Latvia: New Year Presents From The Government

With new 2011 year comes also tax changes in Latvia. What presents will we get in the coming year?
1) VAT increase from 21% to 22% (by 1%)
2) The Reduced VAT increase from 10% to 12% (by 2%)
3) VAT increase on electricity bills for households from reduced 10% to 22% (by 12%)
4) Reduction of Personal Income Tax (PIT) from 26% to 25% (by 1%)
5) Social Insurance increase from 9% to 11% for employee (by 2% increase) and for employer no change - 24.09%
6) Increase in Excise Tax for soft drinks containing sugar or artificial colors
7) And according to IMF and EU Commission the government has to find out possibility to get additional 50 million LVL in order to meet lending criteria. Finance Minister Andris Vilks commented that the measures for finding the money could be introduced in 2011Q2.

On Growth of Newly Established Enterprises in Latvia

Recently reported figures by Lursoft Ltd show that in Latvia number of newly established enterprises grew by 28.39% versus 2009. Seems pretty good results, especially during recession. But what is is behind those figures?
 
On 9 August 2010 the micro-enterprise tax law was adopted and since September 1st companies could be registered as micro-enterprise. But existing companies will be able to transform to micro-enterprise from 1st of January of 2011.

The fact that for openning new company it is needed just 1 LVL and not more than 5 persons employed opened new way for existing companies to restructure and reduce costs. How it works? Staff is laid off and asked to form a small enterprise. Usually this is "non-core staff" - guards, cleaners, etc. New enterprise then sign a contract with the former employer for providing services (cleaning, guarding, etc.). In turn, micro-company is paying only 9% of corporate tax (whic is eaqueal to contribution to national insurance of the employee 9%) and previous employer saves on contribution to national insurance - 24.09%.

Off course, some part of saved 24% can be paid to new partner company as a motivation, but I doubt it happens. And the fact that Latvian goverment all the time tends to reduce contribution to pensions, only decrease trust in social contribution, and forces employees to agreeon micro-enterprise scheme. We will see how many enterprises will be transformed from 1st of January 2011 to micro-enterprise type. But it is clear that contribution to national insurance will decrease further.

Number of registered cars in Latvia grew by 23,3% y-o-y (Jan-Nov vs. Jan-Nov 2009)

As one of the indicators of consumer confidence, number of registered cars grew by almost quarter in Latvia from January till November 2010 comparing to same period of previous year. Probably, some part of residents felt that the crisis is not as hard as perceived before. This also shows the difference between overall situation in the country (low GDP level and consumption) and some part of the economy, which was not affected that much by the crisis.
Source on news: Nozare.lv

GDP Trend 3 Baltic Countries

In Q3 2010 all 3 countries experiencing GDP growth comparing to Q3 2009:













Info from CSB.lv

2010 Q3 GDP: Estonia & Latvia

GDP figures has been revised for Q3 upside both in LV and EE.
Estonia GDP in Q3 resulted in +5.0% comparing to 2009Q3
Latvia GDP in Q3 : +2.9% vs. 2009Q3

Just started

Dear Reader,

I just started blogging in here. And the idea is simple - to track business information about Baltic countries.
This, off course, will not be full information. However, I will do my best to highlight the most important.

BR