Personal income tax in Georgia is quite high among CIS countries. Therefore, the maximum load of employer’s expenses per employee remains very low – only 20% on the accrued amount, regardless of the residence of the recipient of the funds. As a result – higher wages and 4% pension contribution in the case of Georgian citizens.
Calculation on the example of 1000 GEL:
1000 GEL – net (in hands)
Total: 250 – to be paid to the budget
This arrangement attracts not only local residents but also foreigners who go to the country to earn money. The Government takes this into account and offers its visitors a flexible system for collecting mandatory contributions to the national budget. Let us take a closer look at the sphere of tax deductions and find out when a non-resident should pay tax on his salary in Georgia.
What is Personal income tax
Income tax or personal income tax is a direct tax deduction from all individual income: wages, dividends, real estate transactions and even lottery winnings. Such tax is the main tool for forming the budget of any state. Only confirmed expenses of an individual are deducted from the tax base if it is stipulated by the legislation.
The amount of tax deductions depends largely on the type of personal income tax. Most often you can find two types of tax:
- progressive – the greater the amount of income, the greater the tax;
- fixed – the percentage does not change depending on the taxable base.
For example, in Russia there is fixed taxation of income, which is 13% of any amount. In the U.S. the rate is progressive – if a citizen receives up to 9000 dollars a year, he is not obliged to pay income tax on this amount. But if the annual profit is more than 400 thousand dollars, you will have to give 40% of this income to the state.
In addition to the method of calculating the tax, the state changes the rate for different groups of citizens. Much depends on your social status and whether you are a resident of the country.
Income tax in Georgia
Income tax in Georgia is fixed at 20% in 2019. Personal income tax is paid by your customer, be careful and keep in mind that the amount of remuneration specified in the contract will be different from what you get as income tax is deducted from the amount.
This rate includes other deductions for the state. Important reservation – an individual is obliged to make contributions only if the income was received in the country. In this case, it is necessary to be employed under the Labour Code. Therefore, if you are a citizen of the country, but you receive money from a company registered abroad, then personal income tax in Georgia is not mandatory for you. The following types of income are also exempt from tax deduction:
- grants, state pensions, academic scholarships;
- property obtained by inheritance;
- income received after divorce;
- lottery winnings up to GEL 1000;
- income of blood donors;
- income from the sale of a car if the property was owned for more than 6 months.
Salary tax in Georgia does not apply to privileged categories of citizens if their income does not exceed 3000 GEL. Tax-exempt income and privileged categories of citizens are described in more detail in 1 and 2 clauses of Article 82 of the Tax Code of Georgia.
When calculating personal income tax it is necessary to take into account pension contribution. Citizens of Georgia, as well as foreign citizens with residence permits at official employment, are obliged to deduct part of their earnings to the Pension Fund. For individuals, such contributions are already included in the 20% income tax amount from the taxable base.
In this case, the taxable base is formed by deducting 2% from wages, which are withheld by the employer as a contribution to the fund. As a result, personal income tax and the employer’s contribution on behalf of an employee are deducted from wages separately. In fact, the pension contribution is 4% and often the employer pays all 4, despite the fact that the employer is obliged to pay only 2 (calculation is given at the beginning of the article).
Personal income tax for non-residents
The Tax Code of the country also states that income tax in Georgia applies to non-residents of the country. If you have lived in Georgia for 183 days and are officially employed, you must pay 20% even if you are not a citizen of Georgia.
For legal entities, Georgian legislation implies a separate article – income tax. Thus, payments of companies and individuals are separated, and the tax burden becomes lower.
In order to better understand all the nuances of personal income tax of this country and not to get into a difficult situation with contracts, it is better to turn to people who know exactly all the details of the Tax Code of Georgia. Write to us and we will help you to draw up a correct contract and keep proper accounting in the future.