Government decides to finance sick leaves with budget money; postpone tax payments and grant three-year tax holidays

  • 2020-03-18
  • LETA/TBT Staff

RIGA - To mitigate the negative impact of the Covid-19 pandemic on the Latvian economy, the government on Tuesday approved a number of proposals, including to finance employees' sick-leaves from the state budget, postpone advanced personal income tax payments in 2020 and to extend businesses' tax holidays from one to three years. 

A decision was also taken to support businesses with financial instruments. 

The Finance Ministry informed LETA that the government will be able to provide all the aforementioned measures because in recent years the government has been following a prudent fiscal policy. Now that there is an emergency, Latvia can use Treasury funds to provide the necessary support to businesses and employees. The support will be targeted, the ministry underlined.

"The state will provide the necessary support to the health sector and introduce necessary support measures to make sure the economic shock is as contained as possible and to prevent it from leaving a long-term impact on the economy. The state will be able to provide this support by increasing the budget deficit to minimize the consequences of the Covid-19 crisis for various sectors of the economy and Latvian households," the Finance Ministry said.

According to the government decision, the part of employees' sick-leaves that is currently financed by employers will now be paid with budget money. 

In accordance with the law on taxes and duties, various legal solutions will be provided to help businesses and people meet tax liabilities, including various tax postponement options. 

To make sure overpaid taxes are returned to businesses as soon as possible, the State Revenue Service will disburse VAT refunds within 30 days after the VAT declaration deadline, which is April 1, 2020. The indicative fiscal effect from the measure would be an estimated EUR 60 million.

Also, considering the national and global emergency brought about by Covid-19, tax regulations will be amended to allow self-employed personal income tax payers to not make advanced income tax payments in 2020. The fiscal effect of this measure is estimated at EUR 30 to 35 million.

The deadline for the submission of annual statements has been extended to July 31 for all companies. 

The Cabinet of Ministers also approved the proposal to provide the following support instruments to crisis-stricken businesses - loan guarantees for crisis resolution and a loan for crisis resolution. The support programs have yet to be agreed with the European Commission. 

The Finance Ministry has also proposed urgently drafting one special temporary bill aimed at overcoming the Covid-19 impact. This emergency legislation would include tax, social protection and business support measures, increasing the contingency funds, redistribution of appropriations and other necessary measures intended for a fast and efficient coping with the crisis.