Correct calculation of income tax and pension contributions is the foundation of payroll administration: what counts as salary, which benefits are taxed and which are not, which exemption applies to a particular employee, and when the withheld tax must be transferred — all of this is established by the Georgian Tax Code. Under Article 101 of the Code, salary income includes any remuneration or benefit received from employment, including income from a previous workplace in the form of a pension or otherwise. Salary is thus not exhausted by monetary payment — every employer-granted benefit requires tax assessment.
Valuation of Benefits and Personal Use of a Car
The Code sets individual rules for valuing benefits: for a loan issued at a below-market rate — the amount corresponding to the interest payable; for a transfer of goods or services — the market price; for the transfer of housing — the annual market rent; for reimbursement of expenses — the amount reimbursed; for forgiveness of a debt — the amount of the debt; for insurance — the premium paid. A separate rule concerns personal use of the employer's car: the benefit is treated as salary and taxed by engine volume — above 3500 cubic centimetres at 300 GEL, 2500 to 3500 at 200 GEL, below 2500 at 100 GEL, and a hybrid at 60 GEL per month; this tax must be paid by the tax agent no later than the 15th of the month following the reporting month. Personal use of the employer's electric car is not taxed.
Rates and Items Excluded from Salary
Under Article 81 of the Tax Code, the taxable income of a natural person is taxed at 20 percent unless the Code provides otherwise; income from renting out residential space without deductions is taxed at 5 percent. At the same time, salary income does not include reimbursement of business trip expenses within the norm set by the Ministry of Finance, reimbursement of representation expenses, organized transport between home and work, a benefit received within compulsory insurance, and — importantly — pension contributions made by the employer and the state to the employee's individual pension account under the law on accumulated pensions. This means that accumulated-pension contributions do not increase the taxable salary base.