Georgia Payroll Outsourcing and PEO/GEO Services Leader Publishes Payroll & HR Insights for Georgia
Mercans, a leading Georgia payroll outsourcing, PEO/GEO, employee leasing, recruitment and BPO services provider, has published its most recent Payroll & HR Insights for Georgia. These insights provide an invaluable overview of the information every Payroll & HR specialist should know before setting up their HR and payroll functions in Georgia or signing up with a payroll outsourcing or PEO/GEO services provider. Mercans’ summary of labor laws, tax and social security regulations in Georgia allow you to navigate the local complexities and avoid pitfalls.
Mercans’ Georgia Payroll Outsourcing Solutions
While this summary will serve you as a great guide, you should still get in touch with Mercans’ Georgia payroll outsourcing, compliance, PEO/GEO and BPO specialists for a free consultation on setting up fully compliant payroll and HR functions. Better yet, outsource your payroll and HR activities in Georgia to Mercans and our Georgia payroll outsourcing experts will ensure that your employees will always be paid on time and in accordance with the Georgia regulations.
Mercans’ Georgia payroll outsourcing solutions are unique and revolutionary:
- Mercans is not an aggregator – your Georgia payroll outsourcing services will be delivered by Mercans’ dedicated Georgia payroll outsourcing team. No middlemen or subcontractors will ever see your confidential data.
- We use our proprietary Georgia payroll outsourcing software platform, that has been specifically designed to handle the complexities and requirements of Georgia labor regulations.
- Your data is always be secure with Mercans – Mercans is the only Georgia payroll outsourcing provider with ISO 9001, 20000 and 27001 certifications; has passed SOC 1 and 2 (both Type 1 and 2) audits; is GDPR compliant and has successfully completed OWASP Type 3.0 penetration tests.
- Mercans’ Georgia payroll outsourcing software platform can be easily integrated with any global HRMS systems; i.e. Workday, SAP, SuccessFactors, Oracle, Dynamics, etc.
- Mercans’ Georgia payroll outsourcing fees are transparent and competitive – you will save 30-50% over the service fees of any other comparative Georgia payroll outsourcing provider.
Mercans’ Georgia PEO/GEO Services
If you are already too busy to deal with another country or do not have a local legal entity in Georgia and need to hire staff there, then Mercans’ PEO/GEO services in Georgia are the right solution for you. We will employ the staff on your behalf in Georgia and will ensure the full compliance with the local regulations throughout the hire-to-retire cycle in Georgia. Mercans’ recruitment and immigration specialists will even help you to find the right staff and complete their immigration process in the matter of days.
Mercans does not use any subcontractor’s to deliver Georgia PEO/GEO Services. This ensures that your employees receive the highest quality support in Georgia and our service fees are unbeatable.
Georgia Stable Business Environment Attracting Investors
Over the past decade, Georgia’s economy has grown robustly at an average annual rate of 4.5 percent. This was despite numerous shocks, including the global financial crisis of 2007-08, the conflict with the Russian Federation in 2008, and the drop in commodity prices since 2014 that has impacted key trading partners.
Deep reforms in economic management and governance have earned Georgia a reputation of “star reformer.” To bolster the private sector, the country has introduced rules and regulations that make it easier to do business, and the country’s international ratings on governance and the investment climate have soared.
The Deep and Comprehensive Free Trade Area agreement with the European Union and the Free Trade Agreement with China are expected to boost trade integration. Moreover, energy, tourism, and agribusiness can potentially help to integrate the country further into the regional and global economies.
The Georgian economy picked up pace in the first half of 2019, growing at 4.9 percent and accelerating to 5.1 percent by July. While domestic demand was supported by higher consumption, investment contracted due to the completion of several infrastructure projects and declining foreign direct investment.
Mercans and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Doing Business in Georgia
Entity Registration & Incorporation Requirements
Companies are required to obtain tax registration together with legal registration from the National Agency of Public Registry under the Ministry of Justice of Georgia.
The National Agency of Public Registry is responsible for the incorporation of companies in Georgia. The entity incorporation and tax registration are carried out simultaneously, hence no additional actions are required to complete the tax registration of the company.
The Law of Georgia on Entrepreneurs (LOE) sets forth an exhaustive list of enterprises that can be established in Georgia and they are here as follows:
- Joint-Stock Company (JSC)
- Limited Liability Company (LLC)
- General Partnership (GP)
- Limited Partnership (LP)
- Cooperative (CO)
- Individual Enterprise (IE)
The regulations contained in the LOE equally apply to foreign and local companies. Therefore, foreign nationals are eligible to incorporate legal entities listed, considering the absence of any applicable legal limitation. Legal entity incorporation related considerations have been summarized below.
