Riga, November 16, LETA. On Tuesday, the Saeima passed amendments to the Law on Personal Income Tax, which envisages increasing the non-taxable minimum for pensioners to 500 euros in 2022.
At the same time, the Saeima also determined that with the regulations of the Cabinet of Ministers it is necessary to increase the differentiated non-taxable minimum for employees to 500 euros. However, these rules are still under development and have not been approved.
The changes supported by the deputies are part of the package of draft laws accompanying the draft state budget for 2022.
As explained to LETA by the Ministry of Finance (MoF), these amendments only set the pensioner’s non-taxable minimum from 1 January next year at 350 euros per month and from 1 July at 500 euros per month. In turn, the differentiated non-taxable minimum for employees is historically determined by the regulations of the Cabinet of Ministers, which are currently being developed.
At the same time, the amendments to the law supported on Tuesday include a regulation so that the differentiated non-taxable minimum for 2022 could be determined in half-years, similarly to the pensioner’s non-taxable minimum. The State Budget Law of 2022 also envisages the fiscal impact of raising the maximum differentiated non-taxable minimum, thus the MoF notes that every effort has been made to allow the government to adopt a differentiated non-taxable minimum regulation in the near future, which provides for a significant increase in the maximum differentiated non-taxable minimum. amount of workers.
Currently, the non-taxable minimum for persons who have been granted a pension or recalculated after January 1, 1996, or a retirement pension, or a special state pension, or a pension in accordance with foreign regulatory enactments, or a life pension insurance contract, is 3960 euros per year or 330 euros per month. .
The Group of the Greens / European Free Alliance (ZZS) faction called for the tax-free minimum to be raised to € 500 from 1 January 2022, but a majority of parliamentarians did not support the opposition’s intention. Representative of ZZS Viktors Valainis said that raising the non-taxable minimum from the beginning of next year would be more correct, taking into account that a number of political forces promised to introduce it from 2019.
According to him, raising the tax-free minimum faster could directly and quickly help people keep more money in their wallets. Valainis believes that July 1 is too late.
Vyacheslav Dombrovskis (R), a deputy, agreed, saying that this would be normal. He admitted that the fastest increase in the non-taxable minimum was determined especially in the middle of the year, when there are a few months left until the next parliamentary elections. “Probably if the elections were in March, everything would take effect on January 1 or February,” the politician said, speculating that the coalition was thinking of buying the votes in this way.
Valainis added that such a non-taxable minimum amount had come “naturally”, taking into account the fact that the daily expenses and income level of the population do not stand still. Krišjānis Feldmans, a member of the board of the New Conservative Party and a member of the Saeima, expressed surprise about this, saying that the largest reduction in the labor tax in the history of Latvia for people with lower incomes has not come “naturally”.
He also said that it was necessary not only to assess the fiscal impact of the initiative, but also to secure the support of the majority of decision-makers. Feldmans thanked the coalition colleagues for understanding the need to raise the tax-free minimum. At the same time, the politician explained that raising the non-taxable minimum to 500 euros from the middle of next year will cost about 90 million euros, while in 2023 – about 140 million euros.
According to Feldman, such a decision was made after careful consideration of the fiscal impact, knowing that the tax difference would have to be amortized from the budget.
These amendments increase the amount of the pensioner’s non-taxable minimum. In the tax year 2022, the non-taxable minimum of a pensioner will be increased gradually – from 1 January 2022 to 30 June 2022 – 2100 euros or 350 euros per month, but from 1 July 2022 to 31 December 2022 – 3000 euros or 500 euros per month.
In turn, from the tax year 2023, the pensioner’s non-taxable income will be 6,000 euros per year or 500 euros per month.
The changes adopted also provide for a gradual increase in the differentiated non-taxable minimum. In the 2022 tax year, the amount of the maximum differentiated non-taxable minimum will be increased gradually – from 1 January 2022 to 1 June 2022 – to 350 euros per month, while from 1 July 2022 to 31 December 2022 – until 500 euros per month.
From the tax year 2023, the maximum amount of the differentiated annual non-taxable minimum will be 6,000 euros per year or 500 euros per month.
