The closing part of last week's Article.

In Latvia, medical costs are very high for many people, especially for patients with serious illnesses, and the state does not cover them in full. Employers can support their employees financially, but the existing regulation makes this financially disadvantageous. The bill, which is in its 3rd reading in Parliament (Saeima), proposes significant changes that could change this system and allow employers to cover medical costs without an additional tax burden. This article informs you about the expected changes and the consequences for employers and employees alike.

On 1 January 2025, significant changes to the personal income tax (PIT) legislation came into force. Continuing our tradition, we have prepared an overview of the application of PIT, mandatory national social insurance contributions (MNSIC), and solidarity tax (ST) on salaries and wages in 2025.

October 27 was the last day of a public consultation on proposals the Ministry of Economy (MOE) has drawn up for amending the State Aid for Startup Operations Act. The proposals delete references to the de minimis aid rule and authorise the MOE to enter into participation agreements with organisations representing startups to simplify the process of awarding EUR 400,000 in state aid. This article explores what we see as key changes.

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.

Latvian law lays down different principles for including employment periods and periods equivalent to employment in the insurance period for Latvian nationals and foreign nationals, including EU nationals receiving an old-age pension. This has caused disputes between pension recipients and the National Social Insurance Agency (NSIA), as well as building the case law based on interpretations of the Latvian Constitution, EU law and international agreements.

The first year of audit has ended since insurance and reinsurance companies and foreign insurers’ branches started preparing their accounts and consolidated accounts according to International Financial Reporting Standard No. 17, Insurance Contracts (IFRS 17) with significant amendments. The new approach to measuring income from insurance contracts has transformed taxpayers’ accounting records and affected their transfer pricing (TP) policies. As the deadline for submitting TP files for FY23 is approaching, it’s time to assess how IFRS 17 affects insurers’ transactions with related parties.

ESG or sustainability is a hot topic that people initially associated with the environment and climate change. The social and governance components of ESG have recently become even more relevant when it comes to workers, supply chains or tax management. This article briefly looks at why we should be treating taxes as a key component of sustainability.

Coming into force on 1 July 2024, the Latvia–Moldova social security agreement will help the two countries work together in this field by defining how pensions, government benefits and insurance claims can be awarded and paid to persons living in Latvia and Moldova. The agreement also governs the payment of national social insurance contributions on income arising in these countries and dispenses with the need to contribute in both. This article describes how the agreement was reached and explores its key terms that are relevant to every Latvian individual that has economic or social ties with Moldova, as well as to Latvian businesses employing or planning to employ workers from Moldova after June 2024.

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.

Have a great New Year! By tradition we put together information on the legislation and amendments affecting the calculation of personal income tax (PIT), national social insurance (NSI) contributions and solidarity tax (ST) on wages and salaries. This article explores the changes for 2024 so you can get ready for a successful financial year.

The current economic challenges, such as high inflation, scarce resources and pressures to increase profitability, continue pushing businesses towards a global dilemma: either motivate your workers to stay on with a pay rise and then say goodbye to your profit, or cancel your plans for higher pay and perks and then lose skilled workers. This dilemma might have you looking for some more efficient types of employer’s financial support with a low or no tax burden, such as non-taxable fringe benefits. This article offers an overview of exempt fringes and other useful tools employers can use to support their workers in the Baltic States.

Globalisation means it’s common for companies to have their corporate clients and various procurement projects in countries other than their main place of business. To properly benefit from foreign procurement projects, it’s important to assess not only the benefits but also risks associated with such business opportunities, particularly tax risks. If your company has a permanent establishment (PE) in a foreign country, it’s important to be aware of the corporate income tax and payroll tax implications of operating there. In this article, we take a look at employment tax risks and key issues to consider.

On 18 April 2023 the Supreme Court ruled on case No. A420131521 concerning the classification of non-business expenses for corporate income tax (CIT) purposes, application of the concept of labour lease, and additional taxes charged by the State Revenue Service (SRS) in the construction sector, where subcontracted labour was used. By its ruling the Supreme Court refused the company’s request for reversal of the SRS’s decision, which remains unchanged and has taken effect. We feel MindLink subscribers should become familiar with this decision by which the SRS charged CIT and national social insurance (NSI) contributions, as well as a late fee and a penalty. For personal income tax (PIT) purposes, only a penalty was charged.

A new year, a new beginning! As usual, this article summarises the provisions of tax laws and other legislation affecting the calculation of national social insurance (NSI) contributions, solidarity tax (ST) and personal income tax (PIT) on wages and salaries in 2023.