Registering Authority – The incorporation of companies is conducted by the LEPL National Agency of the Public Registry operating within the Ministry of Justice of Georgia (Public Registry). Upon the completion of incorporation process, the Public Registry issues a corporate extract indicating the identification data of the company. Please note, that all document submitted to the Public Registry in course of registration process will be publicly available.
Charter – A company registered under the laws of Georgia must have its Charter (otherwise referred as – Articles of Association or Bylaws) containing the identification data of the company and rules governing the corporate structure. The Charter must be presented to the Public Registry for the registration purposes and should be maintained at the company itself. Stipulated that the Charter of the company is publicly available, the founder(s) of the company may additionally conclude the Shareholders’ Agreement articulating the details of corporate management and operation of the company. The founder(s) are not obliged to submit the Shareholders’ Agreement to the Public Registry and it is maintained at the company.
Charter Capital – Company does not have to indicate the amount of its Charter Capital in any of the documents submitted to the Public Registry.
Stamp – Companies in Georgia are not required to have a stamp; however, in dealings with banks, tax authorities and civil counteragents, the company will be requested to use the stamp on various documents. Consequently, it is recommended for companies to obtain stamps.
Apostille / Legalization – Please note that the documents executed in countries other than Georgia shall be notarized and legalized or apostilled.
Joint Stock Company (JSC)
JSC is a legal entity the charter capital of which is divided into shares of equal nominal value. The types of shares applicable in JSC are specifically indicated in LOE. There are two types of shares applicable in the JSC, namely ordinary shares and privileged shares. The shareholders of the JSC may increase the capital of the company through issuing additional shares. The share amounts to a security certifying the claim of a shareholder in relation to the property of the JSC. The liability of a JSC is limited to its total assets. Shareholders are not liable for obligations of the JSC vis-à-vis the third parties.
Limited Liability Company (LLC)
LLC is the most common form chosen for incorporating companies in Georgia. The liability of the shareholder(s) towards the creditors is limited to its entire property. LLC may be established by any individual or legal entity. The capital of the company is divided into shares and unlike the JSC, the partners thereof can not issue any additional shares.
Limited Partnership (LP)
LP is a company where several partners carry out continuous and independent entrepreneurial activity under the common company name. The founders are all personally liable for any debt the company may undertake.
General Partnership (GP)
GP is a company where several persons jointly carry out independent entrepreneurial activity under the common company name. In GP the obligations of one or several partners towards the creditors of the partnership is limited to their investments into the company (limited partners), while the other partners are personally liable for any debts arising in course of operation of the GP.
Cooperative is a company incorporated with the objective to develop common business and increase the profits of its members. The objective of the cooperative is to accomplish the interests of its members. A cooperative is not primarily aimed at gaining profit. The cooperative is liable against the creditors only with its own property.
Individual Entrepreneur (IE)
As the owner of an enterprise, an individual entrepreneur is a physical person whose entrepreneurial activity shall be conducted in an entrepreneurial manner. In legal relations such person shall act on its own behalf. IE is not a legal entity. An individual entrepreneur uses its rights and performs its obligations as a physical person and bears personal responsibility before creditors for any and all obligations arising in course of its entrepreneurial activities.
Any foreign legal entity (commercial or non- commercial) without the purpose of incorporating any of the separate legal entities under the laws of Georgia, may establish and operate its business through a Branch Office registered in Georgia. The Branch Office is the sub-unit of a business entity and is not considered as a separate legal entity. Therefore, the liability of its founder may not be limited to the assets of the branch itself. The latter denotes that the founder is financially liable for the obligations of the branch.
Registration Requirements for JSC/LLC/GP/LP/CO
In order to register a JSC/LLC/GP/LP/CO, the founder(s) shall submit a formal application before the Public Registry, along with the Charter (Articles of Association) of the company.
The documents to be supplemented to the registration application and Charter (Articles of Association) to the Public Registry are listed below:
- Decision of the founders on the incorporation of JSC/LLC/JLC/LP/CO in Georgia;
- Document certifying the proof of registration of the founder in the foreign jurisdiction; if the founder is a legal entity, the same or a separate document should indicate the names of the authorized representatives, supervising authority and other corporate details of the founder (Certificate of Registration);
- Decision on appointing the Head of the Company (Director) or the relevant Power of Attorney thereof and written consent of the latter on such appointment;
- Passport photocopies of the founders and director(s);
- Notarized permission of the company’s legal address owner or rent agreement, if office area is rented;
- Receipt evidencing payment of registration fee.
