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President announces tax packet for micro-enterprises

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Valdis Zatlers

According to the official newspaper Latvijas Vēstnesis, the President of Latvia Valdis Zatlers has announced the tax package for micro-enterprises. The law provides a single tax rate of 9% for micro-enterprises from the turnover or the income from the economical activity.

The law will come into effect on the 1st of September of the present year. The tax packet for micro-enterprises was adopted by Saeima on the 9th of August. The law provides that an individual merchant, an individual enterprise, a peasant’s or fisherman’s household, or any other individual taxpayer, which has been registered in the State Revenue Service (SRS) as a performer of economic activity or as a limited liability company can be a micro-enterprise, if it has chosen to pay the tax for micro-enterprises in accordance with the criteria set by the law under question.

According to the business portal Nozare, the representative of the Ministry of Economics Evita Urpena has indicated that the norms set by the law apply to individual merchants as well as to individual enterprises, peasant’s or fisherman’s households, or any other individual taxpayer, which has been registered in the State Revenue Servicas as a performer of economic activity or as a limited liability company, if the founders and members of them are physical persons, the turnover of a year does not exceed LVL 70 000 and the number of employees is not higher than five in any time of a year. If the turnover is LVL 70 000, the micro-enterprise tax rate will be 30% for the surplus share; whereas if the income of the employees exceeds LVL 500 month, in addition to the set micro-enterprise tax rate, an augmented tax rate of 50% will be applied.

The law provides a single tax rate of 9% for micro-enterprises from the turnover or the income from the economical activity. Micro-enterprise tax for the taxation period’s turnover is expected to be paid four times per year for each turnover of a quarter. The law provides state social insurance contributions, personal income tax, the state duty of risk of business activity for the employees of the enterprise. If the micro-enterprsie complies with the norms of a enterprsie income tax payer, it also includes the enterprise income tax. The tax includes the personal income of the owner of the micro-enterprise from the share of the revenue of the economical activity of the micro-enterprise as well. The statuss of a micro-enterprise will be granted, if the enterprise has agreed with all of the employees to apply the micro-enterprise tax; the agreement must be registered in writing. The state social insurance contributions of the employees of a micro-enterprise will depend on the turoever of it. These contributions will be allocated 65% of the paid tax.

The proposals supported by Saeima put the social guarantees of the employees of micro-enterprises in order. They provide that the employee of a micro-enterprise paying the tax has the social insurance starting from a day the person has received the status of an employee. The state social insurance contributions of an employee will be calculated proportionally to the number of employess in an enterprise and the actual income of the enterprise. In order to apply the tax legislation to a micro-enterprise, Saeima adopted the amendments of the personal income tax and enterprise income tax as well, providing tax incentives from the general procedure.

In order to evaluate the practical implementation of the law, especially the appliance of the law to the state social insurance contributions and the availability of social insurance services to the employees of a micro-enterprise, the Cabinet of Ministers is to submit a relevant report by the 1st of October, 2011.

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