On 12 December 2008 Latvian Parliament adopted new amendments in tax laws taking effect in 2009.

Value Added Tax (VAT)

The adopted amendments in the Law "On Value Added Tax" establishes that as of 1 January of the following year the standard VAT rate will be 21% instead of the present 18%. 

The amendments also provide cancellation of the present reduced VAT rate of 5%.  Instead of this rate a new reduced VAT rate of 10% will be introduced to the following goods and services:

• Medicines, medical goods and equipment;

• Infant products;

• Supply of heating, electricity and natural gas to inhabitants;

• Public transport services within Latvia;

• Mass media products.

The reduced VAT rate is cancelled and further on the VAT rate of 21% will be applicable to:

• Books;

• Licence fee for commercial television and radio;

• Hotel services;

• Water supply and sewerage services;

• Collection, transportation and disposal services of household waste;

• Funeral services;

• Entrance fee to sports events and cinema;

• Hairdressing services;

• Renovation services provided to inhabitants;

• Deliveries of firewood and wood based heating fuel inhabitants.

Excise tax

Amendments to the Law „On Excise Tax” provide to increase the tax as of 1 February 2009.

The following rates will be applied to the following alcoholic beverages:

• Beer (for 100 litres) – 1.45 Lats for each per cent of absolute alcohol by volume, but not less than 4  Lats for 100 litres of beer instead of the previous 2 Lats;

• Wine and other fermented beverages (for 100 litres) – from 30 Lats to 40 Lats;

• Other alcoholic beverages (for 100 litres of absolute alcohol) – from 705 Lats to 825 Lats.

Excise tax will be applied to mineral oil products based on the following rates:

• Unleaded petrol (for 1000 litres) - 269 Lats instead of the previous 228 Lats ;

• Leaded petrol (for 1000 litres) - 300 Lats instead of the previous 297 Lats;

• Diesel fuel and petroleum (for 1000 litres) – 234 Lats instead of the previous 193 Lats;

• Gas oil (for 1000 kilograms) – 90 Lats instead of the previous 87 Lats.

Amendments to the Law provides to increase excise tax also to:

• Coffee - from 50 Lats to 100 Lats per 100 kilograms;

• Non-alcoholic beverages – from 2 to 4 Lats for 100 litres.

Personal Income Tax (PIT)

As of 2009 the PIT rate will be reduced from 25% to 23%. 

It is planned as of 1 January 2009 non-taxable minimum will be 90 Lats, tax allowance for dependants will be 63 Lats.

It is also planned to introduce additional PIT allowances to disabled persons, politically oppressed individuals and the participants of the national resistance movement, including:

• Disabled persons with the first or second disability group have been assigned an additional allowance of 108 Lats per month;

• Disabled persons with the third disability group will be entitled to additional tax allowance of 84 Lats per month; 

• Politically oppressed individuals and the participants of the national resistance movement have been assigned additional PIT allowance of 108 Lats per month.