Financial support provided by employers to employees for purchasing medication in cases of severe illness will be exempt from income tax. The Saeima adopted this decision on Thursday, 6 March, in the final reading of amendments to the Personal Income Tax Law.

The amendments will enable employers to assist employees requiring costly medication for serious illnesses, where the high cost of treatment is beyond their financial means. The initiative for these legislative changes came from the President of Latvia, who highlighted that such financial assistance is currently taxed as income.

To qualify for this support, employees must submit a medical council’s opinion confirming the necessity of the specific medication and proof that the medication is not covered by the state.

Additionally, the amendments stipulate that the financial assistance provided by employers cannot exceed the amount not reimbursed by the state. Employees must also certify that documents related to the medication purchase have not been and will not be submitted for reimbursement to an insurance company or the State Revenue Service as a deductible expense.

Employers will also be allowed to cover the cost of expensive medications not only for their employees but also for their family members, including dependents, spouses, children, parents, grandchildren, and grandparents.

This will allow employers to voluntarily fund medications or other medical technologies prescribed by a medical council, offering critical support to employees whose treatment is not fully or partially covered by state funds.

While Latvia has introduced measures to reduce medication prices, expanded the list of reimbursable medicines, and increased reimbursement rates, patients’ financial needs remain considerable, as noted in the explanatory note to the amendments.

The amendments to the Personal Income Tax Law will enter into force the day after their promulgation. 

Saeima Press Service