In Georgia, employers do not make direct social security contributions for their employees. However, they are involved in pension scheme contributions. Employers must transfer 2% of an employee's gross salary to their chosen private pension fund. Employees also contribute an additional 2% from their salary to their chosen pension fund.

Income Tax Withholding

While there's no separate payroll tax, employers are responsible for withholding employee income tax. Employers calculate and withhold income tax based on an employee's gross salary according to Georgia's income tax rates. They are also responsible for filing and remitting, which involves submitting necessary tax returns and payments to the Georgia Department of Revenue on a schedule based on the business's size.

Unemployment Insurance Tax

Employers in Georgia contribute to the state's unemployment insurance trust fund. The specific contribution rate is determined annually and is based on the employer's experience rating.

Additional Considerations

In some localities, employers may need to withhold or file additional taxes and contributions on behalf of employees. Employers are generally required to obtain workers' compensation insurance for their employees. Premiums for this coverage are a separate expense for the employer.

Importance of Compliance

Employers must accurately calculate, withhold, and timely submit all required employee tax contributions. Failure to do so can result in penalties and interest charges. Consider using a payroll service provider or working with a tax professional experienced in Georgia's regulations to ensure proper compliance.

In Georgia, employee tax deductions fall into two primary categories.

Federal Withholding Taxes

These taxes are deducted from your paycheck by your employer and forwarded to the IRS. They encompass:

• Social Security and Medicare: These taxes contribute to Social Security and Medicare programs. The combined employee contribution rate is 7.65% (1.45% for Medicare and 6.2% for Social Security) on your wages up to a certain taxable income limit set by the IRS each year.

Georgia Withholding Tax

This is a state income tax deducted from your paycheck by your employer and sent to the Georgia Department of Revenue. Georgia operates a graduated income tax rate, meaning the tax rate increases as your income increases.

Additional Information

• Employees may also have other deductions withheld from their paychecks, such as health insurance premiums or retirement plan contributions. These deductions are not considered taxes but will reduce your taxable income.
• It's crucial to periodically review your Form G-4 (Employee Withholding Allowance) with your employer to ensure your federal income tax withholding is accurate. This can help avoid owing a large tax bill at the end of the year or receiving a substantial refund.

In Georgia, the Value Added Tax (VAT) system is the primary indirect tax, and understanding its implications is crucial for businesses, especially those offering services.

VAT Rate and Registration Threshold

The majority of goods and services in Georgia are subject to a standard VAT rate of 18%. Businesses are mandated to register for VAT if their annual taxable turnover surpasses 100,000 GEL (roughly $30,000) within any continuous 12-month period. Businesses exceeding the threshold must charge VAT on all applicable services. However, businesses below the threshold can voluntarily register for VAT, which can be advantageous for claiming input VAT back on purchases.

VAT Exemptions and Reverse Charge Mechanism

Specific services in Georgia are exempt from VAT. These include essential services like medical and educational offerings, alongside certain agricultural products. When a Georgian VAT-registered business receives services from a non-resident VATable person, the Georgian business becomes responsible for paying VAT through a reverse charge mechanism. Understanding these exemptions and mechanisms is vital for determining your VAT obligations.

Additional Considerations

The location of service provision dictates where VAT is applied. Business-to-business (B2B) and business-to-consumer (B2C) transactions have varying rules regarding the place of supply. Since April 2021, non-Georgian businesses supplying digital services to Georgian consumers must register for VAT in Georgia and comply with VAT liabilities. Consulting with a tax professional is recommended for navigating the complexities of VAT for your specific service-based business in Georgia.

In Georgia, businesses creating jobs may be eligible for an annual tax credit of up to $3,500 per job created over a five-year period through the Job Tax Credit. The amount and eligibility depend on the county's economic tier. The Quality Jobs Tax Credit offers additional credit for businesses creating jobs with wages above the state's average, offering up to $5,000 per job created over five years.

Research and Development Tax Credit

This encourages businesses to engage in R&D activities within Georgia. The credit amount varies based on qualified expenses.

Investment Tax Credits

Businesses making significant capital investments in Georgia may receive tax credits through the Investment Tax Credit. The credit amount is based on the amount invested and the county's economic tier. The Rehabilitation Tax Credit is designed to encourage the restoration and reuse of historic and blighted buildings, providing a credit for qualified rehabilitation expenses.

Port Tax Credits

Businesses increasing imports or exports through Georgia's ports may be eligible for the Port Tax Credit Bonus if they also qualify for the Job Tax Credit or Investment Tax Credit.

Industry Specific Tax Credits

Georgia offers a variety of industry-specific tax credits including the Film Tax Credit, which supports its thriving film and television industry, and Technology Tax Credits, designed to attract and encourage technology-based businesses.

Tax Exemptions

Georgia offers several sales and use tax exemptions for specific industries and purchases, such as manufacturing machinery, pollution control equipment, and raw materials. The Freeport Tax Exemption provides an ad valorem tax exemption on inventory destined for out-of-state shipment, as well as inventory held for manufacturing or processing.

Other Incentives

The Work Opportunity Tax Credit (WOTC) is a federal program coordinated through the Georgia Department of Labor, providing tax credits to businesses that hire individuals from targeted groups facing barriers to employment. Businesses located within a Free Industrial Zone (FIZ) enjoy benefits like exemption from corporate income tax on income from activities within the zone, as well as exemption from customs duties on foreign goods imported into the FIZ.