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Micro enterprise tax regime in Latvia to be reorganized in 2021

BC, Riga, 27.11.2020.Print version
After lengthy and heated debate, the parliament in Latvia in the final reading endorsed amendments to the Micro Enterprise Tax Law, informs LETA.

The bill is a part of next year's budget package. The amendments were supported by 57 lawmakers to 32.

The debates on 40 amendments to the law started on Tuesday evening, continued through Wednesday and Thursday.

Opposition lawmakers were negative about the amendments, saying that several thousands of residents might lose jobs, which is unacceptable during a crisis. The micro enterprise tax regime was adopted during the previous financial crisis, supporting individuals who might establish small companies and provide for themselves. The politicians said that the Covid-19 crisis is unpredictable, it already has left a negative impact on the country and the world economies, therefore it is irresponsible to lay obstacles to people who have an opportunity to work.

The opposition lawmakers had submitted proposals on softer changes in the tax regime, but all opposition proposals were rejected.

Authors of the amendments say that there have been several problems with the micro enterprise tax regime, many businesses had used it as tax optimization, and payers of micro enterprise tax had very low social insurance contributions.

In line with the amendments, the micro enterprise tax regime can be used only by the owner of the micro enterprise, while employees will have to pay taxes in line with the general tax regime.

The wage limit of EUR 720 a month for employees of micro enterprise will be removed as often it had been the cause of unreported wage.

The status of micro enterprise tax payer will not be applied to payers of the value added tax and limited liability companies.

Starting from January 1, 2021, micro enterprise tax on turnover of up to EUR 25,000 a year will be 25%, while tax on turnover over this sum will be EUR 40%.

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