Personal income tax

In 2016 has been reduced the number of persons for which the taxpayer is entitled to relief because the list excludes non-working spouses as well as parents and grandparents, for which relief can be granted only if they are recognized as persons with disabilities and they do not receive a pension.

Tax rates remain the same next year. The minimum non-taxable income of the year is 75 EUR, and the amount of relief for dependents- 175 EUR. The amended law stipulates that at the end of the taxation year to the taxpayer will be applied an annual differentiated non-taxable income, the amount of which will depend on the total amount of annual income and that the taxpayer will be entitled to recover from the State budget after submitting the annual income return. Cabinet rules on differentiated non-taxable income amount are currently only developed, the draft regulations have not yet been published.

Business risk fee

Risk fee in 2016 remain the same as in 2015- 0,36 euro that the employer shall be calculating for each employee with whom he/she has an employment relationship and for which the seasonal farm worker’s income tax is not paid.

State social insurance contributions and the solidarity tax

Also in 2016 in the event the employee is insured for all types of social insurance, compulsory contribution rate is 34.09%, of which 23.59% is paid by the employer and 10.50% - by the employee. Cabinet rules on contribution rates and their distribution between employer and employee in other cases, for example, if the employee is retirement pension recipient, are approved and will be published in the near future.

The maximum amount for payment of state social insurance compulsory contribution in 2016 is set at EUR 48,600. The income that exceeds the above mentioned maximum amount in 2016 will be subject to the solidarity tax.

The solidarity tax will be paid by employees and employers, as well as employees working for foreign employer and self-employed persons who are subject to state social insurance if their income during the taxation period will exceed the maximum amount. The tax rate corresponds to the total rate of 34,09% determined by the law "On State Social Insurance", of which 23.59% is paid by the employer, and 10.5% - by the employee.

State social insurance agency will carry out the tax administration, including the tax calculation after the reaching of the maximum amount of object and a transfer of the tax in the State budget. Responsibility for tax calculation and payment will be applied according to the laws "On Taxes and Duties" and "On State Social Insurance".

The minimum monthly salary and hourly rate

The minimum monthly wage in the normal time frame in 2016 will be 370 EUR, while the minimum hourly rate is determined by the formula Tl min = MDA / h, where TL min is the minimum hourly rate in euros, MDA- the minimum monthly wage, h- the number of normal working hours per month (five-day working week and 40 hours a week or five-day working week and 35 hours a week or six-day working week and 40 hours a week or six-day working week and 35 hours a week), including holiday hours if the employee does not work on a public holiday which coincides with certain employee’s working day.

Cabinet regulations No. 656 established the procedure for calculating the minimum hourly rate if the employee has an aggregated working time.

Property tax

Amendments to the law, which will come into force in 2016 provide that in order to ensure a proportionate increase in the tax burden on land, land units (parts), which are located in the administrative territories outside cities and larger than 3 hectares and at least one of the purposes of use is from the objectives of the target group "Agricultural land", "Forestry land and specially protected natural areas where economic activity is prohibited by laws and regulations" or "Water objects Land" (hereinafter - the rural land), real estate tax up to 2025 taxation year is calculated from the special value determined by the special tax calculation (hereinafter - the special value).

Special value is determined on the basis of rural land cadastral value, provided that the tax on rural land special appreciation per year does not exceed 10% of the previous fiscal year’s special value of the land.

Special value as of January 1 of the tax year is established by comparing the pre-taxation year of special value to the cadastral value determined on 1 January of the taxation year. Special value is equal to the cadastral value, if on 1 January the increase of cadastral value does not exceed 10% of the special value of the pre- taxation year. Special value is equal to special value of previous year multiplied by a coefficient 1.1 if increase of the cadastral value is more than 10% of the special value of the previous year.

Property tax rates for 2016 have not been changed.

Value-added tax

This November 30, adopted amendments to the Law provides that with effect from 1 January 2016 from the state budget amount of tax due as input tax is not deductible of 50% (currently 20%) from the tax on purchased, leased or imported passenger cars whose number of seats in addition to the driver's seat, not more than eight seats, as well as the following car maintenance costs, including the cost of car repairs and the purchase of fuel. As at present, also in 2016 the deduction limitation will not apply to vehicles used for the carriage of passengers for consideration, including taxi services, car rental services and other cases referred to in Article 100 (3) of the VAT Act.

Starting with 1 April 2016, in addition to the existing special arrangements are introduced the special scheme for the supply of mobile phones, tablets, laptops and integrated circuit devices. From 1 July 2016 the tax exemption will not be applied to co-operative societies of apartment dwelling house maintenance and management services to its members, as well as residential housing management services.

The main objective of the amendments to the Law adopted on 17 December this year is for the State Revenue Service to facilitate the fight against fraudsters and tax evaders, giving more rights to exclude the economic operators from the VAT register or refuse the re-VAT registration in case of violations. These amendments to the law will come into force on 6 January 2016.

Vehicle Operation and Company Car Tax

With the amendments to the law the Vehicle Operation Tax and Company Car Tax (CCT) rates are increased, as well as it is stated that CCT is also levied on trucks with a total mass of up to 3,000 kilograms, which is registered as a cargo van and having more than three seats (including the driver's seat).

Excise tax

In 2016 will be increased tax rates on oil products, alcoholic beverages and tobacco products. From 1 July 2016, the excise duty will be levied on the fluids, which are used in electronic cigarettes. Merchants doing business with those products have to obtain the necessary licenses until 30 June 2016.

Contacts of Advisory unit

If you have any questions or need more detailed information, please contact:

Ina Spridzāne (ina.spridzane@leinonen.lv, tel. 67358635) or Kristine Erele (kristine.erele@leinonen.lv tel. 67358600).