State supported insurance policies for farmers may not include a low indemnity limit

The government of Latvia has approved amendments prepared by the Ministry of Agriculture (MoA) to the regulations on granting the State and EU support to insurance of harvest, animals, and plants during the planning transitional period of 2021-2022 so as to ensure that insurance policies do not include a very low indemnity limit that does not protect farmers in the case of great losses.

Therefore, in the future:

• the minimum indemnity limit for the risk factors mentioned in the insurance policy should be in the amount of at least 200% of the insurance premium,

• in the case if the risk factors mentioned in the policy occur, the deductible may not change depending on previously disbursed insurance indemnity for any of the risk factors mentioned in the policy,

• support will not be granted for such insurance policies that provide coverage for losses caused by such diseases that are mentioned in the laws and regulations on compensation for losses occurring during the outbreak of an animal infection disease under supervision of the State or epizootic disease.

The regulations include also the following additional provisions for administration of support:

• at the moment when a farmer applies for insurance support, the policy must be valid, and the insurance policy must be fully paid by the last day of the application submission round,

• in the case of suspicion that insurance policy is not economically based and is not appropriate to the insurance purpose, the Rural Support Service may request an explanation from the insurer or the support applicant,

• regulations for insurance of animals provides proportional reduction of support in the cases when animals have been insured for a period which is less than one year,

• the insurer is obliged to inform the Rural Support Service concerning the cases when insurance contract has been amended or terminated before expiry date, and the insurance premium or its part has been repaid to the farmer.

In order for the support to be received also by applicants who have purchased insurance policies before the effective date of the regulations, all mentioned amendments shall apply only to those insurance contracts that have been signed after 20 August 2021.

Information source: Ministry of Agriculture

New possibilities for land use – how to compensate carbon dioxide emissions with birch.

This spring, the Latvian company “Not Hot Environmental Solutions” planted 32 thousand birches on 16 hectares in Pabērži, Kārķu Parish, Valka Municipality. This young stand will compensate 8.9 tonnes of CO2 over 40 years, while all the trees planted by the company so far – 16 tonnes of CO2. Currently, “Not Hot Environmental Solutions” owns eight birch plantations in different places of Latvia. There are 57.8 thousand trees.

“Not Hot Environmental Solutions” offers companies and individuals to calculate how many tonnes of CO2 each of them produces according to their business, domestic, transport and other habits, and proposes to finance planting of adequate quantities of trees to compensate for these emissions. Trees remain under the management of landowners and will become furniture after 40 years, continuing their life in a new cycle. In this way, everyone has the opportunity to become climate-neutral and even climate-friendly, already compensating for more CO2 than generated.

The company was founded in 2019. The authors of its idea are the businessman Māris Simanovičs and the German businessman with experience in forestry Michael Brockmann. €500 thousand euro has been invested in the development of the company’s mobile app and calculator to combat climate change.

While working on the platform, “Not Hot Environmental Solutions” has collaborated with the Latvian State Forest Research Institute “Silava”, developing an optimal land-planting model and calculating the CO2 capture for birch stands during their life cycle. In order to assess CO2 emissions from operations of a person or company, a calculator has been developed in cooperation with environmental activists and the researcher Jānis Brizgs and adapted separately to companies and individuals.

Information source: Magnetic Latvia – Labs of Latvia

Forest sector signs a memorandum of cooperation.

JSC “Latvia’s State Forests” (LVM) and the Latvian Forest Industry Federation representing non-governmental organizations of the forest sector have signed a memorandum of cooperation with the aim of increasing the share of renewable resources and bioeconomy in the Latvian economy.

The memorandum sets out three strategic objectives for the sector:
– to double value added per job in the forest sector by 2030;
– to double the value of forest products by 2030;
– to increase forest stand productivity by 25%.

The signatory organizations and companies undertake to cooperate in a coordinated manner in achieving these strategic goals of the forest sector and the National Development Plan (NAP2027).

In order to achieve the strategic goals, the forest sector undertakes to promote the introduction of science-based forest management models in Latvia and the development of forest management practices that ensure the reduction of greenhouse gas emissions. The contribution of Latvia’s forests to mitigating global climate change and the use of renewable resources need to be increased. A wider use of renewable wood materials should be encouraged, for example by supporting the construction of wooden houses, including through the establishment of a wooden high-rise building construction program.

