Flat 20% tax. Funded 2+2+2 pension. Georgia payroll, solved.
Georgia’s payroll looks simple – one flat tax, one funded pension – but the detail bites. It demands a funded-pension engine with the state 2% / 1% top-up tiers, the under-40 mandatory versus 40-plus opt-out cohort rule, correct treatment of a distributed-profit (Estonian-model) corporate tax, and reverse-charge VAT on services bought from non-residents. Most providers deliver two of these. Mercans delivers all of them – on a single proprietary stack with no intermediaries.
native payroll
vs nearest peer
since inception
- Income Tax (PIT)
- 20% flat · withheld at source
- Corporate Tax (CIT)
- 15% on distributed profit
- Pension · Employee
- 2% of gross salary
- Pension · Employer
- 2% of gross salary
- State Pension Top-Up
- 2% · 1% above GEL 24k · 0% above 60k
- Social Security
- None beyond funded pension
- VAT Standard Rate
- 18%
- VAT Reverse Charge
- 18% on non-resident services
- Dividend / Interest Tax
- 5% individual
- Small Business Status
- 1% on turnover (to GEL 500k)
- Minimum Wage
- GEL 20 / month (1999 legacy)
- Working Week
- 40 hours
- Annual Leave
- 24 working days paid
- Notice / Severance
- 30 days + 1 month pay
- Withholding Filing
- Monthly · by the 15th
- Pension Enrolment
- Under-40 mandatory · 40+ opt-out
Payroll compliance: the details that can’t be missed
Georgia’s regulators don’t grade on a curve. The Revenue Service audits withholding and VAT filings against the flat-tax and distributed-profit rules. The Pension Agency reconciles the 2% + 2% contributions per worker and the state 2% / 1% top-up against cumulative annual income. The under-40 mandatory versus 40-plus opt-out cohort rule and the reverse-charge VAT on foreign services create silent miscalculation risk. None of these failures announce themselves – they accumulate until an audit makes them very visible.
State top-up tier & cumulative income errors
The state adds 2% of salary to the pension until cumulative annual gross income reaches GEL 24,000, then 1% to GEL 60,000, then nothing. Tracking the wrong cumulative total shifts the state share and leaves per-worker Pension Agency reconciliation gaps that surface on audit.
Pension opt-out & cohort misclassification
Employees under 40 are mandatorily enrolled with no opt-out; those aged 40+ at launch had a one-time opt-out window; individuals 60+ (men) / 55+ (women) sit outside the mandatory scheme. Enrolling or exempting the wrong worker triggers retroactive remittance or refunds with penalties.
Distributed-profit (Estonian) CIT mishandling
Georgia taxes corporate profit at 15% only on distribution, non-business expenses, and free transfers of assets – retained profit is untaxed. Treating accruals as taxable, or missing a deemed distribution, misstates CIT. Understatement penalties reach 50% of the tax plus daily interest.
Reverse-charge VAT on foreign services missed
Services bought from a non-resident not registered in Georgia require the local recipient to self-assess 18% reverse-charge VAT. Omitting it understates VAT; understatement penalties reach 50% of the tax due plus daily interest assessed by the Revenue Service.
The three types of providers who struggle with Georgia
Global Aggregator Platforms
Platforms like Deel, Remote, and Rippling operate through a partner network in Georgia – they don’t own the entity, don’t directly file with the Revenue Service, and don’t control the compliance relationship. When regulations change, the instruction travels: platform → partner → your payroll. Each handoff introduces delay and interpretation risk.
- ×No direct Revenue Service relationship – third-party intermediary files
- ×State top-up tier tracking (GEL 24k / 60k) absent or partner-dependent
- ×Pension opt-out and cohort eligibility handled manually
- ×Regulatory updates filtered through partner SLAs, not live
Large Global Payroll Incumbents
ADP, Ceridian, and similar incumbents have Georgia coverage – in name. In practice, their Caucasus coverage is often delivered through regional partners or legacy systems that weren’t built for Georgia’s state pension top-up tiers, the distributed-profit corporate tax, or reverse-charge VAT on non-resident services.