Registration requirements for a Branch Office:
For state registration of the Branch Office of the foreign company, the documentation to be submitted to the Public Registry are listed below:
- Decision of the founder on opening a branch in Georgia;
- Charter (Articles) of the founder company;
- Document certifying the proof of registration of the founder company in the foreign jurisdiction; if the founder is a legal entity, the same or the separate document should indicate the names of the authorized representatives and other corporate details of the founder;
- Decision on appointing the Head of the Company (director) or the relevant Power of Attorney thereof and consent of the latter on such appointment;
- Notarized permission of the company’s legal address owner or rent agreement, if office area is rented
- Passport photocopies of the director to be appointed of a branch;
- Power of Attorney from the director (head) to be appointed at the branch;
- Receipt evidencing payment of registration fee.
Accounting and Reporting
The financial reporting and audit requirements applicable to the entities operating in Georgia are determined based on the per-defined parameters; e.g. revenue, assets, number of employees, etc.
For example, entities that meet at least two of the below criterions at the end of the reporting period are required to prepare and file audited financial statements in accordance with the International Financial Reporting Standards (IFRS):
- Value of total assets exceed GEL 50 million;
- Revenues exceed GEL 100 million;
- Average number of employees during the reporting period exceed 250.
Smaller entities are typically exempt from audit requirements.
There are no specific requirements regarding the mode of payment except the currency rule. All payments within the territory of Georgia must be made only in GEL. As regards payroll, payments can be made in cash or by bank transfer.
Banks are typically open from 09:30 to 18:00.
The standard weekend days in Georgia are Saturday and Sunday. Pursuant to the Labor Code of Georgia, the working time is 40 hours per week. However, in companies with specific working regimes where the work requires more than eight hours of continuous work (per day), working hours should not exceed 48 hours a week. It should be noted that the abovementioned duration does not include break times.
Overtime compensation is determined by agreement between the employee and employer.
Tax & Social Security
Pursuant to Georgian tax legislation, individuals starting economic activities are required to register with the Georgian Tax Authority (GTA) and obtain a Tax ID prior to their start-up. Foreign citizen non- entrepreneur individuals must register with the GTA and obtain a Tax ID prior to filing their annual personal income tax (PIT) returns. Furthermore, without the National Agency of Public Registry assistance, the RS department is authorized to allow the registration process of taxpayers. These requirements apply to the following persons:
- Georgian citizens
- Foreign citizens
- Legal entities of public law (LEPL)
- Budgetary organizations
- Foreign entities or organizations or their Permanent Establishment (PE)
Corporate Income Tax
Resident enterprises are subject to corporate income tax (CIT) on worldwide income.
Non-resident enterprises carrying out economic activities in Georgia through a permanent establishment (PE) are subject to CIT with respect to its Georgian-source income.
The CIT rate is a flat 15%.
Non-resident enterprises earning income from Georgian sources, other than through a PE, are subject to withholding taxes (WHTs).
From 1 January 2017, Georgia has switched to a new CIT system. The new system represents the adoption of the Estonian model of CIT to the Georgian tax system. As such, retained profits are no longer taxable until they are distributed. The new regime is not aimed to exempt the profits from taxation but is designed to defer the taxation moment. Consequently, taxpayers no longer need to determine taxable gross income and allowable deductions in order to arrive at the taxable profits, but rather a standard CIT rate of 15% is applicable to the grossed-up value of the following transactions:
- Profit distribution.
- Costs incurred not related to economic activity.
- Free of charge distributions.
- Over limit representative expenses.
Note that commercial banks, credit unions, insurance companies, microfinance organizations, and loan providers will be affected by the new CIT regime after 1 January 2023.
Personal Income Tax
In accordance with the Tax Code of Georgia (TCG), irrespective of residency status, a physical person receiving Georgian sourced income is subject to PIT at a rate of 20%.
Individuals who are tax residents in Georgia are generally liable to pay PIT on their worldwide income, though a tax code provides exemption for the foreign sourced income. In the case of tax non- residents, PIT is payable only on their Georgian sourced income, subject to double taxation treaty relief (if any). Accordingly, both tax residents and non-residents of Georgia pay PIT only on their Georgian source income. The Tax Code provides the list of income that is considered as sourced in Georgia. The list includes:
- Income received from employment performed in Georgia
- Income or benefit earned from the supply of goods in the territory of Georgia
- Income earned from the delivery of services in Georgia
- Income earned from leasing movable property used in Georgia or from transferring any other contractual right of use
- Interest and dividend income received from a Georgian resident
- Income received from the sale of shares in a Georgian resident entity
- Other income earned from carrying on activities in Georgia
An individual is recognized as a tax resident of Georgia if one was in Georgia for 183 days or more in any continuous 12-month period ending in the current tax year.
