The Latvian Parliament adopted the state budget for 2015 on 17 December, 2014.
The state budget for 2015 preserves the existing tax policy and does not envisage an increase in current tax rates. The income gap will be reduced by increasing the minimum monthly salary from EUR 320 to EUR 350; in 2015 this will require an allocation of EUR 7.9 million from the state budget.
As of next year, all ceilings that were set in 2009 for social benefits – namely, sickness benefits, unemployment benefits, as well as maternity, paternity and parental benefits – will be lifted.
It was decided earlier that the personal income tax rate will be decreased from 24% to 23% as of 1 January 2015.
As of next year, family benefits will be differentiated on the basis of the number of children raised by the family; that is, families with one child will be granted a benefit in the amount of EUR 11.38, the benefit for the second child will amount to EUR 22.76, and for the third and every successive child the benefit will be EUR 34.14.
Corporate taxation:
- Interest deduction: Interest paid on loans from the Development Finance Institution is not subject to the thin capitalization restriction or the general excess interest restriction. This applies to interest paid after 1 March 2015.
- Taxation of non-resident companies: A company resident in an EU Member State or in a jurisdiction with which Latvia has a double tax treaty in force may, instead of paying (i) the 10% final withholding tax on management and consultancy fees received, or (ii) the 5% final withholding tax on rent received for the use of property in Latvia, opt, upon filing a tax return, to pay 15% corporate tax. The new rules apply in respect of transactions carried out after 1 January 2015. Previously, such an option was only available in respect of income derived by non-resident companies from the sale of immovable property located in Latvia (i.e. instead of paying the 2% final withholding tax on such proceeds, the qualifying companies could opt, upon filing a tax return, to pay 15% corporate tax on the gain).
The Law on the State Budget for 2015, the Law on Medium-Term Budget Framework for 2015, 2016 and 2017, as well as other budget-related laws, will come into force on 1 January 2015.
