Constitutional Court finds procedure for payment of personal income tax for individual business performers unconstitutional

RIGA - The Constitutional Court has found the procedure of calculation and payment of personal income tax for individual business performers unconstitutional.

The Constitutional Court found that Sections 3.1 and 6.1 of Article 11 of the Law On Personal Income Tax does not comply with Article 105 of the Constitution. The decision is final.

The application to the Constitutional Court was filed by the chief ombudsman who had been assessing different complaints about calculation of personal income tax for individual business performers. According to the ombudsman, Sections 3.1 and 6.1 of Article 11 of the Law On Personal Income Tax does not comply with Article 105 of the Constitution, which provides that everyone has the right to own property. 

The Article also says that property shall not be used contrary to the interests of the public, property rights may be restricted only in accordance with law, expropriation of property for public purposes shall be allowed only in exceptional cases on the basis of a specific law and in return for fair compensation.

The ombudsman said that as of January 1, 2018, amendments to the Law On Personal Income Tax provided that individual business performers have to pay personal income tax at the set minimum amount also in case their revenue is lower than expenditure, and they have not earned any profit.

The ombudsman believes that such amendments had been adopted at the time as a result of a political agreement, ensuring larger revenue into the state budget, compensating for what had been lost as a result of tax reform.

As the lawmaker did not react to the call of the ombudsman to correct the mistake, an application was filed with the Constitutional Court.