Developments in the Member States

Part II

The law on 'Micro-Enterprise Tax' enables small businesses (criteria: turnover doesn't exceed LVL 70 000(€ 98
772), maximum number of employees/board members is 5) to pay flat-tax rate of 9 % on their turnover. It includes
state social security contributions, the personal income tax, the corporate income tax and business risk charge for L
micro-enterprise employees. If micro-enterprise's turnover is more than LVL 70 000 (€ 98 772), the excess part is a
taxable at 20 % tax rate.
t
v
VAT and excise duties
i
The standard rate of value added tax is 22 % (21 % before 1 January 2011), and the reduced rate is 12 %.
Furthermore the reduced rate is applicable only on the following transactions: supplies of medicines, medical
a
devices and medical goods, specialized products intended for infants, the inland public transport services, supply of
heating to households and guest accommodation services.

Excise tax is imposed on oil products, gas, tobacco products, alcoholic and non-alcoholic beverages and coffee.
The minimal level of the excise tax for cigarettes is LVL 64 (€ 90) for 100 cigarettes, the excise tax rate for wine,
fermented drinks and intermediate products with the absolute concentration not in excess of 15 % is LVL 45 (€
63), for soft drinks is LVL 5.2 (€ 7). The rate of excise tax for gas is LVL 12 (€ 17) per 1 000 cubic meters of gas
used for heating, and at the rate of LVL 70 (€ 99) per 1 000 cubic meters of gas used as car fuel.

Social contributions
Since 1995, a pension system based on the concept of notional defined-contribution (NDC) accounts is in force.
Unlike in the previous PAYG system, the benefits are calculated on the basis of a person’s contributions to a
notional individual account, utilising a rate of return determined by the government taking into account economic
and demographic indicators. No real funds are accumulated into the accounts, and financing the current cohort of
retirees is based on payroll contributions. The contribution rate is 35.09 %. This rate includes the 24.09 % rate that
falls to employers and the 11.0 % rate payable by employees (increased by 2 % in 2011). The rate for the self-
employed is marginally lower (32.46 %). The minimum taxable base for the self-employed is twelve times the
minimum monthly wage (LVL 2 400 (€ 3 382)).

Other taxes
A real property tax is applicable to land, buildings and engineering constructions and is equal to 1.5 % of the
cadastral value of land and buildings. The tax rate for residential property ranges from 0.2 % to 0.6 % of cadastral
value of the property. A 3 % tax is levied on agricultural land not in use.

There is a duty on the registration of the title to immovable property. The person requesting registration of
ownership is liable to a 2 % stamp duty up to the limit of LVL 30 000. The taxable base is the value of the
property.

Taxation trends in the European Union 115