Business Taxes, Accounting & Payroll

Georgian accounting and tax requirements emphasize simplicity for small businesses while maintaining proper financial controls for larger operations. Understanding accounting obligations, tax compliance requirements, and payroll processing enables efficient business management and regulatory compliance while minimizing administrative burden.

Individual Entrepreneur Accounting - One Percent System

The one percent turnover tax system for Individual Entrepreneurs provides remarkable accounting simplicity unmatched in most jurisdictions. IEs need only track gross revenue from all sources without requirement to document expenses, cost of goods sold, or other deductions. This revenue-only focus eliminates extensive bookkeeping typically required for tax compliance, enabling many IEs to manage accounting entirely without professional assistance.

Monthly tax declarations require reporting total revenue received during the month through the Revenue Service online portal. The declaration form is simple with a single revenue field in most cases. Calculation is straightforward with tax due equaling one percent of declared revenue. The entire declaration process typically takes less than five minutes once revenue information is compiled. Electronic payment of tax obligations occurs through the same portal or via bank transfer.

Record retention obligations exist despite simplified tax calculations. IEs should maintain invoices issued to clients, receipts for significant expenses even though not deductible, and bank statements showing business transactions. While these records don't affect current tax obligations, they provide business insights and protect against potential future inquiries. Basic spreadsheets or simple bookkeeping apps suffice for IE record maintenance.

Professional accounting services for IEs are optional but many entrepreneurs engage accountants for peace of mind. Accounting fees for IE services typically range from 50-100 GEL monthly, covering tax declaration preparation, basic bookkeeping, and answering compliance questions. Even technically capable entrepreneurs may find modest fees worthwhile for professional oversight and time savings. More complex IEs with multiple revenue streams or international operations may justify 100-200 GEL monthly for comprehensive support.

Revenue thresholds require monitoring to avoid exceeding 500,000 GEL annual limits. Approaching thresholds triggers decisions about transitioning to standard tax systems or converting to LLC structure. Accountants help monitor revenue progression and plan transitions minimizing disruption. Proper revenue tracking throughout the year prevents surprise threshold violations requiring scrambling responses.

Multiple currency revenues common for international IEs require conversion to GEL for tax purposes. Using official exchange rates on receipt dates determines GEL equivalent revenues. Accounting software or spreadsheets with currency conversion functionality simplify multi-currency tracking. Many digital payment platforms provide GEL-equivalent reporting facilitating declaration preparation.

Limited Liability Company Accounting Requirements

LLC accounting obligations are more extensive than IE requirements but remain manageable compared to Western standards. Companies must maintain comprehensive financial records documenting revenues, expenses, assets, liabilities, and equity. These records form the basis for annual financial statement preparation, tax compliance, and business management. While professional accountants are strongly recommended, requirements are not as burdensome as many jurisdictions.

Estonian taxation model simplifies corporate tax compliance significantly. Companies pay no tax on retained profits, eliminating quarterly estimated tax payments and extensive ongoing tax compliance. Tax obligations arise only when distributing dividends to shareholders at fifteen percent rate. This distribution-triggered taxation means many LLCs have minimal annual tax compliance beyond financial statement preparation and filing.

Annual financial statements are required for all LLCs regardless of size. Statements must include balance sheets showing financial position at year-end, income statements detailing annual revenues and expenses, and cash flow statements for larger companies. Small businesses can prepare simplified statements while larger entities face more comprehensive requirements. Statements must follow Georgian accounting standards generally aligned with international practices.

Audit requirements apply only to companies exceeding specific size thresholds. Most small and medium LLCs are not required to undergo external audits, significantly reducing compliance costs. Companies exceeding thresholds for two consecutive years regarding assets, revenues, or employees must engage certified auditors. Audit costs typically range from 2,000-10,000 GEL annually depending on company size and complexity.

Monthly bookkeeping maintains current financial records throughout the year rather than scrambling at year-end. Recording revenues, expenses, payroll, and other transactions monthly or more frequently ensures accurate financial information for management and simplified year-end statement preparation. Most accounting firms provide monthly bookkeeping services as standard offerings bundled with annual tax compliance.

Professional accountant engagement is highly recommended for LLCs even when not legally required. Qualified accountants ensure compliance with evolving regulations, optimize tax positions within legal frameworks, prepare accurate financial statements, and provide valuable business insights. Monthly fees typically range from 100-300 GEL for small companies with straightforward operations. More complex businesses pay 300-1,000 GEL monthly for comprehensive financial management.

