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Saturday 18.11.2017 | Name days: Doloresa, Aleksandrs
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Latvian Finance Ministry presents three possible models for workforce tax reduction

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe Finance Ministry (FM) has presented three possible ways of effectively reducing the workforce tax next year.

The first model provides an initiative to reduce the employees’ mandatory social insurance payments form 11% to 10% in 2014. It also suggests retaining PIT at 24% and reduce it by 1% every year from there (23% in 2015 and 22% in 2016). This proposals effect on the state budget is estimated to be LVL 40.1 million.

The second proposed model offers to reduce the employees’ social insurance payments from 11% to 10% in 2014 and have PIT remain at 24% and have it reduced by 1% every year from there on (23% in 2015 and 22% in 2016). It is also proposed to increase the tax-free allowance, having it differentiated from LVL 45 to LVL 98 (EUR 64 to EUR 139), as well as increase benefits for dependents to LVL 98 (EUR 139). This proposal’s fiscal impact on the budget is estimated at LVL 26.1 million.

The third model proposes to reduce the employees’ state social insurance payments from 11% to 10% starting January 1, 2014 and the employers’ state social insurance payments from 24.09% to 23.09% starting January 1, 2015. It is also proposed to retain PIT at 24% and have it reduced by 1% every year from there on (23% in 2015 and 22% in 2016). This proposal’s fiscal effect on the budget is estimated at LVL 40.1 million.

These models have been submitted for review to ministers, industry experts, state social and cooperation partners and municipal specialists.

It should be added that the current law regarding PIT significantly increases the general inequality in residents’ income. The FM’s developed proposals will reduce the inequality of income of Latvian residents, because they offer much opportunity for residents who have small salaries.

FM’s developed proposals for workforce tax reduction will be discussed on multiple occasions over the course of the next several meetings of the government and its cooperation partners, as well as municipal representatives.

It is reminded that the ministers have agreed to seek solutions to the municipal budgets’ stability and overall sustainability, making the municipal budget development an equal priority as the state budget’s development in a medium-term perspective.

Ref: 103.109.109.8460


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  1. J. says:

    Do I understand correctly; at present the PIT is 24% and social tax is 35% (11% on emplyee and 24% and employer) ?

    Thumb up 0 Thumb down 0

  2. jj says:

    PIT is 24%

    Social tax is 9.45% for employee (allowable obviously against PIT) and 20.68% for employer.

    Free of tax is 45 Lats per month.

    So…..employee ends up paying a bit less than 24% in total and employer ends up paying 20.68%

    Thumb up 0 Thumb down 0

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