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Government and social partners agree on introduction of differentiated PIT

Maris Kucinskis/flickr.com/Saeima.
At a meeting of the National Council for Trilateral Cooperation, government representatives and social partners agreed on the introduction of differentiated personal income tax.

The agreement provides that PIT rates will be differentiated based on income forms: 20% for annual income under EUR 20,000, 23% for annual income from EUR 20,001 to EUR 55,000. One section government partners was not agreed upon at the meeting – the tax rate for large wage recipients. Finance Ministry offers transforming solidarity tax by applying solidarity tax calculation principle for PIT. With that, PIT rate for large wage recipients could be 33.5%. Employers opposed this principle, saying that this amount is too high.

Prime Minister Maris Kucinskis admits that this matter will be discussed on Monday, 3 July.

The previous tax reform offer provided for two PIT rates – 20% for income under EUR 45,000 and 23% for income above EUR 45,000.

The council also agreed to establish 0% rate on reinvested profits to help maintain competitiveness of businesses.

Non-taxable minimum is also expected to grow. It is planned to be increased to EUR 200 in 2018, to EUR 230 in 2019 and EUR 250 in 2020. Increased non-taxable minimum will not be applied for income above EUR 1,200.

Minimum wage will be gradually increased from EUR 380 to EUR 430.

From 2018 onward, benefits for dependents will be EUR 200 a month. This benefit is planned to be increased to EUR 250 by 2020.

The government intends to decide on the tax reform act in two parts – 4 July and 11 July.


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