Personal income tax and the State compulsory social
insurance contributions (social security tax)
In 2015, personal income tax (PIT) rate is 23% of employees’ salary income (in 2014 – 24%). The amount of non-taxable income and tax relief for dependants has not been changed in 2015 – non-taxable income for employees is 75 EUR, the amount of the relief for dependants-165 EUR. There is also no change of the business risk fee in 2015 – it is still 0.36 EUR per employee. The rate of microenterprise tax is 9% if calendar year’s income does not exceed 7000 EUR, 11% for the income exceeding the threshhold.
Amendments to the PIT Law provide that from 2015 the tax will not be applicable to the employer's gifts, if the total amount of the employee’s gift for the calendar year will not exceed 14.23 EUR. The social security tax will also not apply to these gifts.
In 2015, the social security tax for employees who are insured for all types of social insurance, is the same as in 2014 – the employer’s share is 23.59 % but employee’s – 10,50 % of the salary and other employment income.
A threshold for social security tax on employment income is increased in 2015, it is 48600 EUR (in 2014 – 46400 EUR).
Deemed income of Board members
PIT and a social security payments should be paid for the company’s Board members’ deemed income which may not be less than minimum wage that is specified by the Cabinet of Ministers (in 2015 – 360 EUR), if the criteria set out in PIT Law and the Law "On State social insurance" are met. The criteria for 2015 are as follows:
1) the company does not have any employee or all employees’ employment income is less than the minimum wage defined by the Cabinet.
2) the monthly turnover of the company exceeds 1800 EUR.
PIT and social security tax on the Board members’ deemed income should not be paid for the calendar year in which the company is registered in the Register of Companies or in the case, if the Board members receive remuneration exceeding five minimum monthly salaries in the another company and this company is one of the group members in accordance with the law "On corporation income tax".
Minimum salary and changes in Labour Law
As mentioned above, the amount of the minimum salary in 2015 has been increased to 360 EUR (in 2014 it was 320 EUR), the minimum hourly rate - 2.166 EUR (in 2014 – 1.933 EUR), the minimum hourly rate for teenagers and employees exposed to particular risks – 2.477 EUR (in 2014 – 2.209 EUR).
On 1st January, 2015 extensive amendments to the Labour Law came into force, which among other things provide additional requirements for the form and content of the employment contract, the obligation for the employer to present the employment contract to controlling institutions, to issue a written order on dismissal from work to the employee, increase from three to five years the period for which a fixed-term employment contract may be concluded, specify payment deadlines for annual holiday pay, specify the procedure for calculation the average earnings and procedure for professional training or raising qualification of employees.
In addition, amendments to the Labour Law extend the limitation period to make remarks or reprimand an employee, specify the procedure for notification of resignation, permissible overtime and aggregated (summarized) working time accounting and calculation, slightly reduce the permissible amount of overtime hours and provide other changes.
Responsibility of Board members
Starting from 1st January, 2015 the responsibility of Board members for delayed tax payments in the state budget is significantly increased. The amendments to the Law "On taxes and fees" provide that the State Revenue Service (SRS) has rights to initiate proceedings on reimbursement of delayed tax payments of the legal person from the person who has been a Board member of the legal person at the time when the overdue tax payments have incurred, if all of the following criteria are fulfilled:
1) the amount of overdue tax payment exceeds total amount of 50 minimum monthly salaries (18 000 EUR);
2) the legal person has been informed by SRS about the decision to recover overdue tax payment;
3) it is found out that after delayed tax incurrence, the legal person has disposed the assets of the person to the persons, who in relation to the Board member is interested party within the meaning of the Insolvency Law;
4) the act has been drawn up on the impossibility of recovery of overdue tax;
5) the legal person has not complied with the statutory obligation of the Insolvency Law to submit an application for insolvency proceedings.
The Law lays down in detail the procedure and time limits in which the SRS initiate the reimbursement process of overdue tax payments, appeal procedures and time limits in which the responsible Board members in accordance with the decision of the SRS must pay overdue taxes.
Corporate income tax
Law "On corporate income tax" provides significant tax reliefs for taxpayers, who are involved in large long- term investment projects or invest in research and development to develop new products or services. The amendments to the Law adopted at the end of 2014, specifies the procedure for the application of these reliefs.
Tax and advisory services of Leinonen Latvia
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