Exchange of Information
From 31 December 2015 information regarding bank accounts, which is at the disposal of credit institutions must be provided to State Revenue Service - the tax authority in Latvia, to be further provided to other EU member states or any other state involved, with whom the Republic of Latvia has concluded an agreement on automatic exchange of information.
On 1 January 2016 the new Annual Accounts and Consolidated Annual Accounts Law developed to introduce the directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013. The new regulation divides companies and groups of companies into categories according to certain criteria and allows certain companies to draw up their annual accounts according to international accounting standards. The new order is anticipated to ensure a more thorough financial control and reduce the overall administrative burden on small companies.
Value Added Tax
From 1 April 2016 the VAT reverse charge mechanism shall apply to supplies of cell phones, tablets, laptops and integral scheme devices. Thus if both the supplier and the recipient are registered VAT payers with the State Revenue Service, it shall be the recipient of goods, who shall pay the VAT for the supply of goods. All payments for such goods shall have to be made using non-cash payments.
A new tax is introduced from 2016 to reduce income inequality. The Solidarity Tax Law provides for payment of tax by private individuals (employees or self-employed individuals) if their income exceeds the top margin for mandatory social insurance contributions (48 600 EUR in 2015). The solidarity tax rate is set to be 10,5% for the employee and 23,59% for the employer. Following the introduction of the solidarity tax all employers are obliged to pay equal mandatory social insurance contributions for all their employees.
Overpaid tax – new judgment
A significant judgement has been announced concerning overpaid tax. The Supreme Court of the Republic of Latvia with its judgement of 7 December 2015 has established that Section 28 of the Law On Taxes and Fees refers to execution of the judgment and that a person does not have to submit another application to the court for requesting compensation for the money depreciation if a decision or a judgment of court has come into force recognizing that tax has been overpaid. The institution’s duty to automatically compensate such depreciation stems from the law and no additional action from the person is required.