Currently, the Parliament is considering amendments to Micro-enterprise Tax Law ('Law'), which provide changes in tax rates and in other provisions, which, in turn, will affect the number of taxpayers in the near future.

Restricted industries

On September 22, 2015 Cabinet Regulations Nr.540 "Industries which do not apply the tax regime for microbusinesses" (‘Regulation’) were accepted. According to the provisions there are 37 industries, in which doing the business microbusinesses will not be entitled to choose to pay the microbusiness tax ('MBT') and to be a MBT payer.

In the list of restricted industries there are included logging, manufacture of basic metals, construction of buildings, wholesale, computer programming, legal and accounting services, architectural services, advertising, market research and other professional, scientific and technical services, labour search and others. According to the Ministry of Finance’s estimates that provision could apply to about 13 thousand microbusinesses.

Limit on industries will come into force from January 1 of the next year. However, the Law provides for a transitional period with regard to those persons who have got a MBT payer status up to 30 April 2015 and carry out economic activities in industry prescribed by the Regulation. These companies have the right to keep the MBT payer status in years 2016, 2017 and 2018. If the MBT payer status is received from the May 1, 2015 to December 31, 2015 and the company carries out economic activity prescribed by the Regulation, MBT payer status can only be applied in year 2016.

Minimum state social insurance contributions (SSIC)

According to the amendments to the Law, which was adopted on April 23, 2015, starting from year 2017 the employee of microbusiness paying MBT will additionally be socially insured according to the law "On State Social Insurance" with the aim to achieve within three years minimum amount of SSIC in order to meet employer and employee’s contributions amount calculated from the minimum monthly wage.

Thus, the MBT will include only corporate income tax, personal income tax ("PIT"), including PIT for employee (also for the owner), and business risk duty.

Starting from year 2017, the employer of microbusiness, MBT payer, for each employee will be obliged to pay SSIC from three-fourths of the minimum wage, while in year 2018 – from the full minimum wage. MBT payers (employers) will be required to contribute a minimum of SSIC object for all the microbusiness’ employees from its own resources. If a person will be the employee for a number of microbusinesses, the objects will not be summed together.

At the same time there is provided the possibility that employee of microbusiness may voluntarily join the state social insurance, by making social insurance contributions during the month of freely chosen object, which will not exceed the minimum monthly salary.

It should be noted that these changes will take effect only if on January 1, 2016 will come into force the relevant amendments of the Law "On State Social Insurance" (‘amendments of the SSI Law') on the mandatory contribution amount to employees of the microbusinesses. At the moment, the project of amendments to the law is brought to the Parliament.

Tax rates

According to the draft of amendments to the Law, MBT rate will depend on whether or not the aforementioned amendments of the SSI Law will come into force on 1 January 2016:

 

If starting from 1 January 2016 amendments of the SSI Law came into force

If starting from 1 January 2016 amendments of the SSI Law have not came into force

 

2016

2017*

2016

2017

Turnover up to 7000 EUR

9%

5%

9%

9%

turnover 7000,01 - 100 000 EUR

(if the status of MBT is the 1st, 2nd and 3rd year)

9%

5%

13%

15%

turnover 7000,01 - 100 000 EUR (starting from the 4th year in the status of MBT)

12%

8%

13%

15%

*according to the project of amendments of the Microbusiness Tax Law which is currently not yet adopted

Contacts of Advisory unit

If you have any questions or need more detailed information, please contact: Ina Spridzāne (ina.spridzane@leinonen.lv, tel. 67358635) or Kristine Erele (kristine.erele@leinonen.lv, tel. 67358600).