• Tax allowance for donations - less favourable conditions for donators

As from 1 July 2009, the corporate income tax allowance for donations to public benefit organisations or budget institutions will be changed. According to the amendments, the taxable income may be reduced by an amount equal to the donations to public benefit organisations or budget institutions. The reduction of taxable income must not exceed 20% of the taxable income.

Taxpayers who have donated to public benefit organisations or budget institutions before 30 June 2009 are allowed to reduce the tax amount calculated for the taxation period commencing in 2009 by an amount equal to the donations made according to the procedure that was in place before 30 June 2009, however, the total tax allowance must not exceed 10% of the total tax amount.

Taxpayers who have donated to public benefit organisations or budget institutions from 1 July 2009 to 31 December 2009 are allowed to reduce the taxable income of the period commencing in 2009 by an amount equal to the donations made according to the new procedure, however, the total reduction of taxable income must not exceed 10% of the taxable income.

• Minimum non-taxable personal income reduced from 90 to 35 LVL

As from 1 July 2009, the minimum monthly amount not subject to personal income tax (non-taxable minimum) has been reduced from LVL 90 to LVL 35.

• More strict reporting requirements

From 1 July 2009 to 31 December 2012, the employer shall provide information on employees to the State Revenue Service within 3 working days from establishing, changing or terminating the employment.

• Value Added Tax to books and firewood reduced

As from 1 August 2009, a reduced VAT rate of 10% is applied to study books and original literature and supplies of firewood and timber to the population;

• New procedures for VAT payers registration and VAT payments

As from 1 October 2009, there is a new procedure of registration of VAT payers at the State Revenue Service, as well as a new procedure of payment of VAT into the budget, if the amount of taxable transactions exceeds LVL 10 000.

Until now, if a person carried out only one taxable transaction within 12 months, which amounted to or exceeded LVL 10 000, this person was not required to register at the State Revenue Service as VAT payer, if the transaction was unrelated to the economic activity of the person. Registration at the State Revenue Service was required only if the said transaction recurred in the subsequent 12 months. 

As from 1 October 2009, this provision has been cancelled and a person must be registered as a VAT payer as soon as the amount of taxable transactions within 12 months reaches or exceeds LVL 10 000, even if only one taxable transaction has been made. Before registration, the tax from the transaction value exceeding LVL 10 000 must be calculated and paid into the budget. When calculating the LVL 10 000 threshold, it does not include the value of fixed assets and intangible investments supplied by the person, if the person carries out such supply once in a 12-month period.

As from 1 October 2009, there is a new procedure of registration of VAT payers at the State Revenue Service, as well as a new procedure of payment of VAT into the budget, if the value of goods purchased within EU exceeds LVL 7 000.

Until now, an untaxed person carrying out economic activity had to register as a VAT payer, if the amount of goods purchased in the EU in a calendar year amounted to or exceeded LVL 7 000. Not earlier than two years from the date of registration, such person was entitled to voluntarily withdraw from the register of taxable persons. A from 1 October 2009, the provision of voluntary withdrawal from the taxable persons register has been cancelled. Before registration, the tax from the goods purchase value exceeding LVL 7 000 must be calculated and paid into the state budget.

• Sale of building plots - subject to VAT

As from 1 January 2010, sale of building plots is subject to VAT (applies to land plots, for which a construction or public utility infrastructure installation permit was issued after 31 December 2009).[i1] 

• Excise duty on beer and other (strong) alcoholic drinks has been increased as from 1July2009;

• Lottery and gambling tax rates have been increased as from 1 July 2009;

• Restrictions for cash usage

From 1 July 2009, there are additional restrictions regarding the use of ready cash. Taxpayers who carry out wholesale trade will only be allowed to use non-cash settlements (including card payments). This restriction shall also apply to those taxpayers who carry out wholesale and retail in the same premises.

From 1 July, the restriction of use of ready cash prescribed by the law (for transactions exceeding LVL 10 000) shall also apply to private individuals who have registered as entrepreneurs.