Changes in Personal Income Tax and Mandatory State Social Insurance Contributions in 2024

As usual, a new year brings changes in legislation. This article summarises the most significant amendments to tax laws on Personal Income Tax (hereinafter – PIT), Mandatory State Social Security Contributions (hereinafter – SSC), and the Labour Law, which entered into force on 1 January, 2024.

In December 2023, Parliament adopted amendments to the laws On Personal Income Tax (hereinafter – the PIT law) and On State Social Insurance (hereinafter – the SSI law), which we summarize more in detail in this article.

Effective from 1 January, 2024, there are the following changes:

• The conditions laid down in the law regarding the deductibility of contributions to private pension funds and withdrawals from private pension funds also apply to Pan-European Private Pension Plans (PEPPs);
• Employer-paid tuition fees for an employee's higher education at state-accredited Latvian educational institutions, educational institutions of the Member states of the EU and EEA are exempted from PIT and SSC if the higher education is related to the acquisition of skills necessary to perform work for the employer;
• The employer-paid life (without accumulation of funds), health or accident insurance premiums exemption from PIT and SSC has been increased from EUR 426.86 to EUR 750 per year;
• Compensation for remote work paid by the employer to the employee as per the rules of the Labour Law is now exempt from taxation (and is now a permanent rule) if the total amount per month for full-time work does not exceed EUR 40 (previously EUR 30 in years 2022 and 2023);
• PIT exemption for social assistance in the form of cash or other items or services has been increased to EUR 3,000 per year (previously EUR 1,000) for payments made to individuals by public benefit organizations, religious organizations, and trade unions;
• Income, scholarships and rewards paid from the European Social Fund Operational Programme “Human Resources and Employment” or “Growth and Employment” or the Recovery and Resilience Mechanism Plan or from the State budget for active employment measures to the unemployed persons during the period from 2010 to 2026 are exempt from PIT;
• Funds granted by the State budget through the State Revenue Service (hereinafter – the SRS) or the joint stock company “Attīstības finanšu institūcija Altum” to individuals (for their private use and not as part of an individual business activity) are exempt from PIT;
• Micro-enterprise taxpayers can apply the differentiated non-taxable minimum and allowance for the dependents to their income subject to PIT; and
• The transitional period, when a royalty recipient (to whom royalties are paid by a payer other than a collective management organization) has the right not to register as a performer of business activity, is extended to 31 December, 2024, this also applies to SSC. Also, the 40% PIT rate for royalty income exceeding EUR 25,000 has been cancelled. Therefore, the payer of royalties (which is not a collective management organization) must now withhold only 25% PIT.

In addition, according to the amendments to the Labour Law, the minimum monthly salary for normal working hours from 1 January, 2024 should not be less than EUR 700 (the minimum hourly rates calculated in accordance with Cabinet of Ministers Regulation No. 656 have also changed).

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.