Planned Tax Changes in 2024

The Cabinet of Ministers, in its meetings on October 9th and 10th, discussed the most significant amendments intended to be included in the legislative package accompanying the bill “On the State Budget for 2024 and Budget Framework for 2024, 2025, and 2026,” which will come into effect on January 1, 2024. The amendments next year will affect practically all taxes (see below).

Corporate Income Tax – the amendments include:

Advance payments of CIT at a rate of 20% of the profit earned in the preceding tax year for credit institutions and consumer credit service providers;
Clarification of the regulation regarding representative cars, specifying that CIT will not be applied to fuel and operating expenses for representative cars registered in the company’s ownership or possession for more than 5 years (60 months).

Value Added Tax – the amendments include:

Increasing the VAT registration threshold from 40,000 to 50,000 EUR;
Additional exemptions for sports and children’s camps (Article 52) – participation fees for sports competitions and fees for sports activities organized by associations or foundations, the purpose of which is not to generate additional income, as well as fees for children’s stays in camps that comply with regulations in the field of education, will be exempt from VAT;

Setting a 60-month limit for the VAT deduction on representative cars (similar to CIT);
Amending Article 105, “Pre -tax Correction for Bad Debts,”by raising the threshold for a bad debt from 430 to 1,000 euros, reducing the minimum period of interrupted supply from six to three months, and allowing VAT correction in any (subsequent) VAT return;

Microenterprise Tax – a single tax rate of 25% is established (the 40% rate is excluded). Amendments in the “Law on Personal Income Tax” also allow MET payers to apply a tax-exempt minimum and benefits for dependents.

Copyright Royalties – the special tax regime for copyright royalties (similar to MET) is retained in 2024, with a single tax rate of 25%.

Excise Tax – the amendments plan to gradually increase excise tax rates in 2024 on alcoholic beverages, tobacco products, liquid used in electronic smoking devices, ingredients used in preparing liquid for electronic smoking devices, tobacco substitute products, as well as certain petroleum products used in special economic zones (SEZ) and free ports (the budget legislative package also includes related amendments to the “Law on Taxation in Free Ports and Special Economic Zones”).

Natural Resource Tax – the amendments include:

Identifying new NRT objects:

Hydrocarbon extraction;
Textile products;
Products containing plastics and fishing gear containing plastics not subject to the manufacturer’s extended responsibility system;
Tires installed on vehicles (first registered permanently in Latvia and not covered by the Management of End-of-Life Vehicles Law, Article 3, paragraph 1);
The amount of plastics included in plastic packaging and in composite packaging that has not been recycled or regenerated during the reporting period; Supplementing the conditions for applying NRT to plastic and composite packaging, setting a higher NRT rate for packaging made of expanded polystyrene and the raw materials for producing expanded polystyrene, as well as setting the NRT rate for composite cardboard packaging as for plastic packaging; Increasing the NRT rates for:
Vehicles;
Domestic and hazardous waste disposal;
Natural resource extraction; Establishing regulations for creating and applying the manufacturer’s extended responsibility system for textile products; Specifying the application of NRT for PM10 particle emissions in the air, determining the application of NRT to total dust emissions (PM), as well as batteries and accumulators, in accordance with the new methods and formulations; Clarifying the exemption from NRT payment for the period after concluding a contract with the deposit system operator for participating in the deposit system, requirements for foreign persons participating in the manufacturer’s extended responsibility system, and the application of NRT for covering accumulations and calculating the waste disposal fee after placing them in a bioreactor, among other changes. Lottery and Gambling Tax – the amendments involve a 20% increase in the gambling tax rate for gambling machines, roulette, and card and dice games, as well as interactive gambling.

The full texts of the bills are available on the Legislative Draft Portal.”