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Dear clients and cooperation partners,
On 4 and 11 July 2017, the Cabinet of Ministers approved several draft laws introducing significant changes to the Latvian tax system as from 1 January 2018. Note that the draft laws were adopted by the Parliament on 27 July 2017 in an expedited procedure. Elsewhere, we have introduced amendments to CIT regulation and changes related to PIT. This tax news gives an overview of the main news of amendments not related to corporate income tax or personal income tax.
Amendments to Value Added Tax Law
An obligation to register in the VAT payers’ register will be imposed on inland tax payers if their taxable transaction value amounts to EUR 40,000 (presently the amount is EUR 50,000).
Starting from 2018, the types of transaction to which VAT payers have to apply the VAT reverse charge procedure have been expanded. The VAT reverse charge procedure will also apply to the following transactions:
- construction services, including separately provided construction services - VAT has been increased, as well as on construction product supplies;
- game console deliveries;
- supply of household electronic devices and electrical equipment;
- supplies of metal and related services;
Likewise, in VAT returns a taxpayer will have to indicate all transactions with a value exceeding EUR 150 without VAT (currently, EUR 1,430).
Amendments to Micro-enterprise Tax Law
The expectation is that, starting from 2018, companies and business operators whose annual turnover does not exceed EUR 40,000 will be allowed to bemicro-enterprise tax (MET) payers (currently EUR 100,000). At the same time, the intention is to increase the allowed monthly salary payable to MET employees up to EUR 900. As of 2019 a person could be employed only by one MET payer and cannot work for several MET payers at the same time.
Amendments to the law “On lotteries and gambling duty and tax”
As from 2018, gambling tax on roulette, as well as card and dice games (for each table) in a calendar year will rise from UR 18,000 to EUR 23,400, while increased gambling tax will apply to video games and slot machines (for each machine at each gaming place) in any calendar year from EUR 3,204 to EUR 4,164.
Amendments to the law “On Taxes and Duties”
A new obligation for credit institutions and payment service providers are set as of 2018 – to inform the State Revenue Service once a year on their clients’ – natural persons (Latvian tax residents) – bank account outstanding balance and turnover in previous taxation year if the turnover of one bank account exceeds EUR 15,000.
As of 2018 the range of transactions on which the SRS is entitled to publish information in the SRS home page without a previous warning to the taxpayer will be expanded, thus facilitating the options of good-faith companies to check the following information about their transaction partners:
- information about employers who on average pay the state minimum monthly salary or less to their employees;
- information about taxpayers who have incurred administrative penalties for violation of salary regulations (payment of untaxed salaries);
- information about taxpayers who have not filed tax returns or statements as specified in this law or specific tax laws with the tax administration within the term set in regulatory enactments;
- information about a taxpayer’s official who serves or was serving as an official in a company and during his or her office the company’s business was suspended.
The amendments expand SRS rights to apply interim measures when assessing personal data in relation to tax income risk, if the SRS detects facts that reveal hiding of a taxable object and avoiding taxes. In those cases the SRS is entitled to apply interim measures to secure enforcement together with
- a decision to perform a tax audit;
- notification of detected non-compliance between the tax and informative statement provided by the taxpayer and the information available to the tax administration;
- A decision in thematic inspection if the thematic inspection has detected a significant violation showing that the taxpayer is avoiding taxes.
Law “On support to taxpayers to settle late payment interest and fines”
The legislator has provided a new measure to aid taxpayers who face problems with paying previously calculated taxes, fines and late payment penalties. Starting from autumn 2017, support measures will be introduced for taxpayers to settle late payment interest and fines for two years so that late payment interest and fines related to a tax debt are removed within 21 days if the taxpayer pays the principal tax debt. This support will apply to all taxes administered by SRS (except real estate tax).
Fines and late payment penalties that occurred before 1 June 2017 will be cancelled. Support will not be available to companies which comply with the following criteria:
- a decision has been adopted to suspend business operations of the taxpayer (or the structural unit of the taxpayer where the violation occurred);
- the taxpayer has been excluded from the SRS value added tax register for a violation under the Value Added Tax Law;
- an official of the taxpayer has been included in the list of risk persons for tax purposes or the taxpayer’s legal address is included in the list of risk addresses for tax purposes;
- a court has decided to initiate insolvency proceedings concerning the taxpayer.
Taxpayers who have obtained payment term extensions for tax payment will also be entitled to support.
The plan is that this law will come into force before 1 October 2017 and a taxpayer will be entitled to apply for support to cancel late payment interest and fines within three months – until 31 December 2017. The payment term for the principal debt can be extended for 24 months, so it should be taken into account that support will not expire before 31 December 2019.
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