- ×State 2% / 1% top-up tiers hardcoded, not tracked on cumulative income
- ×Distributed-profit CIT treated as a conventional profits tax
- ×Reverse-charge VAT on foreign services handled manually
- ×Long implementation timelines – Georgia not a core market
Local Georgian Firms
Local Georgian accounting and bookkeeping firms know the market – but they can’t scale with you. No payroll technology platform, no HRIS integration, no multi-country consolidation, and no data security certifications that multinationals require. Fine for 10 employees. Inadequate at 100.
- ×No proprietary payroll technology – manual spreadsheet-based processing
- ×No HCM connector – Workday, SAP, Oracle feeds require custom work
- ×No data security certifications (SOC 1/2, ISO 27701, BCR)
- ×No Caucasus consolidation – cannot report across regional entities
The only provider that closes every gap
Mercans is the only Georgia payroll provider that combines a proprietary payroll technology stack, full-time in-country compliance teams, direct Revenue Service relationships, and enterprise-grade data security – simultaneously, on one contract, with no intermediaries.
The only engine built for Georgia’s actual payroll architecture
G2N Nova™ is the world’s only API-first gross-to-net payroll engine. It natively models Georgia’s flat 20% withholding and the funded pension as distinct calculation layers, tracks the state 2% / 1% top-up against cumulative annual income, applies the under-40 versus 40-plus opt-out cohort rule, and auto-generates Revenue Service and Pension Agency outputs. This isn’t configuration. It’s engineering.
Full-time Georgia team – not a partner you phone when things break
Mercans employs full-time payroll and compliance professionals in Georgia. They maintain active relationships with the Revenue Service, the Pension Agency, and the National Bank – not through a contact directory, but through ongoing regulatory engagement. When the Revenue Service issues a ruling, when the Pension Agency updates the top-up tiers, when a new data-protection rule lands – we know before it reaches your inbox.
The security posture multinationals require – and Georgia’s data law now mandates
Georgia’s Law on Personal Data Protection (adopted 2023, in force from March 2024) requires payroll processors handling employee personal data to maintain documented privacy controls and to respond to the Personal Data Protection Service. Mercans holds BCR approval, ISO 27701 certification, SOC 1 & 2 certifications, and ISO 27017/27018 – the only payroll provider in the Caucasus with this complete certification stack. Zero security breaches since inception.
Where Mercans wins on every Georgia-specific capability
Each row is a Georgia-specific capability. Each cell shows native coverage as a fill bar – full = native in-platform, half = partial / manual workaround, empty = gap.
Georgia Capability Coverage · 10 dimensions
2% / 1% / 0% by cumulative income
Every rate. Every cap. Every obligation.
Georgia payroll operates on exact numbers with hard deadlines. Mercans builds every figure below into G2N Nova™ and monitors them proactively – so you’re never discovering a rate change from a penalty notice.
Georgia · Rate & Compliance Dashboard
Live 2025–26State Top-Up Steps Down by Cumulative Income
The state adds 2% of salary to each pension account until cumulative annual gross income reaches GEL 24,000, then 1% to GEL 60,000, then nothing. The employee 2% and employer 2% do not move – only the state share does. Mercans’ G2N Nova™ tracks the running annual total per worker – not as a hardcoded band.
→ Cumulative-income state top-up logic in G2N Nova™Funded Pension Enrolment Follows an Age Cohort
The scheme is mandatory for employees under 40; those 40 or older at launch had a one-time opt-out; individuals 60+ (men) / 55+ (women) are outside it. Coverage also depends on residency for foreign nationals. Each worker’s enrolment status must be evidenced before contributions run.
→ Under-40 / 40-plus cohort rule automated in HR Blizz™Corporate Tax Falls on Distribution, Not Accrual
The Estonian model taxes 15% only on profit distribution, non-business expenses, and free transfers – retained profit is untaxed; financial institutions pay 20%. The monthly CIT return follows distribution events, not accounting profit, so deemed distributions must be identified as they occur.
