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

Changes in the taxation sector of Latvia in 2021

Single tax account
As of 1 January 2021, a single account for tax payments is introduced. The account number is LV33TREL1060000300000. Along with the introduction
of the common tax account, the date for the payment of almost all taxes is changed – it is set to be on the 23rd date of the month. Existing accounts will be retained for certain taxes – real estate tax, vehicle operation tax, company car tax, as well as customs duties.

Application of the Personal Income Tax
* The maximum non-taxable minimum per year – EUR 3,600 (EUR 300 per month);
* The amount of income up to which the maximum non-taxable minimum applies – EUR 500 per month;
* Threshold of applying the differentiated minimum exempt from the personal income tax – EUR 1,800 per month (previously EUR 1,200).

Every natural person may learn the amount of their estimated non-taxable minimum on the Electronic Declaration System of the State Revenue Service.

As from January 1, 2021, the minimum monthly salary is raised from EUR 430 to EUR 500.

The amount of tax deduction for a dependant is retained at the previous level – EUR 250.

Micro-enterprise Tax
As of 2021, the Micro-enterprise Tax (MET) may be paid only by a sole proprietor, agricultural or fishery farm, individual merchant or a natural person that has been registered as a performer of economic activity. MET
payer may not be a Value Added Tax (VAT) payer.

MET rate depends on the turnover:
1) for a turnover of up to EUR 25,000 per year – 25 percent;
2) for the turnover share that exceeds EUR 25,000 per year – 40 percent.

In 2021, the companies will be permitted to change their MET status during the year as well and become either Personal Income Tax (PIT) or Corporate Income Tax (CIT) payers as of the 1st date of the next quarter, by submitting
the application to the State Revenue Service by the 15th date of the last month of the current quarter.

The law provides for transitional conditions for the MET payers that have been registered in MET status before 31 December 2020. For instance, a Limited Liability Company (LLC) that has obtained the status of a MET before 31 December 2020, shall be permitted to retain MET status for the entire 2021. The respective LLC will have to become a CIT payer as of 2022.

Regarding the employees of METs, who have been hired by 2021, the requirement to apply regular procedures of tax payments on their salary shall be applied as of 1 July 2021. If an existing payer of MET hires an employee after 1 January 2021, the regular procedure of tax payment calculations shall be binding regarding these employees and transitional procedures will not be in effect regarding such employees.

As of 1 January 2021, the Micro-enterprise Tax Law no longer provides for the limit on the amount of work remuneration.

State social insurance mandatory contributions
From 2021, the rate of mandatory state social insurance contributions is to be reduced by one percentage point – from 35.09 to 34.09 percent. The social tax will be set at 10.5 percent for employees and 23.59 percent for employers.

In order to increase the social protection of self-employed persons, starting from July 2021, the minimum social contributions of self-employed persons will amount to ten percent instead of the current five percent of the income.

As of 1 January 2021, the individually determined deadline for the submission of State social insurance mandatory contributions (SSIMC) reports and payments of SSIMC for each taxpayer will lose effect. In future, the employer’s report shall be due by the 17th date of each month and the
SSIMC payment deadline shall be 23rd date.

Reduced VAT for fruits, berries and vegetables
Amendments to the Value Added Tax (VAT) Law preserve reduced 5% VAT for fresh fruits, berries and vegetables until 31 December 2023 to assist with development of agriculture sectors, reduce grey economy and increase the
competitiveness of legally working businesses.

Information source: State Revenue Service, Ministry of Finance

State support to agricultural and food sectors

Government approved amendments drafted by the Ministry of Agriculture to the procedures for granting, administering and monitoring state aid to agriculture in order to reduce the negative impact of the spread of Covid-19.

Even after the termination of the first emergency situation, Latvia is exposed to the negative effects of Covid-19 in the sectors of agriculture and food, causing financial difficulties and endangering the viability not only of the manufacturers initially included in the support activities, but other manufacturers as well.

The income of farmers representing dairy sector has decreased, therefore amendments to the regulations provide for the granting of support to dairy producers (for dairy cows) in the July – September period as well, if the income of the manufacturers of the sector in this period have been at least by 5% lower than their average income over the period of the previous three years. The support funding for dairy cows in July-September will be ensured by redistributing the funds unused for the needs of other activities.

The amendments to the regulations provide for support for all eligible animals (beef varieties, as well as cattle obtained as hybrids of such varieties, or male cattle obtained as hybrids of dairy varieties or dairy and beef varieties) from the age of six months that were sold from April to September this year, as well as support for sows during the period from April to June this year.

Meanwhile, in other areas of agriculture and food, the turnover reduction threshold was reduced from 25 to 15 percent. This means that companies will be able to apply for support, if their net turnover has declined by more
than 15 percent.
Amendments provide for individual changes of specifying nature as well.

Information source: Rural Support Service