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Monday 29.05.2017 | Name days: Raivis, Raivo, Maksis
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Finance Ministry proposes preserving micro-enterprise tax

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvian Finance Ministry proposes reducing PIT to 20%, cancelling solidarity tax and preserving micro-enterprise tax as part of the tax reform.

Bank of Latvia, Latvian Employers’ Confederation, Latvian Chamber for Commerce and Industry, OECD, World Bank Certus think tank and other organizations have submitted proposals to Finance Ministry. On Tuesday, 28 February, Finance Minister Dana Reizniece-Ozola reported on the ministry’s proposed changes to the tax policy at the meeting of the National Council for Trilateral Cooperation.

The ministry and authors of proposals agreed that Latvia has a high labour tax burden, especially on small wages. All sides agreed that a reform of the corporate income tax is necessary by means of review of benefits or by introducing 0% tax rate on reinvested profits. It is noted that there is a necessity to equalize tax rates for income applied with PIT and CIT.

Finance Ministry offers to reform labour force taxes by introducing 20% PIT rate for income under EUR 45,000 a year. For income above EUR 45,000, the PIT rate is proposed to be set at 23%. The ministry also proposes increasing minimal wages to EUR 430, as well as cancelling solidarity tax. The ministry’s offer also provides for setting differentiated tax-free minimum from 0 to 300 euros. Wages of EUR 1,350 would have zero tax-free minimum and wages minimal wages would have tax-free minimum of EUR 300.

The ministry predicts that one of the benefits for labour tax reform will be average wages in Latvia reaching EUR 910.5 in 2017. This means that after paying tax from EUR 910.5, net wages are EUR 641.3. After this reform, however, wages would be EUR 680.9 after taxes.

The ministry adds that if it is decided to increase tax-free minimum, it will be necessary to address the matter regarding the tax-free minimum of pensioners. One proposal for this is gradually increasing it with EUR 300. The ministry believes that increasing tax-free minimum for pensioners would give them additional EUR 15 income every month.

Finance Ministry’s proposed changes to capital taxes provide for setting PIT at 20%. The tax rate would be 0% for reinvested profits and 20% at the moment of division of profits.

VAT rate would remain at 21% for the reform. However, it is planned to introduce the so-called reverse VAT payment order and reduce VAT threshold. Also, FM intends to discuss gradual increase of excise taxes, gambling and lottery tax increase and refocusing real estate tax regulations on sorting out cadastral value system.

The ministry believes it is necessary to realize the tax reform in the next two years, when Latvia is expected to perform active use of EU funds.

Ref: 225.109.109.2041


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