The creation and use of forestry and bioeconomy products is one of the cornerstones for maintaining and developing production in the regions of Latvia, which in turn would reduce regional depopulation trends.

“The forest sector is one of those sectors of the Latvian economy, the wise development of which makes it possible to obtain very diverse long-term dividends throughout the country. These are well-paid jobs throughout the country, these are traditional and innovative export products, and it is an opportunity to spend free time in well-tended and well-managed forests of Latvia. The forest sector has the potential to do both – increase the overall well-being of the Latvian population, as well as help to fulfil Latvia’s commitments within the framework of the European Green Course. Well-tended and well-managed forests are both a renewable long-term natural resource and an excellent way of sequestering carbon dioxide,” tells Indulis Kovisārs, President of the Latvian Forest Industry Federation.

Information source: Latvia’s State Forests

Special tax regime for seasonal agricultural workers

The Rural Support Service (RSS) and the State Revenue Service (SRS) remind that the farmers employing agricultural workers in works of seasonal nature from 1 April to 30 November can pay 15% personal income tax on the wages of these workers, but not less than 0,70 euro per day of employment.

For registration of seasonal agricultural workers, the employers must use the RSS Electronic Application System (EAS) (the mentioned workers don’t have to be registered additionally with the SRS), registering the income gain date, the form of concluded contracts and the remuneration for work calculated for seasonal agricultural workers. The EPS provides farmers (employers) with a possibility to obtain all data entered during the month in an aggregated form and the calculated amount of tax, in order to submit them to the SRS in a standardized form once a month.

For the farmer to be able to apply the preferential tax regime to their seasonal workers, the farmer must meet the following conditions:

  • the farmer owns, permanently uses or leases agricultural land used to grow fruit trees, berry bushed or vegetables;
  • in 2021, the farmer has applied the land for the single area payment, following the procedure for granting the state and European Union aid to agriculture within the framework of direct support schemes;
  • the farmer is not a micro enterprise tax payer.

In turn, in order to be able to apply 15% personal income tax rate to a seasonal agricultural worker’s income, the worker must meet the following three conditions:

  • the person is employed in agricultural seasonal works for no more than 65 calendar days with one or more farmers in total;
  • the person’s income gained from one or more farmers in total does not exceed 3000 euro;
  • the person has not had an employment relationship or a contractor’s agreement concluded with the farmer during the four months prior to the start of the agricultural seasonal works for the benefit of the same farmer.

In case where a seasonal agricultural worker is employed in the same farm for 65 consecutive calendar days and his monthly income exceeds 3000 euro, such worker must be registered with the State Revenue Service as an employee, and thereafter the personal income tax and the mandatory state social insurance payments must be paid in full from his or her income.

Information source: Ministry of Finance, Rural Support Service

Cadastral values in Latvia

It is planned to continue to apply the current Latvian cadastral values at least until 31 December 2025. This is stipulated by the amendments to the law conceptually supported in the first reading by the Latvian Parliament on February 4.

The amendments set a task for the Cabinet of Ministers to prepare and submit to the Parliament for consideration draft laws ensuring re-evaluation of the amount of state fees related to cadastral value. Among other things, the amendments envisage drafting the laws necessary for the
exemption of housing from real estate tax, determine the amount of real estate tax for compulsory shared property, as well as commercial areas and agricultural land.

“While the majority of the Parliament and the government has not agreed on a comprehensive review of the real estate tax system, which would ensure a fair and tolerable tax burden for population and entrepreneurs, the increase of cadastral values should not be allowed,” previously argued Juris Jurass (New Conservative Party), the Chairman of the Legal Commission which is responsible for the progress of the draft law in the Parliament.

In Latvia, the amount of real estate tax is related to the cadastral value of the property. Until now, cadastral values have been frozen to prevent an increase in Real Estate Tax (RET).
In order for the amendments to the Real Estate State Cadastre Law to enter into force, the Parliament must support such amendments in two more readings.

The currently valid cadastral values are calculated using real estate transactions for 2012 and 2013. The State Land Service (SLS) has been developing a new cadastral valuation methodology for several years. Therefore, since 2017, the cadastral values of properties have been frozen and are used, for example, in the calculation of RET and compulsory rent.

In 2017, the Parliament supported amendments to the law, which provided for the freezing of cadastral values of real estate until 2020. At the end of October 2019, it was decided to “freeze” cadastral values for another two years until 2022.

Information source: Latvian Public Broadcasting