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Latvia To Ditch Flat Tax On Income

by Ulrika Lomas, Tax-News.com, Brussels

29 June 2017


Latvia's Prime Minister has announced plans to replace the country's flat tax on personal income with a progressive rate structure.

Prime Minister Maris Kucinskis informed a news conference on June 26 that as part of a wider package of tax reforms, three rates of income tax, at 20 percent, 23 percent, and 31 percent, would be put in place.

Under existing law, personal income is taxed at a flat rate of 23 percent, after a monthly personal allowance for individuals of EUR75 (EUR85).

Under the new proposals, income up to EUR20,000 would be taxed at 20 percent, income between EUR20,000 and EUR55,000 would be taxed at 23 percent, and income in excess of EUR55,000 would be subject to tax at 31 percent.

Additionally, the monthly personal allowance will be increased to EUR200 in 2018, to EUR230 in 2019, and to EUR250 in 2020.

The "solidarity tax" will also be abolished under the tax reform plan. This means that social security contributions above the maximum social security contribution base (EUR52,400 in 2017) will be refunded, as they were prior to 2016.

A previous version of the tax reform plan proposed a two-tier personal income tax, with income up to EUR45,000 taxed at 20 percent, and income above this threshold taxed at 23 percent.

TAGS: individuals | tax | law | Latvia | tax rates | social security | tax reform | individual income tax

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