Forthcoming changes in the personal income tax law in Latvia

According to the draft law the following changes will take place on the 1st of January 2014, or if so mentioned, on a later date.

Tax rate for Personal income tax (PIT) will remain unchanged at 24 % in 2014. Amendments introduce a gradual reduction of the tax rate for the following years: 23 % from the 1st of January 2015 and 22 % from the 1st of January 2016. 

The existing mandatory state social insurance contribution (MSSIC) rate of 35,09 % will be reduced to 34,09 %, of which 23,59 % will be paid by the employer and 10,5 % will be borne by the employee.

Social security contributions and PIT also to be made for members of the board working without remuneration, if the turnover of the company has exceeded EUR 12678 (LVL 8910) in the previous year and in the respective months there were no employees or the MSSIC and PIT object was less than the minimum monthly wage and the company has a turnover in current year.

The above mentioned amendment will not be required if the member of the board will reward monthly salary at least by amount of EUR 1601  (LVL 1125) to another capital company and if both companies are members of one company group according to Corporate Income Tax law (CIT).

The fixed income tax scheme will not anymore be an option and new registrations for this scheme will not be made. For the taxpayers, who have been earlier registered for the fixed income tax scheme, a two-year transitional period is set.

Company loans for owners and employees are to be regulated and possibly viewed as taxable income. According to the draft law, new provisions are introduced with regard to the loans issued to private individuals and certain criteria are set for loan agreements to determine taxation.

The minimum monthly wage and hourly rate for 2014 are approved.

  • The minimum monthly wage will be EUR 320 (LVL 225 ). The current amount is LVL 200.
  • The minimum hourly rate will be EUR 1,993 (LVL 1,359). The current amount is LVL 1,203.


The monthly non-taxable minimum and the tax allowance for dependents for the purposes of personal income tax are increased to EUR 75 (LVL 53) and EUR 165 (LVL 116) respectively. At present, the monthly non-taxable minimum and the tax allowance for dependents amount to EUR 64,03 (LVL 45) and EUR 113,83 (LVL 80) per month respectively.

  

Forthcoming changes in the micro enterprise tax law of Latvia 

Starting from the 1st of January 2015, if the annual turnover of the company is below EUR 7000 tax rate will remain unchnged at 9 %. If the turnover exceeds EUR 7,000 the excess part of the micro-enterprise tax rate will be:

  • From the 1st of January 2015 11 %.
  • From the 1st of January 2016 13 %.
  • From the 1st of January 2017 15 %.