Taking into account that as of 1 July 2021, labor tax on persons employed in a micro-enterprise is subject to labor taxes in accordance with the general procedure, the draft law supported by the deputies applies to micro-enterprise employees and provides them with more favorable conditions than at present. regulation in the Law on Personal Income Tax are applicable as of July 1, 2021.
As of July 1, 2021, persons employed in a micro-enterprise have the right to apply the non-taxable minimum, benefits and eligible expenses when determining their taxable income with personal income tax (PIT).
Procedures have also been adopted, which stipulate that the employee’s expenses related to the performance of telework, which are covered by the employer in accordance with the Labor Law, are exempt from taxation in the tax year 2022, if their total amount per month for full-time work does not exceed 30 euros.
Simultaneously with these amendments, it is also planned to exempt from the PIT the treatment expenses covered by the employer within the norm, increase the amount of the non-taxable minimum for pensioners, clarify the norms related to the exemption of agricultural land from PIT, and include norms for micro-enterprise employees.
The law contains a norm that provides for the exemption from taxation of grants granted within the framework of the PIT support program for the renovation and increase of energy efficiency of residential buildings for improving the energy class of a building and receiving technical assistance, as well as losses incurred by a credit institution. liabilities to the credit institution for the provided loan.
In the planning period of the European Union (EU) funds for 2021-2027, it is planned to receive co-financing for the reduction of air pollution by prioritizing the replacement of inefficient wood-burning stoves with ecodesign-compliant biomass boilers or other renewable energy technologies, such as heat pumps and solar panels. , as well as promoting and financially supporting the connection to the district heating system. Indicatively, the start of the support program is planned for the beginning of 2022.
In order to ensure that the additional costs of paying the tax do not hinder the application of the population for such support program and generally do not hinder the fulfillment of air protection objectives and, consequently, ensure adequate air quality for the population, the amended law (co-financing) with PIT.
The amendments to the law also stipulate that co-financing granted by local governments for the connection of real estate to the centralized water supply system or the centralized sewerage system is not subject to PIT.
In order to provide support to the population in the management of waste harmful to health, especially to the low-income population, the draft law stipulates that in the case of replacement of obsolete asbestos-containing roofs, the support granted to the household for the management of such waste is not subject to PIT.
In order to enable employers to direct funds within the framework of the collective agreement to the health care of employees, the draft law stipulates that in addition to the employee’s paid employment expenses specified in the collective agreement, the employer’s paid medical expenses are excluded from the payer’s income. the types of employee expenses paid by the employer do not exceed 480 euros per year in total (on average 40 euros per month) and the employer complies with the conditions included in the law.
Payment for the use of medical services must be substantiated by a supporting document submitted and kept by the employer. This norm is applicable from January 1, 2022.
On the other hand, for those who pay solidarity solidarity tax in the tax year, the rate of mandatory State social insurance contributions is lower than the 25% specified in the Solidarity Tax Law, a difference is formed, which must be paid to the budget. The draft law stipulates that the said difference must be paid to the budget in the form of a PIT by submitting a declaration of income for the taxation year.
According to the norms included in the Law on Personal Income Tax, income from the alienation of real estate which is agricultural land by type of use is not subject to PIT, if all the conditions included in the law regarding the buyer and seller of agricultural land are met.
The current PIT regulation stipulates that the exemption for income from the alienation of agricultural land may be applied only if the immovable property does not consist of buildings and structures, and if the immovable property does not consist of buildings and structures, but also by a forest or other land, the exemption shall apply in proportion to the part of the land that is utilized agricultural area.
The amendments stipulate that if the real estate consists of buildings and structures, forest or other types of land, such as swamps, land under water, the exemption from PIT applies if the transferor of real estate submits an appraisal provided by a certified real estate appraiser to the State Revenue Service, which indicates not only the total market value of the real estate, but also the market value of a separate part of the real estate – agricultural land.
In this case, for the application of the PIT exemption, the share of the market value of the real estate attributable to agricultural land in the total real estate market value is taken into account.
On the other hand, if real estate does not include buildings or structures, but real estate consisting of agricultural land and forest or other land, such as swamps, land under water, is disposed of, the draft law provides that the PIT exemption applies to agricultural land in proportion to its market size. the proportion of value in the total market value of real estate in accordance with the assessment of a certified real estate appraiser or, if the taxpayer does not have such assessment, in proportion to the part of the land area which is agricultural land by type of use.
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