Corporate income and micro-company tax changes in Latvia 2017
Corporate income and micro-company tax changes in Latvia 2017
When considering establishing a company, making profit, employing workers, and other activities related to business, one should firstly look at the tax rules and rates in the respective country of establishment or activity. Taxes are one of the reasons to switch activities from one country to another, and this is exactly why the tax reform in the Republic in Latvia of 2017 is something to take into account. In this article, the main and the most important proposed amendments in Latvia’s tax rules and changes in tax rates are reviewed. The amendments have been lastly revised and adopted in the third Parliament sitting on July 27, 2017. It is planned that the amendments will be in force from January 1st, 2018, but some rules only from January 1st, 2019.
Corporate income tax changes in Latvia 2017
Corporate income tax system in Latvia is to be revised completely and after changes corporate income tax is to be paid upon the distribution of profit. Before the reformation and up until the changes become enforceable on 2018, income in general was taxed by corporate income tax. Thus, after the amendments, the rate of 15% from income is to be changed to 20% from the distributed income, leaving the profit which is invested back in the company untaxed. These changes, as forecasted by the initiators of the change in legislation, will boost the economy, specifically, will motive to start new businesses and to pay taxes willingly. Also, overall competitiveness in the field of national business activities and product innovations of Latvia will be increasing.
Micro-company tax changes in Latvia 2017
Reform will lower micro-company allowed annual turnover from EUR 100’000 to EUR 40’000, and the personal income tax in Latvia is to be 15% from the turnover. Also, the maximum allowed salary of Latvian micro company employees is to be raised to EUR 900 (before it was EUR 720), and from 2019 a person will be allowed to be employed in only one micro-company. As generally intended, micro-company establishment is meant for small, individual businesses or those who wish to start their own business but lack big investment, personal funds, experience or want to engage in small-sized commercial activities. Raising of the maximum allowed salary amount in a micro-company established in Latvia has been explained by the fact that even micro-companies are in a need of highly-qualified specialists and employees for the business to be successful. The problem before the amendments was that the salary of EUR 720 would not be satisfactory for many professionals, and therefore establishing or engaging in a micro-company was no more an option. In 2018, however, the maximum allowed EUR 920 in a month is much closer to the average wage for a professional employed in Baltics or Latvia specifically.
Should you have any questions about tax changes in Latvia, Lithuania or Estonia please do not hesitate to contact our English speaking lawyers at info@gencs.eu.
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