Tax changes of fiscal policy in Latvia. Comparison of tax rates in the Baltic States.

Remi Troch

Director International Tax

17 January, 2013

Page 1

Taxes the tool of fiscal policy

Corporate income tax in the Baltic States
Standard rate Latvia 15% Reduced rate 9% for micro companies 5% Small and medium companies
(also applicable to enterprises if more than 50% of the annual turnover is derived from agricultural business)

Loss carry forward Unlimited

Lithuania

15%

Unlimited

Estonia

21/79 (26,6%)

N/A

Page 2

Taxes the tool of fiscal policy

Value added tax in the Baltic States
Standard rate Reduced rate 12% medication, medical equipment, books, hotels, Electricity 21%

Latvia

21%

Lithuania

21%

9% 5% - medicinal products

Estonia

20%

9% books, media, hotel services, medication, medical equipment, etc.

Page 3

Taxes the tool of fiscal policy

Payroll tax in the Baltic States Personal Income Tax

Employee

Employer

Personal income tax

Latvia

11%

24.09%

24% as of 2013

Lithuania

9%

30.98% - 32,6%

15% /5% (for manual self

employed activities)

Estonia

2.8% (+2% pension fund)

33%

21%

Page 4

Taxes the tool of fiscal policy

Payroll taxes in the Baltic States
A comparison of payroll tax and salary in 2013 (gross to net) Gross salary: 10.000 per year
PIT rate Latvia 2012 Latvia 2013 Lithuania
25% 24% 15%

Soc sec employee

11% 11% 9% 2.8% + (1-2% funded pension payment)

Tax exempt
768 768 194

Soc sec contribution

1 100 1 100 900

PIT
2 214 2 125 1 336

Net salary

6 686

6 775
7 764

Estonia

21%

1 728

280 + (100-200)

1657 - 1 636

7 963 - 7884

Page 5

Taxes the tool of fiscal policy

Personal income tax on capital in the Baltic States
Standard rate Latvia
24%

Dividends
10%

Interest income
10%

Payments from private pension funds

10% 15% / 0% if contract with the pension fund of at least 5 years; payout takes place at least after 5 years when the recipient is at retirement age ) 21%/ 10% (from pension funds registered in EU or EFTA country )

Life insurance
10%

Lithuania

15%

20%

0%* / 15%

15% / 0% (if certain conditions are met)

Estonia

21%

0%

0%** / 21%

21%

*- income from securities, deposits, loans to be repaid not earlier than after 366 days .
** - interest received from a credit institution established in the EU or an EFTA country or from a permanent establishment of a foreign credit institution registered in the EU or an EFTA country .

Page 6

Taxes the tool of fiscal policy

Inheritance and Gift Taxes in the Baltic States
Inheritance Gift

Latvia

There is no separate inheritance and gift tax, but gifts are sometimes included in the resident recipients taxable income.
The taxable base of resident beneficiaries includes all kinds of inherited property, irrespective of whether their source is in Lithuania or abroad.

Gifts from a spouse, child, parent, grandparent or grandchildren exempt from taxes.
Gifts received from any individual is exempt if they do not exceed EUR 2 300 per year.

Lithuania

The tax rate is 5% for inherited property up to EUR 145 000 If the value exceeds EUR 145 000, the whole amount is subject to a 10% tax.

Estonia

There are no inheritance or gift taxes. Inheritances and gifts are usually not subject to income tax. The gains from the transfer of property received as a gift or inheritance, however, are subject to income tax.

Page 7

Taxes the tool of fiscal policy

Real estate taxes in the Baltic States
Object Land, buildings and engineering structures used for business purposes Uncultivated agricultural land Land Lithuania Tax rate 1.5% of the cadastral value but at least 5 LVL per object 3% of the cadastral value but at least LVL 5 per object 1.5% of the land value as determined by the government 0.3%-1% of the market value (determined by the respective municipality). Municipality may reduce the rate or even exempt. 0.1%-2.5% of the market value determined by the respective municipality. For land to which a limitation of economic activity applies, the government may reduce the rate by 25%, 50% or 75%.

Latvia

Buildings used for business purposes

Estonia

Land

Page 8

Taxes the tool of fiscal policy

Real estate: budget revenue from transfer and real estate tax
Revenue Million of local currency Latvia 84,114 Percentage of total government revenue 1,76%

Lithuania
Estonia Belgium Austria

332
755 7,3 1,24

0,97%
0,93% 4,78% 1,02%

Page 9

Questions

10

CONTACTS

Remi Troch
Director International Tax BDO Tax Alberta street 1-2, Riga, LV-1010 Phone: (+371) 67222237 Fax: (+371) 67222236 E-mail: remi.troch@bdotax.lv

Page 11