Latest amendments to the Micro enterprise Tax Law in Latvia
On November 23, 2016 were accepted amendments to the Micro enterprise Tax Law, establishing that from January 1, 2017 the applicable tax rate will be 5% and the rate will no longer include state social insurance contribution, obliging micro enterprise taxpayers to perform mandatory social insurance compulsory contribution for each employee. It was also established that the micro enterprise tax regime will be in force until December 2018.
Just few days before the New Year`s eve the rules of the game have been changed.
On December 20, 2016 in the extraordinary meeting the Parliament of the Republic of Latvia – Saeima has approved amendments to the Micro enterprise Tax Law, establishing that from January 1, 2017 the tax rate from 9% is increased to 15%.
The amendments establish that for companies with the turnover not exceeding 7000 euros per year the applicable tax rate will be 12%. The differential rate will be in force for one year and starting from 2018, the micro enterprise tax rate for all micro enterprises will be 15%.
Furthermore, Saeima has refused from introduction of minimum monthly compulsory state insurance contribution amending the Law "On State Social Insurance" as well.
Introduction of minimum monthly contribution would have significantly increased tax burden of companies with small turnover, as it was planned that the social contribution will have to be paid for employees also for those months when the company does not have turnover at all.
Saeima also approved the proposal to exclude previously accepted provision that micro enterprise tax regime will be in force until the end of 2018. Also President joined the view that this provision has to be excluded.
Saeima has instructed the Cabinet of Ministers until June 1, 2017 to submit draft laws what will establish introduction of new specialized simplified tax regulation for small businesses and micro enterprises, for replacing the existing micro enterprise tax regime.
Therefore the last amendments to the Micro enterprise Tax Law also establish that the micro enterprise tax regime will be in force one more year after entering into force of the new tax regime for small companies.
Latvia with the current micro enterprise tax regime was ahead of small businesses of other countries, but now with the new 15% tax rate, what will have to be paid from turnover (corporate income tax rate in Latvia is also 15% what has to be paid from the profit) the future of the regime is unclear.
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