2017 tax rates at glance
- Corporate income tax rate is 15%.
- Personal income tax rate is 23%.
- Non-taxable income is EUR 60 per month.
- Social tax rate is 34.09% (23.59% paid by the employer and 10.5% paid by the employee). The maximum amount of the social contribution is set at EUR 52 400 per year.
- Solidarity tax – 34.09% (10.5% paid by employee and 23.59% paid by the employer). The social contributions for the income exceeding EUR 52 400 will be directed to the Solidarity tax payments.
- VAT standard rate is 21%, reduced rate 12%.
The minimum wage is EUR 380 per month.
The introduction of a “new” approach in vehicle taxation
According to the amendments of the Law On the Vehicle Operation Tax and Company Car Taxa new chapter enters into force as off 1 January 2017 on the Vehicle Operation Tax payment for a foreign registered vehicle. The Vehicle Operation Tax for the foreign registered M1 and N1 category vehicle will be charged according to its usage period in Latvia and paid by the driver if being resident of Latvia.
Changes in the Value Added Tax Law
The following changes to VAT Law come into force as off 1 January 2017:
- Throughout the law, several tax threshold values are rounded upwards or downwards to the figure without the decimal point.
- The law no longer provides for the taxation period of ½ year. The amendments also provide that after the registration at the State Revenue Service VAT register, the taxation period is one month, and it is maintained for following six calendar months.
- Introduced extended understanding of the term "representative car", aligned with the Law on Corporate Income Tax, which prevents the input tax deduction for the passenger cars registered as cargo vehicles (N1).
- Additional Article 143.3 providing domestic reverse charge mechanism applicable to the transactions with unwrought precious metals, precious metal alloys and supplies of metal coated with precious metal.
Changes in Micro-enterprise tax
Latest amendments to the Law on Micro-enterprise Tax stipulates that starting from 2017 the micro-enterprise tax is 15%. In case the turnover is not exceeding the threshold of EUR 7000, the tax is 12%. Further changes in micro-enterprise tax regime are still under consideration with the goal to increase the social protection for the employees, at the same time to maintain the low-tax regime for lifestyle businesses.
Changes in the Law on Taxes and Duties
- Amendments to the Law provides for the possibility of the State Revenue Service to close or suspend the top-level domain name ".lv" zone in case of certain circumstances.
- A new Chapter XIII providing for the contractors’ joint liability for the construction industry employees.
- The cash transactions between individuals are limited to EUR 7 200.
Changes in the Law on Personal Income Tax
- Deemed income in amount of the minimal wage per month for the Member of the Board (introduced last year) is extended and applies for all the Members of the Board in following cases:
- there were no employees or a member of the board who were paid minimum wage for that month and
- the monthly turnover exceeds 5 minimum wages (EUR 1 900)
- The tax does not apply to the employees’ catering expenses, if such are determined by the collective employment agreement and do not exceed EUR 480 per year in case of certain criteria.
- The tax does not apply to the scholarships of EUR 280 paid by the employer in case of certain criteria.
- The tax does not apply to the scholarships of the student undergoing medical education programs, promoting acknowledgment of the education programs paid from the medical institution resources.
Changes in the Law on Corporate Income Tax
- The changes concern donations, the income of non-residents related to the sale of real estate property as company’s shares, reporting of the payments to non-residents.
- New restrictions for covering losses of the previous years. The changes stipulate that, starting with the FY2017, the losses of the previous taxation periods (commencing with FY2008) can be covered in an amount not exceeding 75% of the taxable income for the current period. Thus, the period for covering losses stays unlimited, whereas the amount for one year is limited.
- The definition of a representation passenger car is changed - "representation passenger car" further renamed as "representation car”.
- Specification of the procedure of the corporate income tax advance payment calculation - it will be done automatically after the submission of the declaration.
Changes in the Law on Lotteries of Goods and Services
- According to the amendments to the law, all the lotteries of goods or services, regardless the amount of the prize fund, shall receive the permit of the Lotteries and Gambling Supervisory Inspection.
Please note that Grant Thornton Baltic newscasts are compiled for general information only, are free of obligation and are free of legal responsibility and liability. They do not cover all laws or reflect all changes to legislation, nor are the explanations provided exhaustive. Therefore, we recommend that you contact Grant Thornton Baltic or your own adviser for further information.