Business, Financial Services, Latvia, Law and Regulations, Taxation

This proposal was supported by the majority of the committee lawmakers, including from the opposition parties. The ruling Unity’s lawmakers abstained in the vote, while Martins Bondars from the opposition Latvian Association of Regions voted against it.

The proposal supported by the committee provides that the microenterprise tax rate for small companies with an annual turnover below EUR 7,000 will be 12% exceptionally for one year.

At the same time, the committee turned down the Unity’s proposal on allowing microenterprises to choose between two alternatives – paying the 15% microenterprise tax or paying the current 5% tax plus minimum social contributions for each employee.

Prime Minister Maris Kucinskis (Greens/Farmers) told the press after the coalition meeting today that the coalition parties had not been able to reach a compromise in relation to tax policy changes yet.

As reported, Saeima last week approved in principle several bills that stipulate increasing microenterprise tax rate to 15% next year and scrapping minimum social contributions. On Tuesday, Saeima has to hold the final reading of this bill.

Last week, speaking to reporters after a meeting with Prime Minister Maris Kucinskis (Greens/Farmers), President Raimonds Vejonis said he was dissatisfied with the ruling coalition's work on tax legislation and went on to describe the situation as "a real mess". The president finds it unacceptable that new tax initiatives are being debated at the last moment instead of being prepared and discussed in due time.

LETA also reported that the Latvian parliament in late November adopted the legislative package related to the 2017 budget, including amendments under which the micro enterprise tax will be abolished as of January 1, 2019, and the companies will be required to make the minimum social contributions for all employees, including those who are paid less than the minimum wage, from January 1, 2017. Following the protests by business organizations, the ruling Union of Greens and Farmers proposed to lift the minimum social contributions requirement and increase the micro enterprise tax rate from 9% to 15% of turnover, with a large portion of this revenue to be paid into the state social insurance contributions account. However, one of the three ruling parties - the Unity - does not approve of this proposal and has made own suggestions about how to deal with the situation.