On Thursday, 22 September, the Saeima adopted in the final reading amendments to the Law on Personal Income Tax, thus changing taxation of persons who receive remuneration for working abroad.

Pursuant to the amendments, personal income tax will not be imposed on income earned in another EU member state, a member state of the European Economic Area or in a country with which Latvia has a concluded and enforced tax convention. These amendments will come into force on 1 January 2012 and will apply to income earned in 2011.

“In this way we will support inhabitants of Latvia who are working abroad. From now on, they will not have to cover the difference between the personal income tax rate in Latvia and the country they work in,” emphasises Jānis Reirs, Chairman of Budget and Finance (Taxation) Committee, which is responsible for the Draft Law.

Amendments to the Law also provide partial tax amnesty. The Law sets forth that 5% personal income tax has to be paid for income earned abroad in the period from 2008 to 2010. Persons who have not paid the tax will have the right to submit an updated declaration of income by the end of this year.

Persons who have paid personal income tax of 25% for income earned abroad over the last three years will be able to receive a refund if they submit a detailed declaration.

The new regulations will not apply to income received during the year for which a personal income tax audit has been carried out nor to seafarers’ income earned abroad, which is subject to a different tax regime.

Other amendments to the Law also include a provision granting tax relief for a dependent sibling who is under the age of 24, on the condition that he/she continues to study in a general, vocational, special or higher education institution and his/her parents are not able-bodied.

However, in order to reduce the level of unregistered economic activity, a performer of economic activity will have to register with the State Revenue Service before engaging in economic activity by indicating the field of activity. This provision will not apply to persons who have engaged in economic activity and have not registered the fact before these amendments entered into force. Until now, one had to register with the tax administration within one month after commencing economic activity.

Saeima Press Service