Single tax account
As of 1 January 2021, a single account for tax payments is introduced. The account number is LV33TREL1060000300000. Along with the introduction of the common tax account, the date for the payment of almost all taxes is changed – it is set to be on the 23rd date of the month. Existing accounts will be retained for certain taxes – real estate tax, vehicle operation tax, company car tax, as well as customs duties.
Application of the Personal Income Tax
* The maximum non-taxable minimum per year – EUR 3,600 (EUR 300 per month);
* The amount of income up to which the maximum non-taxable minimum applies – EUR 500 per month;
* Threshold of applying the differentiated minimum exempt from the personal income tax – EUR 1,800 per month (previously EUR 1,200).
Every natural person may learn the amount of their estimated non-taxable minimum on the Electronic Declaration System of the State Revenue Service.
As from January 1, 2021, the minimum monthly salary is raised from EUR 430 to EUR 500.
The amount of tax deduction for a dependant is retained at the previous level – EUR 250.
As of 2021, the Micro-enterprise Tax (MET) may be paid only by a sole proprietor, agricultural or fishery farm, individual merchant or a natural person that has been registered as a performer of economic activity. MET payer may not be a Value Added Tax (VAT) payer.
MET rate depends on the turnover:
1) for a turnover of up to EUR 25,000 per year – 25 percent;
2) for the turnover share that exceeds EUR 25,000 per year – 40 percent.
In 2021, the companies will be permitted to change their MET status during the year as well and become either Personal Income Tax (PIT) or Corporate Income Tax (CIT) payers as of the 1st date of the next quarter, by submitting the application to the State Revenue Service by the 15th date of the last month of the current quarter.
The law provides for transitional conditions for the MET payers that have been registered in MET status before 31 December 2020. For instance, a Limited Liability Company (LLC) that has obtained the status of a MET before 31 December 2020, shall be permitted to retain MET status for the entire 2021. The respective LLC will have to become a CIT payer as of 2022.
Regarding the employees of METs, who have been hired by 2021, the requirement to apply regular procedures of tax payments on their salary shall be applied as of 1 July 2021. If an existing payer of MET hires an employee after 1 January 2021, the regular procedure of tax payment calculations shall be binding regarding these employees and transitional procedures will not be in effect regarding such employees.
As of 1 January 2021, the Micro-enterprise Tax Law no longer provides for the limit on the amount of work remuneration.
State social insurance mandatory contributions
From 2021, the rate of mandatory state social insurance contributions is to be reduced by one percentage point – from 35.09 to 34.09 percent. The social tax will be set at 10.5 percent for employees and 23.59 percent for employers.
In order to increase the social protection of self-employed persons, starting from July 2021, the minimum social contributions of self-employed persons will amount to ten percent instead of the current five percent of the income.
As of 1 January 2021, the individually determined deadline for the submission of State social insurance mandatory contributions (SSIMC) reports and payments of SSIMC for each taxpayer will lose effect. In future, the employer’s report shall be due by the 17th date of each month and the
SSIMC payment deadline shall be 23rd date.
Reduced VAT for fruits, berries and vegetables
Amendments to the Value Added Tax (VAT) Law preserve reduced 5% VAT for fresh fruits, berries and vegetables until 31 December 2023 to assist with development of agriculture sectors, reduce grey economy and increase the
competitiveness of legally working businesses.
Information source: State Revenue Service, Ministry of Finance