Georgia has a unique advantage as a trade and transportation hub between Eastern Europe and Western Asia. It has around 3.7 million people, with Tbilisi as its capital. The official currency is the Georgian Lari (GEL), and the country has seen steady economic growth, with real GDP rising by 9.4% in 2024.

For 2025, the World Bank projects 5.5% growth, while the International Monetary Fund (IMF) forecasts 7.2%. Georgia’s economy is also becoming more diverse. In addition to agriculture and mining, growth is strong in tourism, transport, IT, and manufacturing.

The IT sector has grown rapidly, thanks in part to skilled migrants. Inflation is under control at 3.5% and is expected to average 3.4% for the full year. Georgia’s simplified tax system, economic reforms, and steady growth make it an attractive place for doing business.

Understanding the country’s payroll and tax system is important to operating successfully in Georgia. This guide provides employers and employees with the key facts they need for smooth, compliant operations.

What Are Payroll Taxes in Georgia?

In Georgia, payroll taxes work differently from many Western countries. Instead of paying into several different systems (like unemployment, healthcare, or general social security), the main payroll-related payments are limited to two things:

  • Personal Income Tax (PIT)
  • Contributions to the funded pension scheme

This simple structure makes it easier for companies to handle payroll. There are fewer tax types and rates to manage, which reduces paperwork and saves time. Georgia uses this system to support its goal of being a business-friendly country with fewer tax burdens.

Employee and Employer Commitments

Georgia introduced the funded pension system under the Law on Funded Pension in August 2018. It works alongside the country’s basic state pension and is meant to help workers build personal retirement savings.

Here’s how contributions are split:

Contributor
Rate
Notes
Employee
2%
Deducted directly from wages
Employer
2%
Based on gross salary

The government adds up to 2%, depending on the worker’s yearly income:

Annual Income (GEL)
Government Contribution Rate
Up to 24,000
2%
24,001 – 60,000
1%
Above 60,000
0%

All Georgian citizens and permanent residents working for a Georgian employer must partake in the pension funding till retirement age. Individual entrepreneurs can also join voluntarily. However, if entrepreneurs have employees, those employees must participate. Workers who were already 60 years old (men) or 55 (women) before August 2018 don’t have to join.

Personal Income Tax in Georgia

Georgia uses a flat 20% tax rate for personal income. This applies no matter how much a person earns. One unique benefit of Georgia’s system is territorial taxation.

This means Georgian tax residents only pay PIT on income earned in Georgia. Foreign income, like overseas jobs, investments, or pensions, is not taxed in Georgia.

How Tax Residency is Decided

Georgia uses a simple rule to decide if someone is a tax resident. If you are physically in Georgia for 183 days or more during any 12-month period that ends in the current tax year, you are a tax resident. This rule is applied each year on its own. Days counted for residency in a previous tax year don’t carry over into the next year’s calculation.

Capital Gains Tax for Individuals

In Georgia, capital gains (profit from selling an asset) are taxed based on the asset. The rate for standard capital gains tax is 20% (same as PIT), however, there’s a reduced rate of 5% for sales of residential apartments and attached land and sales of vehicles.

Georgia's Special Tax Regimes

To promote entrepreneurship and support small enterprises, Georgia offers special tax regimes for micro and small businesses. These regimes provide major tax savings and reduce paperwork, making it easier for individuals and small businesses to operate legally.

For micro businesses, individual entrepreneurs with annual turnover under GEL 30,000 and no employees are fully exempt from income tax. This tax-free status encourages informal workers to register their businesses, contributing to economic formalization.

For small business status, individual entrepreneurs with annual turnover under GEL 500,000 get a 1% tax on total turnover, replacing standard income tax. If the turnover exceeds GEL 500,000, the rate increases to 3%.

Georgia also offers special tax incentives for targeted industries through Virtual Zone Person (VZP) status and Free Industrial Zones (FIZs). VZP status is mainly used by IT companies and offers tax benefits such as exemptions from Corporate Profit Tax and VAT on certain activities.

FIZs are designated areas for export-oriented manufacturing and logistics. Businesses operating in FIZs may benefit from reduced or zero tax rates on profit, VAT, customs duties, and property. Companies interested in these zones should visit the Revenue Service of Georgia (RS) for eligibility and benefits.

Tax Administration and Compliance in Georgia

The Revenue Service is Georgia’s main tax authority. It oversees tax collection, enforcement, and compliance. The RS is working to modernize its systems, including making New Computerized Transit System (NCTS) declarations compulsory for transit procedures. The RS also wants to simplify data entry, such as lists related to gambling restrictions.

While Georgia’s tax process may seem straightforward enough, employers can easily miss key changes and deadlines, leading to non-compliance. It’s best to seek expert help with hiring professionals to navigate tax processes efficiently.

Simplify Hiring with an Employer of Record

While Georgia’s economic prospects are generally positive, employers should be aware of a possible changing political atmosphere, especially the likely integration into the EU in the near future.

An Employer Record (EOR) enables you to legally hire employees in Georgia, handling compliance, payroll, benefits, and other HR processes, while letting you maintain full control over day-to-day management and work responsibilities.

RemotePeople’s EOR services are helpful for companies that:

  • Need to hire employees in Georgia without establishing a legal entity
  • Are testing local markets before committing to full business expansion
  • Want to ensure full compliance with local employment laws and tax requirements
  • Require a fast, cost-effective way to onboard employees in Georgia

Additionally, the RemotePeople Global Payroll Calculator is a FREE tool for businesses to accurately estimate payroll costs, factoring in local salary rates, income tax, social security obligations, and employer contributions specific to Georgia. 

By leveraging the RemotePeople integrated services, including recruitment, EOR. PEO, benefits administration, and payroll tools, businesses new to the Georgian market can benefit from a single provider that handles multiple operational challenges.