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Taxes of micro-enterprise taxpayers in 2017 and other news

Micro-enterprise tax (MET) payers are now faced with a dilemma whether to maintain status of the taxable person next year or to waive it. The main reason for it is the amendments to the Law "On State Social Insurance" which was adopted by the Parliament in November last year. It envisaged that the minimum monthly mandatory state social insurance contribution (SSIC) during 2017 cannot be less than 75 % or ¾ of the minimum wage of employees, including the micro-enterprise staff. During 2017, the minimum wage will be 380 euros thus SSIC minimum contribution is 285 euros in 2017 whereas in 2018, the amount not less than the minimum wage in 2018 will have to be paid to the Sate Social Security Agency. For more information on MET and SSIC rates, please refer further in the article.

Sector restrictions and MET payment cancellation

For MET payers, as per the sector restrictions approved last year (a list of sectors listed in the Regulations of the Cabinet of Ministers No. 540 "Regulations on the sectors where micro-enterprise tax treatment is not applicable’’) will be suspended. The amendments of MET law that has been adopted in the first reading by the Parliament already prove it. The reason for the change of legislator position is due to the definition of the final deadline i.e., 31 December 2018 for MET payment treatment. Thus, it will be possible to pay MET in 2017 and 2018 only.

The above-mentioned MET Law draft amendment determines that the payers of MET must re-register for one of the current tax regimes in case of continuation of economic operations until 15 December 2018. If the re-registration will not be carried out, the taxpayer, depending on the legal form, will become a corporate or personal income tax payer.

The project provides that newly registered economic operators for MET treatment will be able to apply only until 30 June 2017.

MET and SSIC rates

The following MET rates are set in 2017:

  • 5% rate if a micro-enterprise turnover does not exceed EUR 7000.
  • 5% rate if a micro-enterprise turnover above EUR 7 000 but not more than EUR 100 000 for the first three years following acquisition of the MET status but starting with the fourth year - 8%.

The law also sets additional rates in excess of MET statutory turnover and limit of employees.

As mentioned above, as of 2017, the MET payers will have to pay also SSIC for every employee per month and contribution cannot be less than three-quarters of the minimum wage, or 285 euro (the SSIC payment 97.16 euro if 34.09% rate applied). If the employee complies with the categories of persons, such as age pensioners, Group I and II disabled persons as per Article 20. 3  paragraph 10 of MET Law, the SSIC minimum contribution in 2017 is calculated as 3/8 of the minimum wage, i.e. from 142.50 euro (the SSIC monthly payment 48.58 euro as per 34.09% rate), but in 2018 from ½ of the minimum wage.

Unfortunately, SSIC payments will have to be made also during the months when MET payer has not obtained income or its employees did not have salary. For instance, it applies to micro-enterprise owners who are employees in accordance with Article 1 of Law of MET. In order to avoid a situation where the owner will have to pay a tax for "nothing", MET payer has to give up MET status timely or suspend business which is a time-consuming process.

Planned business support measures

According to a conceptual report of the Ministry of Economy of Latvia, new measures are planned for business start-ups and businesses with low turnover. Currently, the Law of new business operating aid is approved at first reading by the Parliament. According to the annotation of draft law, the support is envisaged to entrepreneurs working on innovative products and services with high added value and require highly qualified specialists.

In addition, the Ministry of Economy in cooperation with the Ministry of Welfare and the Ministry of Finance is preparing proposals on social entrepreneurship law and other initiatives to achieve the goals set.


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