Following a lively public debate about revising the Latvian system of labour taxation to make it more competitive in the Baltic region, the Ministry of Finance has put together and on 26 September 2024 presented proposals for amending the Personal Income Tax (PIT) Act. The proposals make several changes to PIT treatment, affecting the rates, personal allowances and other core principles of tax treatment. This article explores key changes to labour taxation affecting taxpayers from next year.
On 9 September 2024 the State Revenue Service (SRS) reminded Latvian taxpayers about the opportunity to apply for an automatic refund of personal income tax (PIT) without filing the annual tax return (ATR). Persons wishing to receive into their bank account any PIT overpaid in the previous tax year are asked to apply for this service by 30 September 2024. In August 2024 the SRS added Smart-ID to the array of tools for signing in to the Electronic Declaration System (EDS), offering taxpayers an easier method of authentication.
The end of the summer saw the Supreme Court rule on cases concerning the tax treatment of income from various entertainment services. Just like income from live streaming of video games, winnings from participation in games of chance are high on the agenda when it comes to interpreting the relevant tax rules, which is causing disputes with the tax authority. One of these disputes involved the State Revenue Service (SRS) deciding to charge personal income tax (PIT) and late fees on an individual’s unreported winnings from a company organising games of chance. The taxpayer sued the tax authority, and his appeal eventually landed in the Supreme Court. This article continues our MindLink series on Supreme Court rulings concerning the tax treatment of income from recreational activities and looks at a recent Supreme Court ruling.
The State Revenue Service (SRS) has drawn up a plan for dealing with situations where individuals have not reported their income in full. This year the SRS has identified about 70,000 individuals with a difference of at least EUR 20,000 between their bank account turnover and reported income. In September the SRS plans to send out notices asking those individuals to revise their income and report it in full. Sending such letters is not a new practice – the SRS has used them for several years to check that a person reports all taxable and non-taxable transactions. A letter arrives through the SRS’s electronic reporting system. The SRS has 30 days to wait for a response from the person giving reasons for the discrepancy or adjusting their annual tax return if they find the discrepancies between the bank account turnover and the tax return arise from unreported income.
The live streaming of video games has become a popular form of entertainment attracting millions of global viewers on streaming platforms. The creators of video game livestreaming often encourage viewers to make voluntary payments supporting the gamer, which in certain cases may be his only source of income. This income has attracted the attention of the State Revenue Service (SRS). Having examined a person’s activities of creating video game streams and receiving money from viewers, the SRS found an unregistered economic activity and charged personal income tax (PIT). The person challenged this decision, and the case ended up in the Latvian Supreme Court. This article explores the background to the case and the Supreme Court’s opinion on the PIT treatment of income received from viewers during the live streaming of video games.
Inheritance tax is payable by individuals that receive property or money from a testator. Rates and exemptions may vary from country to country according to the degree of relationship between heirs, the inherited value and other criteria. Latvia has not introduced inheritance tax. This article explores the Finance Ministry’s proposal for introducing inheritance tax in Latvia, as identified in the report ‘An assessment of the current workforce cost situation and proposals for future action’, a tax policy planning document.
The Constitutional Court (CC) ruled on 13 June 2024 that provisions of the Personal Income Tax (PIT) Act are consistent with section 105 of the Constitution, which guarantees the right to property. The ruling was passed after the Administrative Regional Court and Riga City Court disputed the PIT Act’s provisions requiring payment of PIT on gambling and lottery winnings regardless of what the gambler has paid to play the game.
The Ministry of Finance has drafted proposals for amending the Cabinet of Ministers’ Rule No. 336 of 31 July 2001, ‘Allowable Expenses on Education and Medical Services’. The proposals mainly deal with the need to clearly define expenses that taxpayers may claim as allowable expenses.
The peculiar procedure for calculating and paying solidarity tax (ST) often has taxpayers wondering about its link with other Latvian taxes: personal income tax (PIT) and mandatory national social insurance (NSI) contributions. Confusion about ST’s essence and mechanism may lead to a dispute with the tax authority and even litigation. This article explores one of the latest cases heard by the Latvian Supreme Court regarding an ST payer’s request for a refund of PIT wrongly paid by making ST payments in Latvia.
In our earlier article we looked at the proposed amendments to the Personal Income Tax (PIT) Act, coming into force on 1 July 2024 along with the rules governing civil partnerships. In addition to a range of PIT reliefs that are currently available to married persons and relatives up to the third degree under the Civil Code, the lawmaker intends to provide civil partners with equivalent social guarantees.
Effective from 1 July 2024 amendments to the Notaries Act introduce rules on a civil partnership that will allow unmarried (including same-sex) couples to legally register their relationship and will give them social and economic protections. The amendments are to take effect together with amendments to the Personal Income Tax (PIT) Act and to the National Social Insurance Act, which extend PIT relief to persons having entered into a civil partnership.
On 17 October 2023 the EU amended its blacklist of uncooperative tax havens that are subject to special taxation procedures. The blacklist now contains 16 jurisdictions, including Antigua and Barbuda, Belize, the Republic of Seychelles, and Russia. As 2023 saw the list being amended several times, there are certain tax aspects that may raise questions, yet national law does not always provide the answers. In this article we take a look at what the Ministry of Finance (MOF) and the State Revenue Service (SRS) think about the tax treatment of a Latvian-resident individual’s income from a substantial participation in a foreign company, including dividends from a blacklisted tax haven.
In today’s fast-changing employment space, the status of workers has become a subject for legal, social and economic debate. Recent years have seen significant changes to the labour market and to the traditional perceptions of employment, in particular as a result of Covid-19.
On 7 December 2023 Parliament passed amendments to the Personal Income Tax (PIT) Act in their second – final – reading. As part of the 2024 budget bills package, these amendments were debated as a matter of urgency, with two readings only. This article explores what we see as key changes, including new products added to the basket of allowable expenses, compensation for remote work, and other exempt income groups that will have their exemption thresholds increased from next year.
