Latviski English По-русски
Wednesday 21.02.2018 | Name days: Eleonora, Ariadne

Economic Diary: new year with new taxes

(No Ratings Yet)

The beginning of 2013 was marked by a number of legislative changes related to business activities.

As promised by the Latvian government, PIT has been reduced from 25% to 24% starting from January 1, 2013. Even though the difference is insignificant, it will allow entrepreneurs to save some money on workforce.

However, real estate tax rates have gone up. Their rates will now be set by municipalities from now on. This instrument was given to municipalities for the first time, so that they would be able to affect the residents’ level of welfare and business environment on their territory. The government reduced the maximum rate. For most objects, it will not exceed 1.5% from their cadastral value.

Requirements on the use of cash in business were also made stricter. In the past, enterprises were required to declare transactions worth up to 3 000 LVL with legal persons on a monthly basis. Now, this requirement is active for transactions worth 1 000 LVL. Furthermore, transactions worth 2 000 LVL or more with individuals that do not perform any business activities will be required to be reported annually. Finally, the maximum allowed payment amount in “live” currency was reduced from 10 000 to 5 thousand LVL.

But the most important event – Latvia gradually introduces a holding regime. Starting from January 1, Corporate Income Tax on inbound and outbound cross-border dividends is cancelled. Tax payments from interest payments and royalties will no longer be collected from the ones going to EU countries. Starting from January 1, 2014, the same will apply to payments in favour of companies from third countries. Furthermore, starting from 2013, income from share sales will not be subject to this tax; losses will not be allowed to be used to reduce the taxed income.


The name of the first businessman in Latvia to complete the entire process of registering a firm using the portal was revealed this week. It was Janis Gailis, a businessman from Valmiera, who created the Ajanapa Company in the end of 2012. He was even congratulated by Justice Minister Janis Bordans.

It became possible to register a firm without having to leave the home computer in November 2012. Using electronic services, it is now possible to not only found a company, but also make changes and receive all the necessary information. The filling out of all the applications, provided the person knows the information he needs to input in each space, does not take longer than 30 minutes. If the person chooses a fast procedure, his company is created within one day’s time. The standard procedure takes three days.

The amnesty, which no one really needed

The first week of 2013 marked the conclusion of the collection of applications from individuals and legal persons that wanted to participate in the tax amnesty initiative of the State Revenue Service (SRS). It was planned in the beginning of the project that nearly 110 thousand companies and residents would use the opportunity of having part of their tax debts written off. However, the real results turned out to be far more modest. There were only 1 792 applications submitted in the period from October 1, 2012 to January 2, 2013: 1427 applications stated the write off of nearly 10 million LVL in uncollected taxes.

Social organizations representing the interest of business do not believe the tax amnesty initiative has failed: more than three thousand individuals have used it. However, it should have been carried out earlier, they note.

“We proposed a similar initiative two years ago. If it had been realized then, the count would have been tens of thousands. This is, at its core, a remedy for the consequences of the crisis. Like any medication, it should be taken at the right time. Unfortunately, many did not last long enough to be able to use it, and are now in the middle of an insolvency process,” – says the Chairman of the Latvian Chamber Commerce and Industry Janis Endzins.

Once more about taxes

This week marked the conclusion of the European Commission’s proposal to review the current system of beneficial VAT rates in EU countries.

Consumers and business representatives were able to give assessments to the current order and offer their own ideas regarding possible changes. The processing of results may take up to several weeks. It is planned to prepare specific legislative initiatives based on these opinions in 2013.

In general, Brussels is aiming towards cancelling VAT benefits, which are not the same in different countries and prevent effective function of the single EU market. Furthermore, it is important to make sure that similar products and services are charged with taxes equally.

“EU countries need new income sources, business needs less complicated tax system with lower expenses. We are more interested in the question: will specific beneficial tax rates bring the profit they were intended to bring, or create more trouble than they are worth?” – notes European Commissioner for Budget and Financial Planning Algirdas Semeta.

The European Commission believes that limiting the use of lowered VAT tax rates would allow the governments to increase budget revenue without having to increase taxes. Furthermore, the standard VAT rate could be reduced in some countries.


Leave a reply

FCMC invites Bank of Latvia to provide ABLV Bank with yet another emergency loan

The Finance and Capital Market Commission (FCMC) has invited the Bank of Latvia to issue ABLV Bank another emergency loan.

Crime rate in 2017 was the lowest in Latvia’s history

Last year’s crime rate turned out the lowest in Latvia’s history, as reported by Prosecutor General Ēriks Kalnmeiers in his annual report.

LEC: government priorities should include searching for causes and solutions, not the guilty

Latvian Employers’ Confederation (LEC) is worried about ongoing events and their negative effect on the stability and future development of the country’s economy. LEC believes that stabilization of the financial situation requires careful coordination of actions between institutions and the government.

Producer price level in Latvia grew 0.9% in January

Compared to December 2017, level of producer prices in Latvian industry rose by 0.9 % in January 2018. Prices of products sold on the domestic market went up by 1.2 % and prices of exported products by 0.6 %.

Latvian President believes country’s financial system is stable; prime minister plans to report to European Council

«Latvia’s financial system is stable, and there is no reason to worry about possible instability of the banking system. Banks continue working as usual,» says the President of Latvia Raimonds Vējonis.

Corruption Perception Index in Latvia experienced no major changes in 2017

Latvia’s positions did not improve much in Transparency International’s compiled Corruption Perception Index 2017, said Delna – Society for Openness acting director Liene Gātere in an interview to Rīta panorāma programme.

