Around 350 proposals have been received by the Latvian parliament in relation to tax reform laws. Last week, the Saeima supported tax reform laws in the first reading. This week, on the other hand, it is planned to review them in the final reading.
Janis Vucans, head of Saeima’s Budget and Finance Committee, had previously mentioned that plenty of proposals had been received and that they would be compiled accordingly. Considering that the submission term ended on July 24, and many usually submitted their proposals at the last moment, the head of the committee refrained from commenting on them.
As previously reported, the most massive changes are intended for the Law on Personal Income Tax. Amendments to the law provide for introduction of a differentiated PIT rate starting from January 1. PIT rate for annual income under EUR 20,000 will be 20%, for income under EUR 55,000 – 23%, and for income above EUR 55,000 – 31.4%.
Amendments to the Law on Solidarity Tax provide that 1% of the tax will be diverted to finance healthcare. 6% will be diverted to socially insured individuals – occupational pension scheme members. This will form the capital for state retirement pensions. If a person is not a member of occupational pension scheme – 4% of the tax will be transferred to the person’s chosen private pension fund.
It is also planned to establish that Solidarity Tax will be transferred to the PIT division account in the amount of 10.5%. This amount will be then divided between the state and municipal budget. The remaining tax revenue amount will be diverted to the state pension special budget revenue.
Major amendments are also intended for the Law on State Social Insurance. Amendments provide for social fees to be increased by 1%. This will make the mandatory fee rate 35.09%. Employers will cover 24.09% of this amount and employers will cover 11%.
Also amendments suggest establishing an obligation to perform mandatory payments from royalties. It is planned that royalties will be paid at 5% to insure the recipient’s pension.
Amendments to the Corporate Income Tax provide for a conceptually new payment regime. The new model provides for putting off CIT payment to the moment when revenue is divided or otherwise diverted to costs that do not secure continued development for the company. Amendments also provide for application of a 20% tax rate on dividends, whereas dividends received by private persons will not be applied with PIT. (BNN/Business World Magazine)