Tax News in December 2019

Amendments to the Law On Taxes and Duties

The amendments of 13 November 2019 to the law On Taxes and Duties provide that the State Revenue Service (hereinafter – the SRS) has the right to provide information to a taxpayer on its business partner which in accordance with the information at the disposal of the SRS is to be regarded as a high-risk business partner.

The SRS will also notify the business partner of the fact that information thereon has been disclosed to the respective taxpayer.

Upon receipt of information from the SRS in respect of a high-risk business partner, taxpayers are recommended to reconsider further co-operation with the respective partner. Having sent the notification, the SRS may deprive the taxpayer of the right of deduction of input tax on the basis of a tax invoice issued by the high-risk business partner.

Furthermore, amendments have been made also to Section 60 of the Law with regard to the responsibility of members of the board of directors in cases where tax payments have been delayed. In order to ensure more efficient exercising of the recovery function by the SRS, it has been established that the SRS will be able to institute a recovery claim not only against the member of the board of directors, but also against the person who is actually exercising the functions and tasks of the board of directors. The criterion specified in Clause 3 of Paragraph one has been also supplemented; in the event of the occurrence thereof the SRS has the right to enforce the recovery against the mentioned persons. Specifically, in accordance with the data at the disposal of the SRS in most cases it was impossible to enforce the recovery against the member of the board of directors due to the absence of the criterion to alienate assets after occurrence of late tax payments in respect of the person which complies with the concept of an interested party within the meaning of the Insolvency Law(1) in relation to the member of the board of directors. To remedy this situation, by introducing the respective amendments the SRS is entitled to enforce the recovery against the member of the board of directors also in cases where company assets will be alienated prior to the occurrence of late tax payments and regardless of whether company assets will be alienated or not.

Amendments to Cabinet Regulation No. 676, Regulations Regarding the Amount of Non-taxable Minimum and Tax Relief for Calculation of Personal Income Tax
The annual differentiated non-taxable minimum and the annual taxable income up to which the maximum annual non-taxable minimum is applied will be raised as of 1 January 2020.

The proposed changes include:

-         the maximum annual non-taxable minimum is raised from 3000 euros (i.e., 250 euros per month) up to 3600 euros (i.e., 300 euros per month);
-         the amount of the annual non-taxable income up to which the maximum annual non-taxable minimum is applied is raised from 5280 euros (i.e., 440 euros per month) up to 6000 euros (i.e., 500 euros per month);
-         the applicable coefficient for the calculation of the differentiated non-taxable income is raised from 0.32895 up to 0.42857.

The coefficient applicable in the formulas to calculate the non-taxable minimum has been defined more precisely – the income increase coefficient of 1.09 whereby it is planned to prevent situations resulting in personal income tax surcharges to personal income tax payers in the event of increase in income over the year.

Therefore, the net salary of employees the gross salary whereof is in the range between 300 euros and 1200 euros will increase slightly.

 
Amendments to Cabinet Regulation No. 969, Procedures for Reimbursement of Expenses Relating to Official Travels

The mandatory requirement to prepare an official travel order with a signature has been cancelled from 29 November 2019. In the future, the order may be prepared in electronic form and without signature provided that such order has been approved by the head of a company or an authorised person thereof in the electronic system of the respective company.

The amounts of daily allowances and expenses for a hotel have been increased for official travels and work travels in Latvia and abroad, thus, respectively amending Annex 1 and Annex 2 to this Cabinet Regulation.

The daily allowance rate in Latvia has been increased from 6 euros up to 8 euros and the expense rate for hotels in Riga is 120 euros per day and in other residential places – 60 euros per day.

Increase in expense rates for hotels has been prescribed also for work travels. Actual travel expenses in the public transport in the territory of the Republic of Latvia (also in taxis), if use thereof is properly grounded, can be reimbursed in full amount provided that all documents certifying the relevant expenses have been submitted.

With the approval of the head of a company, seat booking for travel can be also reimbursed during the period of the official travel.