The status of resident or non-resident is established for each tax period. In addition, the days according to which the person was considered a resident during the previous tax period are not considered when establishing residency for the following tax period.
The gross taxable income of a resident individual is any income received in the form of salary, from economic activity not related to employment, or from other activities.
The following payments or benefits received from an employer would be treated as taxable income (not exhaustive):
- Per-diems and accommodation expenses received in excess of norms established by Georgian Ministry of Finance.
- Use of an automobile of any type for private use (Except for the one having electric engine).
- When receiving loans at an interest rate lower than the rate established by the Finance Minister, the difference between the established and actual interest rates.
- Goods or services sold or transferred free of charge by employer to employee.
- Assistance for education of an employee or their dependents (excluding training programs directly related to performance of the employee’s duties).
- Life and health insurance premiums.
There are no social security contributions in Georgia.
From 1 January 2019, joining a pension scheme is mandatory for all employees, except for:
- Individuals who have been 60 years of age (55 years of age in case of women) before the enactment
- of the law.
- Self-employed individuals.
The pension scheme is financed by employer, employee, and government, as follows:
- Each employer will transfer 2% of the employee’s salary income to one’s private pension account while paying the salary.
- Each employer will transfer 2% of the employee’s salary income to one’s private pension account on behalf of its employee.
- Each self-employed individual will transfer 4% of one’s annual income to the individual pension account.
- The government will transfer (i) 2% of the income of the participant to one’s private pension account when the annual salary of the participant/income of the self-employed individual is less than GEL 24,000 and (ii) 1% of the income of the participant when the annual salary of the participant/income of the self-employed individual is between GEL 24,000 and GEL 60,000. In case the annual salary of an employee/income of the self-employed individual is greater than GEL 60,000, the government will only contribute to the extent of GEL 60,000.
The tax year is the calendar year.
The following individuals are required to submit individual income tax declarations to the tax authorities at their place of registration before 1 April (for income received in the previous calendar year):
- Resident individuals, including foreign individuals with Georgian tax residency, for whom income is not taxed at the source of payment in Georgia.
- Non-resident individuals with Georgian-source income not subject to taxation at the source of payment.
Resident employers are required to withhold PIT at source and remit the withheld tax to the tax authority upon the payment of salaries. Non-resident employers are not required to withhold PIT and if the employee personally files a PIT declaration and pays the respective taxes. Returns are filed by 15th of the month, following the reporting period in which the payment was made.
Together with the withholding tax return, information about payments made to non-residents and taxes withheld should be submitted to the GTA within the same deadline. The taxable income of a non-resident is defined as the difference between the gross income gained from a Georgian source and the amounts to be deducted under the Tax Code of Georgia. Also, taxes paid by a non-resident must not exceed the amount withheld at the source of payment.
According to Georgian Labor Law, remuneration must be paid once a month. If there is a delay, employers are obliged to pay their employees 0.07% of the delayed sum for each day of any delayed compensation or payment.
When labor relations are terminated, an employer shall be obliged to make final settlement to an employee no later than seven calendar days, unless otherwise defined by a labor agreement or law.
Employers are authorized to deduct from the employee’s remuneration overpayments or any other funds payable by the employee to the employer. The said deduction shall not exceed 50% of the remuneration.
No additional specific requirements are defined by the Labor Code of Georgia.
The Georgian labor code provides extremely flexible conditions for employment. There is no minimum wage, creating conditions where compensation for labor is based entirely on an agreement between employer and employee.
The employee is authorized to take paid leave of at least 24 business days and maximum 15 days of unpaid leave per annum.
An employee’s leave pay shall be determined by the average pay for the previous three months. If the time worked from beginning to work or after the last leave is less than three months, then leave pay shall be determined by the average pay of months worked, and in the case of fixed monthly payment, it shall be determined by the last month’s payment.
Furthermore, employees are entitled to use maternity leave for a total duration of 730 days, of which 183 days are paid (or in case of pregnancy complications or multiple childbirth — 200 days).
There are no specific requirements defined under the Labor Code which state the mandatory insurance for employees or the amount of salary payment.
According to the Labor Code, in order to terminate an employment contract, the employer must send a written notice to an employee at least 1 month earlier before the contract termination and pay at least 1-month’s salary. The employer is entitled to send a 3-day written notice prior to termination of labor contract however under these circumstances the employer must pay at least two-month’s salary as a compensation.
