Latvia’s Cabinet of Ministers approved the draft law on the 2025 State Budget and the budgetary framework for 2025, 2026 and 2027 with various tax amendments on 15 October 2024.
The consolidated national budget revenue for 2025 is planned at EUR 15.1 billion and the estimated expenditures are EUR 17.1 billion. The projected 2025 State budget revenue sees an increase of EUR 583.2 billion compared to the 2024 budget.
Non-taxable minimum income
A fixed non-taxable minimum of EUR 510 per month is planned for all salaries starting in 2025. This amount will increase to EUR 550 in 2026 and further to EUR 570 per month in 2027.
Personal income tax (PIT) relief
- An expansion is planned for the personal income tax (PIT) relief increasing the allowance to EUR 700 per year.
- A unified PIT rate of 25.5% is proposed for annual incomes up to EUR 105,300 (EUR 8,775 per month). For income exceeding EUR 8,775 per month, a tax rate of 33% will apply.
Reduced VAT rate on fruits and vegetables
The reduced VAT rate of 12% will be extended to certain fresh fruits, berries, and vegetables until 31 December 2028 under the VAT Law.
Increased excise duties on fossil fuels
Excise duties on fuel, natural gas, and petroleum gases used for heating will be increased – starting with a CO2 rate of EUR 10 per ton in 2025 and EUR 20 per ton in 2026.
Increased excise duties on beverages and tobacco
- Starting in 2027, the excise tax rate will rise for certain non-alcoholic beverages, alcoholic beverages (including beer), and tobacco products.
- Starting in 2025, a planned increase in excise duty rates on non-alcoholic beverages containing up to 8g of sugar.
Increased vehicle taxes
Motor vehicle taxes as per the Law on Vehicle Use Tax and Company Car Tax, will increase by an average of 10% starting in 2025 for vehicle use tax and in 2027 for company car tax.
The proposed amendments will go into force on 1 January 2025 upon parliamentary approval.
