FM initiates a broader discussion on changes to the personal income tax declaration system

On Monday, October 16, the Ministry of Finance (FM) will propose in a meeting of the ruling coalition parties to ensure broader consultations and discussions with government social and cooperation partners on planned amendments to the Law on Personal Income Tax (PIT), which aim to improve the general population's income declaration system. The FM will suggest removing these proposed law changes from the state budget draft package and subject them to further coordination.

"Considering that the concept of general income declaration is a very significant issue for the entire Latvian society, I propose ensuring broader discussions and consultations with social and cooperation partners on its content and implementation. I also suggest removing these law amendments from next year's state budget package. I believe that the planned amendments should be reviewed by the Saeima in the ordinary course, in three readings, after the state budget is approved," says Finance Minister Arvils Ašeradens.

The prepared law amendments are developed in line with the task set in the Shadow Economy Restriction Plan for 2021/2022 - to develop regulatory framework for the annual obligation of the general population to declare their income. The draft law aims to improve the existing general population income declaration system.

Ministry of Finance of the Republic of Latvia Information

A new system for processing export declarations has been introduced - the Automated Export System

As of October 10, 2023, a new system for processing export declarations, the Automated Export System, is in operation. It replaces the previously used Electronic Customs Data Processing System (EMDAS) Export Control System.

To process export declarations in the new system, users must log in to the State Revenue Service (SRS) Electronic Declaration System and, upon opening EMDAS, select the Automated Export System. Detailed information on how to complete declarations in the new system is available on the SRS website in the section dedicated to the Automated Export System.

It is worth noting that export standard declarations (EXA, EUA, COA), for which the processing was initiated in the Export Control System until October 10, will also be concluded within the Export Control System. This also applies to simplified and summary export declarations (EXB, EXC, EXX, EXY).

Any changes to declarations concluded in the Export Control System and the annulment (invalidation) of declarations will be handled in the "Post-Clearance" section of the Export Control System.

Information provided by the State Revenue Service (SRS) of Latvia.

The government supports proposals for changes in tax policy

On Tuesday, September 26, the Cabinet of Ministers considered an informative report on the development of the Basic Principles of State Tax Policy for 2024-2027. The report provides information on the work done in assessing the main challenges of tax policy and the resulting conclusions and policy objectives. It also identifies several tax policy issues that will be approved alongside the state budget for 2024, without significantly increasing the tax burden on entrepreneurs and citizens.

The informative report summarizes the work completed so far, including the review of 14 existing tax laws in Latvia, the modeling of macroeconomic scenarios, an assessment of the revenue potential of the Latvian tax system, and the strategic directions for tax policy related to the general goals of the state. The report also sets out the goals of the Basic Principles of State Tax Policy for 2024-2027.

The aim of tax policy is to support progress towards the macroeconomic target, which states that Latvia's economic growth should exceed at least 5% per year to ensure sustainable economic growth and consistent improvement of well-being by 2030, reaching the average EU level of prosperity.

The working group for improving tax policy development has reviewed various possible tax policy changes that will need to be carefully evaluated and modeled when preparing the Basic Principles of State Tax Policy.

The informative report includes various initiatives for possible tax changes that could be included in the 2024 state budget draft package. The overall fiscal impact is planned to be €162.9 million.

Following discussions in the working group, the Ministry of Finance proposed that the government support a special regime for the corporate income tax (CIT) for banks and non-bank lenders, which would require a payment of 20% of the previous year's profit. This is planned to be included in the budget draft package for the following year and is expected to have a fiscal effect of up to €140 million.

The report includes proposals for a gradual revision of excise tax rates to harmonize tax rates and conditions among the Baltic States. There are also proposed changes to gambling taxes, micro-enterprise taxes, and natural resource taxes, as well as a series of changes in tax reliefs.

Additionally, there is a proposal to include favorable thresholds for entrepreneurs by increasing the value-added tax (VAT) registration threshold from €40,000 to €50,000, as well as increasing the VAT input tax limitation for bad debts.

The goals of the Basic Principles of State Tax Policy are to achieve increased funding for sustainable public services and economic development, raise the well-being of citizens, and promote competitiveness in the Baltic region. It is important to consider that the geopolitical situation and the state's development cycle necessitate a significant increase in state funding for public services, especially in support of the healthcare and education sectors, and by investing in state security.

The state tax system must be fair, understandable, and predictable to taxpayers. The government has agreed that tax policy is subject to change once in the political cycle. An essential condition for implementing the Basic Principles of State Tax Policy is the improvement of tax administration and the reduction of the shadow economy. The goal of reducing Latvia's shadow economy is to approach the EU's average indicator by 2027.

The informative report is available on the Legislative Draft Portal. Information provided by the Ministry of Finance of Latvia.