Employee Tax Withholding is one of the primary fiscal obligations for employers in Georgia. Under Georgian legislation, the employer acts as a tax agent, meaning they are required to withhold tax from an employee's salary before payout and transfer it to the budget. While this process may seem straightforward, it involves numerous nuances, especially regarding non-residents, bonuses, benefits in kind, and pension contributions. Incorrect withholding or late transfer leads to substantial fines and penalties, posing financial and reputational risks to the company.
This service covers the full cycle of the withholding process and consultation on the following issues:
- Income Tax Calculation (20%): Taxing salaries, bonuses, allowances, and vacation pay.
- Pension Contribution Administration: Correctly calculating the 2% employee, 2% employer, and 2% state shares and transferring them to the Pension Agency.
- Taxation of Benefits in Kind: Taxing corporate cars, housing rent, insurance, or meals based on their market value.
- Applying Tax Exemptions: Correctly reflecting statutory exemptions for individuals with salaries under 3,000 GEL (specific one-time reliefs), parents with many children, or persons with disabilities.
- Declarations: Submitting monthly declarations on the Revenue Service electronic portal (RS.ge) no later than the 15th of the month following the reporting month.
Complex situations are common in practice. For example: A company pays for an employee's apartment rent. Legally, this amount is considered salary and must be taxed, a fact often overlooked by employers. Second scenario: A foreign employee working remotely. Should income tax be withheld in Georgia? The answer depends on residency status and the place where the work is performed. Third case: An employer grants a loan to an employee at a low interest rate. The difference between the market and actual interest rates is considered a benefit and is taxed. Fourth: Agreements on "Net" salary, which require a "Gross-up" calculation to ensure taxes are withheld correctly from the gross amount.
The Tax Code of Georgia (Chapter XI, Income Tax) details the rules for tax withholding at the source. Article 154 obliges the tax agent to withhold the tax. Additionally, the Law on Funded Pensions defines the obligation to make pension contributions for all employees (with some exceptions). The Labor Code regulates employment relations, which is the basis for salary payment, but tax obligations are governed by the Tax Code. Orders from the Minister of Finance regarding declaration filing procedures are also significant.
The process begins with preparing the Payroll. An accountant or outsourcing company calculates the accrued salary for each employee, deducts the pension contribution and income tax. The resulting "Net" amount is transferred to the employee's account, while taxes go to the unified treasury account. Simultaneously, an electronic declaration is prepared and submitted. Specialists ensure that all calculations are accurate and compliant with the latest legislative changes.
Legal.ge allows you to find qualified accountants and tax specialists who ensure the flawless management of the tax withholding process. Experts on our platform will protect your business from fines and help you correctly administer complex payroll schemes. Do not risk your responsibility as a tax agent—entust this task to professionals on Legal.ge.
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