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Wednesday 21.11.2018 | Name days: Andis, Zeltīte
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Latvian government starts talks on applying reduced VAT on public catering

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUFinance Ministry has reached a conceptual agreement on applying on restaurants a reduced 12% value added tax rate instead of the current 21% under the condition that catering companies are to cease paying employees envelope wages, LNT reported on Wednesday, 1 August.

Catering companies have been trying to secure tax benefits for a long time now. Jānis Jenzis, president of Association of Hotels and Restaurants of Latvia, said the excessive tax burden has already caused the closure of some prominent restaurant in Riga.

Estimates from Finance Ministry show that more than 40% of people employed in the industry are not even paid minimal wages. For there to be a general agreement regarding the minimal wage level for people employed in the industry, the document needs to be signed by companies that together employ at least half of people working in the industry and whose total turnover exceeds half of the entire industry’s turnover. The president of the association said he hopes the signing of the agreement is a matter of time.

Finance Minister Dana Reizniece-Ozola said reduced VAT may be applied to the industry only if catering companies cease paying envelope wages. «If the industry signs a general agreement detailing a specific wage level for each profession, then we could conceptually support reducing VAT,» said the minister.

The politician mentioned that a new way of performing tax payments for workers employed for a short time may be adopted next year. This includes situations when restaurants require additional help for special events or when farmers need extra farmhands.

«Companies do not always require full-time workers. It would be desirable if it was possible to purchase a voucher for simple work that would cover all employment taxes and social fees, as well as ensure the general tax regime is not any less beneficial to employees,» said the finance minister. She explains that Latvia may adopt this approach using digital solutions. For example: paying taxes for short-term employees using a mobile app.

The minister said this matter will be discussed at next week’s meeting of National Council for Trilateral Cooperation.

On 1 August, Economy Ministry brought up the matter of taxing tips. The ministry’s deputy state secretary Raimonds Aleksejenko said it is wrong for the country to have no regulations whatsoever in regards to tips. At the same time, he refused to say if economy ministry stands in favour of applying taxes to tips.

«Legal turnover of tips in restaurants is made difficult. This is a topic the industry should continue resolving, I believe. We need to consider applicable regulations to make sure this area does not become grey. We need to be sure – do we apply taxes or do we not? And how should this be reflected in a company’s finances?» said Aleksejenko.


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