→ Distributed-profit CIT events reconciled in G2N Nova™VAT: 18% Standard Plus Reverse Charge on Imports of Services
VAT registration is mandatory once taxable turnover exceeds GEL 100,000 in any continuous 12 months. Standard VAT is 18%, and services bought from non-residents trigger 18% reverse-charge VAT self-assessed by the local recipient. Both the threshold and the reverse charge must be monitored continuously.
→ VAT threshold + reverse-charge tracking in G2N Nova™Run a Georgia payroll. Right here, right now.
Switch worker type. Move the slider. Every number you see is the same calculation G2N Nova™ runs in production – flat 20% withholding on gross, the funded pension 2% employee deduction, the employer 2% match, and true cost of employment exposed live.
Georgia Payroll Calculator · Live
G2N Nova™ engineEight things only Georgia experts know to handle
These are the compliance details that don’t appear in standard payroll setup guides – but appear in every Revenue Service audit, Pension Agency reconciliation, and labour dispute we’ve encountered in Georgia over 12 years.
The State Pension Top-Up Steps Down by Cumulative Income
The state adds 2% of salary to each worker’s pension account until cumulative annual gross income reaches GEL 24,000, then 1% up to GEL 60,000, then nothing. Only the state share moves – the employee 2% and employer 2% stay flat. Tracking the wrong cumulative total shifts the state contribution.
Pension Enrolment Depends on an Age Cohort
Employees under 40 are mandatorily enrolled in the funded pension with no opt-out. Those aged 40 or older at the scheme’s launch had a one-time right to opt out. Individuals 60+ (men) or 55+ (women) sit outside the mandatory scheme. Enrolling or exempting the wrong worker creates reconciliation gaps.
There Is No Social Security Beyond the Funded Pension
Georgia abolished the old social tax. Apart from the funded pension (2% + 2% + state top-up) there are no employer or employee social-security contributions – no health, unemployment, or disability funds. Systems ported from neighbouring countries often invent phantom social charges and over-cost the employer.
Corporate Tax Is 15% on Distribution, Not on Profit
Under the Estonian model in force since 2017, retained profit is untaxed; 15% CIT applies only on profit distribution, non-business expenses, and free transfers of assets. Financial institutions pay 20%. Treating accrued profit as taxable, or missing a deemed distribution, misstates the corporate tax.
Foreign Services Trigger Reverse-Charge VAT
When a Georgian entity buys a service from a non-resident not registered for VAT in Georgia, the recipient self-assesses 18% reverse-charge VAT. A VAT-registered payer can recover it; an unregistered payer bears it. Missing the self-assessment understates VAT and draws penalties.
Small Business Status Pays 1% on Turnover
Individual entrepreneurs with Small Business Status pay 1% on turnover up to GEL 500,000 (3% above), and micro businesses under GEL 30,000 with no employees are exempt – not the 20% flat regime. Misclassifying an IE contractor as employment, or vice versa, changes the entire tax base.
Residency Drives Both Tax and Pension Coverage
Employment income sourced in Georgia is taxed at the flat 20% regardless of nationality. The funded pension covers Georgian citizens and foreign or stateless persons permanently residing in Georgia – a short-term non-resident expat is generally outside it. Classification drives the whole calculation.
Income Tax Is on Full Gross – Filed Monthly by the 15th
The 20% income tax is computed on full gross; the employee’s 2% pension does not shrink the taxable base, so scheme participants net 78% of gross versus 80% for non-participants. PIT and pension are declared and paid to the Revenue Service and Pension Agency by the 15th of the following month.
One workforce. Two entirely different compliance tracks.
Georgian citizens and permanent residents on the full flat-tax-plus-funded-pension regime vs. non-resident expats and pension opt-outs on a withholding-only profile requires two distinct compliance frameworks, two treatments of the pension, and two views of residency. Mercans runs both simultaneously on every pay cycle.
Parallel Compliance Engines
Flat 20% income tax withheld on full gross. The employee’s 2% pension does not reduce the taxable base, so participants take home 78% of gross. PIT is remitted to the Revenue Service by the 15th of the following month.
