The annotation of the draft law states that it is necessary to improve the competitiveness of the labor force in the Baltic region and to reduce the labor tax burden on low- and middle-wage workers.
The draft law therefore envisages a single package of measures - a revision of the personal income tax rates and the minimum tax system - aimed at increasing labor competitiveness and reducing the labor tax burden on low- and middle-income workers.
Currently, the rate of personal income tax is 20% for annual income up to €20 004; 23% for the part of annual income exceeding €20 004; and 31% for the part of annual income exceeding the maximum amount of the compulsory contribution object established in accordance with the Law on State Social Insurance.
From 2025, two thresholds for the progression of the personal income tax are to be introduced, including a 25.5% personal income tax rate for income up to €105,300 per year or €8,775 per month and a 33% personal income tax rate for income above €8,775 per month.
The draft law also foresees replacing the graduated non-taxable minimum with a uniform (fixed) non-taxable minimum applicable to all employees, irrespective of gross income, starting 2025.
The non-taxable minimum is set at €510 per month in 2025, €550 per month in 2026 and €570 per month from 2027.
At the same time, the draft law increases the non-taxable minimum for pensioners from €6,000 per year (€500 per month) to €12,000 per year (€1,000 per month) from 2025.
It is also planned that in 2025 the national minimum wage will be set at €740 per month, which is €40 more than at present.