Small business tax amendments approved

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Next year, the microenterprise tax rate will rise to 15%, and to 12% for enterprises with smaller turnover.

Under the amendments passed by Saeima in the final reading on Tuesday, the microenterprise tax rate will be 15% for enterprises generating more than €7,000 in annual turnover and 12% for microenterprises whose annual turnover does not exceed €7,000.

The amendments to the Law on Microenterprise Tax were passed by 78 votes, with lawmakers from Unity party also supporting the bill. Ten MPs, representing the Latvian Association of Regions, Unity and Harmony, did not take part in the vote. Earlier, the government coalition failed to reach an agreement on the new tax regulation for microenterprises.

By agreeing on a lower tax rate for enterprises with small turnover the coalition partly accepted the proposals of opposition parties - Harmony and For Latvia from the Heart.

At the same time, lawmakers rejected Unity’s proposal to allow microenterprises to choose between two alternatives – either to pay a 5% tax plus minimum social security contributions or just a 15% tax.

As of next year, 70.4% of revenue from microenterprise tax will be transferred into the state social insurance contributions account. On January 1, 2018, the share of the tax revenue going to the social insurance contributions account will grow to 80%.

This provision has been added as the coalition has decided not to introduce the minimum social security contributions for now.

At present, the microenterprise tax rate is 9%.

Earlier on Tuesday, Saeima passed another bill stipulating that the microenterprise tax regime will remain in place for a year after a new tax regulation for small enterprises comes into effect. 

The previous amendments, which would reduce the tax to 5% but make business owners pay minimum social security contributions, were protested by some 200 people as the 2017 budget was being adopted. The amendments were repealed by the president and sent for repeat review in the parliament.

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