VAT compliance adds complexity for registered companies with turnover exceeding 100,000 GEL annually or those voluntarily registering. VAT-registered businesses must maintain detailed records of sales and purchases, issue compliant invoices, file monthly VAT returns, and remit collected VAT to authorities. Accounting fees increase 100-200 GEL monthly for VAT compliance given additional complexity and documentation requirements.

Payroll Processing for Employers

Payroll obligations arise for businesses employing staff, requiring proper calculation of gross to net salaries, tax withholding, social contribution processing, and timely remittance to authorities. Georgian payroll proves relatively straightforward compared to many jurisdictions with simple tax rates and minimal additional levies. Understanding payroll mechanics enables employers to budget accurately and ensure compliance while avoiding penalties from late or incorrect processing.

Gross salary represents the amount agreed in employment contracts before any deductions. From this gross amount, employers must withhold 20% income tax and 2% employee pension contribution, resulting in net salary paid to employee. For example, GEL 2,000 gross salary generates GEL 400 income tax withholding, GEL 40 employee pension deduction, and GEL 1,560 net payment to employee. The simplicity of flat 20% income tax eliminates progressive brackets and complex calculations found in many countries.

Employer contributions add 2% pension contribution on top of gross salary as employer's obligation separate from amounts withheld from employee. Using the same GEL 2,000 gross salary example, employer pays additional GEL 40 pension contribution, making total employment cost GEL 2,040. This remarkably low 2% employer burden contrasts dramatically with 20-40% employer social taxes common elsewhere. The minimal employer contribution makes Georgian employment costs highly competitive and predictable.

Monthly payroll declarations submit to Revenue Service by the 15th of following month, reporting all employee salaries and calculating total tax and pension obligations. The online declaration system requires entering each employee's identification number, gross salary, and withholdings. The system calculates total amounts due which employer pays through electronic transfer. Late filing or payment incurs penalties encouraging timely compliance.

Payroll software simplifies calculation and declaration processes, particularly for businesses with multiple employees or complex compensation structures. Georgian accounting software like Spectrum and Delphi include payroll modules handling calculations, generating declarations, and maintaining employee records. International platforms like QuickBooks or Xero can work with proper configuration. Many small businesses outsource payroll to accountants entirely, paying 50-100 GEL monthly per employee for full payroll processing including declarations and payments.

Payslips documenting salary calculations and deductions should be provided to employees each month. While not strictly legally required, payslips demonstrate transparency and professionalism while preventing compensation disputes. Standard payslips show gross salary, income tax withholding, pension contributions, and net payment. Digital payslips via email or payroll software satisfy this requirement efficiently. Maintaining organized payroll records protects employers during tax audits or employment disputes.

Annual salary reconciliations summarize full year compensation and withholdings for each employee. These reconciliations issue typically by January or February of following year, providing employees with annual income statements needed for their personal tax filings. The reconciliation also ensures employer's monthly declarations throughout year were accurate and complete. Any discrepancies discovered require correction through amended declarations.

Bonus and variable compensation require proper tax treatment identical to regular salary. Bonuses are subject to 20% income tax withholding and 2% pension contributions. Employers should include all compensation forms in payroll processing including performance bonuses, commissions, allowances, and benefits. Failure to properly withhold taxes on all compensation creates liability for both employer and employee.

Contractor payments differ fundamentally from employee payroll with no withholding obligations for payments to Individual Entrepreneurs or other companies. When engaging IEs as contractors, businesses simply pay agreed amounts without tax withholding. The contractor handles their own tax obligations through their IE declarations. This distinction makes proper classification of workers as employees versus contractors important both for compliance and cost management.

Accounting Software and Tools

International accounting platforms like QuickBooks Online, Xero, and FreshBooks serve many Georgian businesses particularly those with international operations or English-speaking teams. These platforms provide familiar interfaces, excellent support resources, and broad integration capabilities with payment processors and banking systems. Costs typically range from $15-50 monthly depending on features and user counts. Multi-currency support proves valuable for businesses operating internationally.

