which a tax is paid in a fixed amount, depending on the engine size (clause 21, article 101 of the Tax Code G):
The income of employees from the personal use of the employer's car is considered wages, on which a tax is paid in a fixed amount, depending on the engine size (clause 21, article 101 of the Tax Code G):
- more than 3500 cm3 - 300 GEL;
- 2500 - 3500 cm3 - 200 GEL;
- less than 2500 cm3 - 100 GEL;
- hybrid car - 60 GEL.
- electric car - 0.
IMPORTANT
In addition to income tax, employees who are citizens of Georgia or persons permanently residing in Georgia are subject to the payment of contributions to the Pension Fund of Georgia in the amount of 2%. The employer pays the same.
The calculation and payment of deductions have a number of features.
In addition to income tax, employees who are citizens of Georgia or persons permanently residing in Georgia are subject to the payment of contributions to the Pension Fund of Georgia in the amount of 2%. The employer pays the same.
The calculation and payment of deductions have a number of features.
The procedure described above is relevant both for the current tax period and for previous years.
Changes are not expected.
Using the buttons below, you can check whether the conditions for recognizing you as a tax resident in the country where you actually work remotely are met, and whether you have an obligation to pay tax on your salary in this country. Also find out whether Georgia has a double taxation treaty (DTT) and its conditions in relation to wages.
Currency control of Georgia when receiving a salary from a Georgian employer
The transfer of wages and other payments in favor of an employee in accordance with an employment contract is possible to his account both in a Georgian bank and in a bank account abroad. However, there may be restrictions in your country of citizenship - select the appropriate country here.