To qualify for a work residence permit as a business owner (entrepreneur, freelancer) or an employee the employer must provide an employment agreement or a similar document certifying the employment. Please note that the applicant’s monthly salary cannot be less than US$347 (five times monthly subsistence minimum for working age male). If the employment agreement does not include the monthly income it is recommended to produce a bank account statement from a local bank confirming a balance of around US$4,163 (12 mo. x $347/mo.).
In addition, the annual turnover of the employer shall not be less than GEL 50,000 (around US$18,300) per each foreign employee that applies for residency. A lower amount of GEL 35,000 (US$12,800) per foreign employee applies to medical and educational institutions.
- Register a company or other business (optional)
- Open a bank account
- Obtain an employment agreement (business manager)
- Obtain a recommendation letter from a Georgian citizen or resident (freelancer)
- Obtain a bank account statement from a local bank
- Visit Georgia (if not already in the country)
- File the application for work residency with the government
- Wait 10-30 days for the residency to be approved (applicant can leave Georgia in the meantime)
- Apply for and get the residence card (ID card)
Georgia Payroll Outsourcing
Make sure your employees are always paid accurately and on time with real-time access to your HR and payroll data by allowing Mercans’ Georgia payroll outsourcing team to manage all aspects of your payroll function in Georgia. Mercans’ cutting-edge HRBlizzTM payroll suite is intuitive and transparent: save time, and let technology do the hard work. Mercans’ Business Intelligence and HRIS integration tools tie all of your systems into a single harmonious platform.
Mercans’ Georgia payroll outsourcing offering, leverages Mercans’ more than 20-year experience in delivering payroll outsourcing and PEO/GEO services in Georgia. HRBlizzTM SaaS Global Payroll Suite features, designed for Georgia payroll software and payroll outsourcing clients, include:
- Integration Georgia tax and social security systems and process.
- Ability to generate electronic bank files for all major bank in Georgia.
- Built-in working hours rules in compliance with Georgia labor law.
- Holiday/annual leave calculations in accordance with Georgia labor regulations
- Sick pay calculations in accordance with Georgia labor laws
- Collective bargaining agreements related configurations and support.
- Income tax calculations in accordance with Georgia tax regulations
- Tax calculations for non-resident individuals.
- Foreign tax relief based tax credits.
- Personal deductions and employment expenses support for tax calculations.
- Fully configurable setup for unemployment, accident and group life insurances.
- Customizable and configurable benefits plans.
- Restricted Stock Units (RSU) tax calculation in accordance with Georgia regulations.
- Online Employee Self Service (ESS) for delivery of payslips.
- Fully automated integration with the existing HRIS and third-party systems.
- Wage type specific gross-to-net or net-to-gross calculations and simulations.
- Customized calculations formulas for employee benefits.
- In-kind benefits calculations.
- Private pension plans administration.
- Formula and eligibility driven calculations.
- Automated conversions of annual compensation amounts to monthly, daily and hourly rates.
- Wage type specific pro-rata calculation rules.
Georgia PEO/GEO Services
React quickly to the market demands and deploy staff anywhere in the world in just days: this is Mercans’ global employee outsourcing and employee leasing services. Mercans PEO/GEO and employee leasing services in Georgia provide you agility, increase your competitiveness and are easy to implement. There is no need for you to worry about setting up a local company, recruiting and payrolling staff. Enjoy the security of Mercans’ guaranteed compliance with the regulations in Georgia. Mobilize any number of resources quickly— and focus on building your business while we take care of the rest.
Georgia Talent Acquisition & Recruitment
Get access to a large pool of global and local talent in Georgia, reduce time-to-hire, and improve hire quality all in one. Our Mesaar recruitment suite uses innovative matching and psychometric assessment tools to identify the best candidates for your business at record speed. Our consultants have extensive experience placing candidates across industries and organizational levels, and we have led executive searches and outsourcing mobilization projects for large multinationals involving thousands of candidates in Georgia and other parts of the world.
Georgia HR Advisory
Tap into the experience of our seasoned HR advisory team in Georgia. Their expertise ranges from HR policies and procedures, salary benchmark studies, and HR due diligence to sophisticated HR transformation projects. Get a speedy and precise needs analysis, and have us design, implement, and monitor the execution of any project—carried out by subject-matter experts who understand your needs, and who know what it takes for your business to stay ahead of the competition.
Georgia BPO Services
Make your business thrive and concentrate on the essentials and let Mercans’ business process outsourcing services minimize your administrative and overhead costs. Fully outsource your back-office functions to a team of HR, finance, accounting, immigration, and administration specialists. Our BPO team will take care of it all while you have the time and freedom you need to nurture your business.
Download PDF: Mercans Country Guide for Georgia 2020