Georgian-specific accounting software like Spectrum and Delphi offer advantages of local language support, Georgian tax compliance features, and familiarity among local accountants. These platforms are designed specifically for Georgian accounting standards and regulatory requirements. Costs are comparable to international alternatives. Businesses working primarily in Georgian markets with Georgian-speaking accountants may prefer local software solutions.

Spreadsheet-based accounting remains viable for small businesses with simple operations. Well-designed spreadsheets can track revenues, expenses, and basic financial metrics sufficient for small IE or LLC needs. Free templates are widely available online adapted for Georgian requirements. Spreadsheet approaches work best when business volumes are low and complexity is minimal. Growth typically necessitates transitioning to proper accounting software.

Cloud accounting provides accessibility from multiple locations and devices valuable for remote businesses or those with team members. Automatic backups protect against data loss while version control prevents confusion from multiple file versions. Real-time access enables accountants to work directly with current data rather than requiring file exchanges. Security considerations are important but reputable cloud platforms provide robust protection.

Integration with banking and payment systems automates transaction recording reducing manual data entry. Many Georgian banks offer data export features compatible with accounting software. International payment processors like Stripe, PayPal, and Wise provide integrations enabling automatic revenue recording. Bank feed connections where available dramatically reduce bookkeeping time while improving accuracy.

Selecting and Working with Accountants

English-speaking accountants are readily available in Tbilisi and other major cities serving international business community. Many accounting firms specialize in serving foreign entrepreneurs and companies, understanding unique challenges and requirements. English proficiency varies but major firms maintain staff with strong English communication skills. Interviewing multiple candidates ensures finding accountants with appropriate language skills and expertise.

Service scope definition clarifies what accountants will handle versus client responsibilities. Full-service arrangements include all bookkeeping, tax filing, financial statement preparation, payroll processing, and advisory services. Partial services might cover only tax compliance with clients handling bookkeeping. Clear agreements prevent misunderstandings and ensure appropriate service levels. Written engagement letters documenting scope and fees provide clarity for both parties.

Fee structures vary with some accountants charging flat monthly rates while others bill hourly. Monthly retainers provide cost predictability advantageous for budgeting. Hourly billing suits businesses with irregular needs though costs can be unpredictable. Most small business accounting uses monthly retainer arrangements. Larger companies may negotiate customized fee arrangements. Understanding fee structures and what services are included prevents surprise charges.

Communication expectations should be established early including response time expectations, preferred communication methods, and meeting frequency. Some businesses need weekly interaction while others manage with monthly check-ins. Understanding accountant availability and communication preferences ensures smooth working relationships. Good accountants are accessible for questions but also set reasonable boundaries enabling them to serve multiple clients effectively.

Technology requirements and systems compatibility matter when accountant relationships involve shared access to accounting software or document systems. Confirming accountants can work with your chosen platforms or are willing to adopt new systems prevents technical friction. Cloud-based systems generally facilitate accountant collaboration better than local software installations.

References and credentials verification helps select qualified professionals. Asking for client references, checking certifications, and verifying experience with similar businesses reduces risk of poor service. Georgian accountants may hold local certifications or international qualifications like ACCA. While credentials matter, practical experience and communication abilities often prove equally important for successful relationships.

Common Accounting Challenges and Solutions

Multi-currency operations create complexity requiring consistent conversion methodologies and currency management. Using official exchange rates on transaction dates ensures compliance and consistency. Accounting software with multi-currency capabilities automates conversions reducing manual work and errors. Businesses should maintain records in both transaction currencies and GEL equivalents for complete documentation.

International payment processor records require reconciliation with accounting systems. Platforms like PayPal, Stripe, and Wise generate transaction reports that must be incorporated into accounting records. Fee deductions, currency conversions, and settlement timing can create reconciliation challenges. Regular monthly reconciliation prevents accumulation of unmatched transactions becoming unmanageable.

Missing documentation from suppliers or clients creates gaps in accounting records. Establishing systems for requesting and filing received invoices prevents missing documentation. For missing supplier invoices, proactive requests and follow-ups ensure complete records. Digital document management systems reduce likelihood of losing paper documents while enabling easy retrieval when needed.

Year-end closing procedures require additional effort beyond monthly bookkeeping. Ensuring all transactions are recorded, accounts are reconciled, and financial statements are accurate takes focused effort. Planning year-end activities in advance and working closely with accountants prevents last-minute rushing. Some businesses close books temporarily early in new years while finalizing prior year statements.