Next year will bring not only an increase to minimum wages, introduction of differentiated tax free allowance and decrease of gas tariffs but also a number of other legislative changes that will undoubtedly affect the finances of Latvian households. SEB Bank’s economic expert Edmunds Rudzitis has compiled fifteen of the most important changes.
Minimum wage increase – minimum wages in Latvia will be increased by EUR 10 (from EUR 360 to EUR 370) next year. Minimum wage changes could affect more than 20% of employed people in Latvia.
Increase of dependants benefits – this benefit will be increased by EUR 10 (from EUR 165 to EUR 175), which means additional EUR 2.3 per month. However, the range of people eligible for this benefit will be narrowed down – it will no longer apply to employed people’s unemployed spouse and parents.
Wage increase for people employed in the government sector – wages will be increased for police officers, fire fighters, prison personnel, doctors, workers of the State Employment Agency, State Social Insurance Agency, Ombudsman’s Office, State Audit and State Probation Service employees, members of the government and certain posts in the Saeima and teachers (from 1 September onward).
Introduction of differentiated tax-free allowance – people whose wages are smaller than EUR 1,000 will be eligible for increased tax-free allowance in 2016. This increase will depend on their wage size.
Solidarity tax – it will be applied to wages that exceed EUR 48,600 annually. Wages that exceed EUR 48,600 will be applied with 39.09 tax rate. This tax may be applied to EUR 4,700 people in Latvia.
PIT return for child interest education – starting with 2016 child interest education will be added to the list of expenditure eligible for tax return. 23% of overpaid tax will be allowed to be returned in 2017 by submitting an income declaration to SRS.
Re-calculation of pensions provided in 2010 – pensions provided in 2010 will be re-calculated in 2016. Re-calculation will increase pensions of people who started getting their pension paid during the economic crisis, when a negative capital index was applied to all pensions.
Reduction of natural gas tariffs – starting with 1 January 2016 an onward, the price of natural gas will reduce by 2% for gas stove users (approximately 380 thousand households) and 4% of gas heating users (more than 50 thousand households). Considering the ties between gas price and the price of crude and diesel fuel in the past nine months, the current low oil price allows for the possibility that reduction of gas tariffs is also expected in the second half-year of 2016.
Reduction of price on electricity – it is expected that the price of electricity will reduce for households in 2016. Reduction will depend on the chosen tariff plan (estimated at 2-4% on average).
Increase of excise tax for fuel – excise tax rate for fuel will be adopted in Latvia on 1 January 2016. It is expected to increase the price of petrol by 0.03 EUR/litre and the price of diesel fuel – by 0.01 EUR/litre. Good news – it is expected that oil price will remain low at the beginning of 2016.
VAT on management services for apartment buildings – 1 July 2016 marks the entry into force of the addition of 21% VAT rate of management services provided to apartment buildings.
Increase of water supply, sewer and waste management tariffs – 2016 will see an increase of tariffs on water supply and sewer service in multiple large towns and regions in Latvia. It is also expected that waste management tariffs will increase as well.
Changes to real estate tax payments – In 2016, real estate tax payments will reduce for families with children in Riga and will increase for real estate properties that do not have any tenants (1.5%). The same applies to land owners.
Excise tax increase for alcoholic drinks and tobacco products – excise tax on alcoholic drinks and tobacco products will increase in 2016. The same applies to fluids used in e-cigarettes.
Car repair services to become more expensive – car inspection services will become EUR 3.61 more expensive in 2016. This will affect more than 500,000 car owners across Latvia. Repeated technical inspection will become EUR 1.98 more expensive.