Taxes and benefits: Changes starting 2018

The centenary year with it brings a number of changes in tax policy, most of which are tied to the sweeping reform adopted last year, reports LSM's Latvian-language service.

Progressive income tax

Latvia has moved to a differentiated income tax based on income. The lowest, 20% tax rate applies to annual incomes of up to €20,000. A rate of 23% now applies to annual incomes from €20,001 to €55,000, and a 31.4% rate to annual incomes of over €55,000.

Previously the personal income tax stood at 23% for all earners. 

Tax-exempt differentiated minimum income will be increased to €200 a month, applied fully to wages of up to €1,000 a month.

The same tax-exempted income has been increased to €250 for retired people.

Minimum wage bump

The minimum wage has moved from €380 to €430.

In March 2017, 162,700 people were paid the minimum wage - at least officially, - of whom 131,200 were private sector and 29,100 were public sector employees. 

Higher social insurance contributions

Mandatory social insurance contributions have been raised by 1%. This revenue is to be used for healthcare funding.

While people involved in economic activity and those earning author's fees and royalties will be required to pay 5% mandatory social security contributions in order to save up for pensions.

On the flip side, there'll be support for artists out of work. They will receive benefits of up to the minimum wage, for up to six months a year. Around 200 people a year could qualify to receive such benefits, Latvian Radio reported earlier.

Enterprise taxes

A 20% income tax on distributed profit will now apply, and 0% tax on reinvested profit.

The microenterprise tax system will remain in place, however, the maximum turnover for such companies has been reduced from the previous €100,000 to €40,000 a year.

Latvia also lowered its value-added tax registration threshold from €50,000 to €40,000.

Excise tax

An excise tax bump will see price increases for alcohol, fuel and tobacco.

A liter of gasoline is to cost around €0.048 more; and diesel fuel €0.038 more. 

700ml of wine is to cost an estimated €0.119 more. 

500ml of vodka is to cost €0.532 more. 

500ml of beer is to cost €0.072 more.

While a pack of cigarettes is to cost €0.243 more. 

Misc

The Value-Added Tax has been reduced to 5%, from the standard 21%, for fresh fruit, berries and vegetables traditionally grown in Latvia.

Families raising two or more children will get extra benefits starting March 2018

Tax breaks for dependents have also been raised.

1 comment
Roy Walker Walker
And the Latvian state will now be playing the lottery - with your money! If you win, the government wins too and, unlike you, it won't cost them a penny to play. Should you win, up to almost a third of your winnings will be taken by the state, but if you don't, you can't claim a tax refund on your losses, so the government cannot lose.
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