Funded pension runs 2% + 2% plus the state top-up. The employee contributes 2% and the employer 2% of gross, with the state adding 2% (1% once cumulative annual income passes GEL 24,000, nil above GEL 60,000).
Enrolment is mandatory for the under-40 cohort. Employees under 40 cannot opt out; those aged 40+ at launch had a one-time opt-out; individuals 60+ (men) / 55+ (women) are outside the mandatory scheme.
No social security beyond the pension. There are no health, unemployment, or disability contributions – the funded pension is the only mandatory social charge on payroll in Georgia.
Residency drives pension coverage. Georgian-source employment income is taxed at the flat 20% regardless of nationality, but a short-term non-resident expat is generally outside the funded pension – only citizens and permanent residents are enrolled.
Opted-out and exempt workers take home 80%. Without the 2% pension deduction, non-participants keep 80% of gross rather than 78%. The distinction must be applied per worker, not assumed.
Coverage status must be evidenced. Where a foreign national is exempt from the pension, the basis (residency, age cohort, opt-out) must be documented – the default assumption for residents is that the pension applies.
Contractors on IE status sit on a different base. Individual entrepreneurs with Small Business Status pay 1% on turnover, not 20% flat – misclassifying employment as an IE relationship is a primary audit trigger.
Every obligation. Every authority. Mercans owns the calendar.
Georgia compliance runs across the Revenue Service and the Pension Agency on monthly and event-triggered cadences. Mercans’ managed payroll absorbs every filing as standard scope – you don’t track deadlines. We do.
PIT & Pension Withholding Return
The 20% income tax and the 2% employee + 2% employer pension are declared and paid to the Revenue Service and Pension Agency by the 15th of the month following payroll. Late payment triggers daily interest and penalties assessed by the Revenue Service.
VAT Return (incl. Reverse Charge)
VAT payers file an 18% monthly return by the 15th, including reverse-charge VAT self-assessed on services bought from non-residents. Registration is mandatory once taxable turnover exceeds GEL 100,000 in any continuous 12 months.
Pension Agency Contribution Remittance
Employee 2% and employer 2% are remitted per worker to the Pension Agency, with the state adding 2% or 1%. The fund reconciles individual accounts – cohort or top-up errors surface as per-employee discrepancies requiring correction.
Corporate Income Tax on Distribution
The 15% CIT is declared monthly by the 15th on profit distribution, non-business expenses, and free transfers of assets – retained profit is untaxed. Financial institutions apply 20%. The return follows distribution events, not accounting profit.
State Top-Up Tier Tracking
Cumulative annual gross income drives the state pension share: 2% until GEL 24,000, 1% to GEL 60,000, then nil. A per-employee running total is required so the correct state contribution is claimed on each run.
Reverse-Charge VAT on Foreign Services
Buying a service from a non-resident not registered for VAT in Georgia obliges the local recipient to self-assess 18% reverse-charge VAT on the relevant return. VAT-registered payers can recover it; unregistered payers bear the cost.
Notice, Severance & Final Settlement
Termination requires 30 calendar days’ written notice with at least one month’s severance, or 3 days’ notice with at least two months’ severance, plus payout of accrued but unused annual leave under the Organic Law.
VAT Registration Monitoring
Taxable turnover must be monitored continuously; VAT registration becomes mandatory once it exceeds GEL 100,000 over any continuous 12-month period. Voluntary registration is often advisable for frequent buyers of non-resident services.
Georgia is one market. Mercans covers the Caucasus and the CIS.
For companies running payroll across multiple Caucasus and CIS states, complexity multiplies – not adds. Each country runs its own tax authority, social insurance or pension body, and filing mandate. Mercans covers all major markets on a single platform with country-specific compliance engines running in parallel.
covered
1 contract
consolidation
Caucasus / CIS
Every filing. Every format. Submission-ready.
Mercans generates the exact file types that the Revenue Service and the Pension Agency expect to receive – not formatted summaries that need reformatting before you can submit them.
