Latvia: Proposal on amendments to the Micro-enterprise Tax Law

On November 6, 2013 in Saeima in the second reading shall be considered Draft law on Amendments to the Micro-enterprise Tax Law.

Amendments establish that natural or legal person, who is a member of a partnership, can not be the Micro-enterprise tax payer. It is planned that this provision shall come into force on July 1, 2014, so that in transitional period the member of the partnership shall be able to withdraw from it. Within the time, while micro-enterprise tax payer is the member if the partnership, part of the partnership profit (what is related to micro-enterprise) shall be imposed with Micro-enterprise tax applying additional rate 20%.

Also, this Law shall include the restriction - a taxable person, who is registered as Micro-enterprise tax payer, at the same time shall not be entitled to pay Personal Income Tax or patent fee from the economic activity income. This restriction shall not apply to Micro-enterprise tax payers, who have passive economic activity income (e.g. from lease of the property) and who apply to this income Law on Personal Income Tax Article 11 (12).

The amendments also provide that if the Micro-enterprise has provided its employee with the loan, what according to Law On Personal Income Tax is equivalent to income, it is not included in the income of the employee of micro-enterprise and shall be imposed with Personal Income Tax according to provisions of Law on Personal Income Tax.

It is planned that from July 1, 2014 as employee’s or owner’s income from the micro-enterprise shall be considered cash or non-cash advance payment, if the payment (or part of it) shall not be settled within 90 days after the business trip or official journey, in other cases - within 90 days from the day of serving out the cash or non-cash.

Also it is planned to introduce in the Law the provision, what allows not applying the Micro-enterprise tax additional rate, if the tax payer within last three taxation years has shown stable turnover increase tendency.

Valters Gencs

Tax Attorney & Founding Partner

Gencs Valters Law Firm, Riga

Email: valters.gencs@gencs.eu

Tel: +371 67 24 00 90