Latvian citizens arrested in Britain under suspicions of organizing slavery

Five people were arrested in a joint international operation by Latvian and British law enforcement operatives, as confirmed by Latvian State Police.

Opinion: Russia is trying to use the situation to create chaos in Latvia

Russia is trying to use the established situation to create chaos in Latvia. Efforts, however, are fated to fail, says chairman of Saeima’s Defence, Internal Affairs and Corruption Prevention Committee Ainars Latkovskis.

Dismissal requested for Latvia’s Finance Minister; parties worried about finance sector sinking deeper

Latvia’s Finance Minister Dana Reizniece-Ozola has failed to prevent the decision made by United States Department of the Treasury, which is ruinous for the country’s financial sector and humiliating for its reputation, says chairman of New Conservative Party Jānis Bordāns.

Defence Ministry: a massive information campaign is being realized against Latvia

Considering events of the last several days in the country’s banking sector and the arrest of the governor of the Bank of Latvia – Ilmārs Rimšēvičs – it is entirely possible that someone is currently realizing a massive information operation. Its structure and execution is not unlike the one observed in USA, France and Germany during the pre-election period, BNN was told by Latvia’s Defence Ministry.

Latvian parliament to search for ways to dismiss current Bank of Latvia governor

Members of Latvia’s Saeima plan to search for a solution in the matter regarding the possible dismissal of the governor of the Bank of Latvia Ilmārs Rimšēvičs.

Bank of Latvia governor: I have received death threats

«This situation is incredibly complicated. This situation is quite possibly the most complicated one I have ever been in. I feel a great deal of support from people I don’t know, as well as my friends and family members. I have decided to not back down – I am innocent. The the people attacking my reputation have only one goal in mind – to have me step down,» said the governor of the Bank of Latvia Ilmārs Rimšēvičs during a press conference on Tuesday, 20 February.

Proportion of people working in Latvia’s culture sector is larger than the average in EU

The number of people working in Latvia’s culture sector is equal to 4.5% of the total number of employed people in the country. This proportion is also larger than the average one across the European Union, according to data published by Eurostat.

Ministry: idea for compulsory secondary education should be put on hold for now

Considering that Latvia’s Education and Science Ministry has several ongoing industry reforms, it would be best to put the proposal for compulsory secondary education on hold, said Education and Science Minister Kārlis Šadurskis during a meeting of Saeima’s Education, Culture and Science Committee.

Association: ECB should become more involved in resolving Latvia’s financial scandal

Association of Latvian Commercial Banks sees a need for the European Central Bank (ECB) to become more involved in the discussion and help resolve the situation, considering evaluation of ABLV Bank’s business model is in direct competence of ECB.

Hesburger to invest 11.5 million euros in Baltics this year

The largest fast food catering restaurant network in Finland and Baltic States – Hesburger – plans to invest approximately EUR 11.5 million in business development this year. EUR 5.5 million are planned to be invested in Latvia’s market, says Hesburger Development Director Ieva Salmela.

Air temperature drops below -30° C in certain parts of Northern Europe

On Tuesday, 20 February, air temperature in central and northern parts of Finland dropped to -27° C… -31° C in morning hours. In Norway, close to the Finnish border, air temperature has dropped as far as -34° C, according to data from meteorological stations.

FCMC suspects someone may want to undermine Latvia’s financial sector

It is not impossible that someone may want to undermine Latvia’s financial sector, said chairman of Latvian Finance and Capital Market Commission Pēters Putniņš in an interview to Rīta Panorāma programme on Tuesday, 20 February.

European exchange indexes decline; Wall Street enjoys a holiday

European exchange indexes declined on Monday, 19 February. No trading was performed at American stock markets, because the country was celebrating President’s Day.

Party: Latvian banking system’s crisis threatens Skanste neighbourhood's development

There are serious risks associated with European Union’s co-financed project for the revitalization of Skanste neighbourhood, including construction of Skanste tramway line, says member of Riga City Council and For Latvia’s Development party Viesturs Zeps.

Public opinion: KGB documents should be made publicly accessible immediately

Latvia’s society believes the KGB documents should be made publicly accessible immediately. In addition, residents say they are confident in their ability to discuss those documents without the country’s supervision, which takes the form of expert opinions prevailing over society’s moral views, as stated by guest researcher of History Institute of the University of Latvia M. His. Marta Starostina.

For Latvia’s Development: the prime minister is gone, but finance minister claims otherwise

«What we have observed in the past several days is that Latvia’s financial sector has received several heavy strikes as a result of the government’s uncoordinated and chaotic actions. Prime Minister Māris Kučinskis has evidently ‘disappeared’ and offers no clear plans to resolve the crisis, whereas Finance Minister Dana Reizniece-Ozola says different things in every interview. Such behaviour will not help resolve the crisis. It could instead pull the country’s financial sector in a much deeper crisis,» says chairman of For Latvia’s Development Juris Pūce.

Bank of Latvia provided ABLV Bank with a loan of 97.5 mln euros in exchange for securities pledge

The Bank of Latvia has provided ABLV Bank with a loan worth EUR 97.5 million in exchange for securities pledge, as confirmed by the financial institution.

Prime Minister: Bank of Latvia governor is not allowed to take official post

As a security measure, the governor of the Bank of Latvia Ilmārs Rimšēvičs has been applied with a prohibition to take post, said Latvian Prime Minister Māris Kučinskis after a meeting of the Cabinet of Ministers.

Poland's halt to logging in ancient forest came after irreparable damage

Although Poland has stated logging in the old-growth Bialowieza forest has been stopped, Warsaw has failed to reveal the amount of trees already cut down.