Business, Taxes, Accounting.
Microenterprise in Latvia (MUN)
The law “On the Microenterprise Tax” has been in force in Latvia since September 1, 2010. The purpose of this law is to reduce the tax burden on small businesses. The basic tax rate for a microenterprise is 9% of the net turnover. This takes into account the net turnover, costs are not taken into account. Thus, it is not profitable to pay this tax to production workers. This tax status is more suitable for those who provide services.
What is the tax on microenterprises.
The microenterprise tax (MUN) is a single tax payment that includes all of the following taxes:
Salary taxes – mandatory contributions of state social insurance, personal income tax, state duty for business risk for microenterprise employees; Income tax from enterprises – if a micro-enterprise becomes a limited liability company; Income tax from the population – if a microenterprise becomes an individual merchant, an individual enterprise, a peasant or fishing industry, an individual registered as a self-employed person.
The reporting period for microenterprises is a quarter. The microenterprise submits to the State Revenue Service a declaration and pays MUN until the fifteenth day following the reporting quarter of the month.
Who has the right to receive the MUN payer status? The order of registration.
Microenterprise in Latvia can be:
individual merchant (IK); Individual enterprise (IU), peasant or fishing industry (ZS); a natural person registered in the State Revenue Service as a person conducting economic activities; Limited Liability Company (SIA).
To receive the status of the payer MUN it is possible in summarizing order – having submitted the corresponding application:
simultaneously with the registration of the enterprise in the Register of Enterprises; simultaneously with the registration of a natural person as a self-employed in the State Revenue Service;
A functioning limited liability company, an individual merchant, an individual enterprise, a peasant or fishing enterprise, an individual registered as a self-employed person can change their tax status once a year and apply to the State Revenue Service for assignment of the MUN payer status to December 15 pre-taxation year. In this case, the MUN status begins to operate from January 1 of the taxation year.
In order to be eligible for the status of a microenterprise tax payer, the following criteria must be met:
net turnover in a calendar year should not exceed 100,000 euros ;
 If the MUN status is requested when a legal entity is created, the net turnover is projected if the MUN status is already received by the operating enterprise, the criterion is the net turnover of the calendar year in which the MUN status is requested.
participants of a limited liability company can only be individuals; participants in a limited liability company must also be members of the management board; owners of microenterprises – members of a limited liability company, an individual merchant, an individual enterprise, a peasant or fishery enterprise or a self-employed person – must also be employees of the microenterprise; the number of microenterprise employees at any time should not be more than five (workers are not included absent or suspended from work); The income of a microenterprise worker should not exceed 720 euro net a month.
The basic tax rate for microenterprises is 9%, which applies to net turnover, which does not exceed 100 000 euros per year. If the turnover of a microenterprise exceeds 100,000 euros, an additional tax rate of 20% is applied to the excess part. If the income of an employee of a microenterprise exceeds 720 euros per month, an additional tax rate of 20% is applied to the higher part of the income. If the number of employees in a microenterprise is more than five during the quarter, then to the 9% tax rate, two percentage points are added for each additional employed person.
When transferring to the status of the MUN payer, the operating enterprise is obliged to obtain the written consent of all employees to change the tax status. New employees must be warned in writing that the company has the status of a MUN payer, that is, that the employee’s social contributions and income tax will be calculated from the net turnover of the microenterprise, and that microenterprise employees are entitled to voluntary joining the system social insurance – that is, they can independently pay additional insurance contributions from incomes that do not exceed 720 euros (until December 31, 2013, 500 lats).
In writing, it is necessary to warn MUN workers also that from next year the company will terminate the status of the payer of MUN (if there is such a decision).
Restrictions for persons who have several enterprises.
If an individual holds shares in several limited liability companies, the right to obtain the MUN status can be obtained only for one of these companies; If an individual is a member of a limited liability company and at the same time is registered as an individual merchant, an individual enterprise, a peasant or fishery economy, or as a self-employed person, only one of these legal forms is eligible for obtaining the MUN status.
How is the MUN calculated? Advantages and disadvantages.
As an example, take the Limited Liability Company (SIA) “Romashka”, which in 2011 was the payer of corporate income tax and in 2012 received the status of a payer of MUN. SIA “Romashka” renders consulting services and as expenses pays salaries and taxes to employees, rent of premises, communication services, advertising, etc. And in 2011 and 2012, these costs were unchanged – 5,000 lats a year. In 2011 and 2012 at the enterprise 5 workers who received the salary of net on 500 ����� constantly worked. All employees applied tax benefits – their tax books were in the microenterprise. All employees are simultaneously the owners of SIA Romashka and are entitled to dividends. In order to pay employees 500 lats each year in 2011, SIA Romashka set a gross salary for each employee at 723.24 Ls. In 2012, the labor contracts were changed – for each employee was established a gross salary of 500 Ls.
Activities of SIA “Romashka”
In 2011, the owners of SIA “Romashka” & # 8212; individuals received dividends in the amount of 8531.20 lats (minus 10% of the tax on dividends = Ls 9479.11 – 10%). In 2012, the amount of dividends was 25,830 lats (minus 10% of the tax = Ls 28700 – 10%). Thus, with other things being equal, the total net official income of each of the members of SIA Romashka increased in 2012 by LVL 3459.76 (Ls 11166 in 2012 minus Ls 7706.24 in 2011). In 2011, this money went into the budget.
MUN workers are in an uncertain situation, because their social status differs from the ordinary status of the employee. MUN workers can not apply tax benefits, including dependents, where they benefit – for example, if they work at the same time in the MUN, where they receive unchanged 720 EUR in their hands and in SIA, where, by applying tax credits, they could additionally receive exonerated from tax revenues. The microenterprise does not have the right to apply the norms of the laws “On Income Tax from the Population” and On Income Tax from Enterprises “with respect to income – to reduce the taxable income of the current year by the amount of losses of previous years, apply tax incentives to donations, etc.
Distribution of tax on microenterprise.
Paid to the state budget MUN is allocated to the accounts of other taxes as follows:
1. For limited liability companies, individual enterprises, peasant or fishing farms, which in previous periods of taxation were payers of income tax from enterprises:
0,1% & # 8212; to the account of the duty for risk of entrepreneurial activity; 65% & # 8212; to the account of compulsory state social insurance contributions; 30% & # 8212; on the income tax from the population; 4.9% & # 8212; on the income tax from enterprises.
2. For individual merchants, individual enterprises, peasant or fishing farms, which in previous periods of taxation were payers of income tax from the population:
0,1% & # 8212; to the account of the duty for risk of entrepreneurial activity; 65% & # 8212; to the account of compulsory state social insurance contributions; 34.9% & # 8212; on the income tax from the population.
3. For individuals registered with the State Revenue Service as persons conducting economic activities:
65% & # 8212; to the account of compulsory state social insurance contributions; 35% & # 8212; on the income tax from the population.