Republic of Latvia: amendments to the Law on Personal Income Tax reviewed

On September 18, 2012 the Cabinet of Ministers of Republic of Latvia revised the amendments to the Law on Personal Income Tax.

The draft law provides that further cash or non-cash upfront payments, served out by the company, shall be considered as employment income, if for them shall have not been made settlement of accounts (presented the purchase receipt or returned residual money) within 90 days after the end of the business trip, but in the other cases - within 90 days from the moment of serving the cash or non-cash upfront payment.

There shall have to be calculated personal income tax and social security contributions, considering the mentioned upfront payments as employment income. It shall be assumed, that the sum of cash or non-cash upfront payment, for what is not made settlement of account, is the net salary.   

In the draft law mentioned adjustment shall not be applied if the remaining sum of the served out upfront payment, what shall be in the disposal of the recipient of the payment, shall not exceed the minimum monthly wage.

There is established the transitional period regarding company`s served out cash or non-cash upfront payments until December 31, 2012, which shall not be settled. If these payments shall not be settled until June 30, 2013, on July 1, 2013 they shall be considered as employment income.

If the upfront payment shall be served out until December 31, 2012, but the employee shall return from the business trip after December 31, 2012, the established adjustment shall be applied in the general procedure.