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Ministry of Finance
of the Republic of Latvia
1 Smilsu st., Riga
LV-1919, Latvia

P.: +371-67095405
F.: +371-67095503
E-mail: pasts@fm.gov.lv
info@fm.gov.lv

Support available to entrepreneurs in the form of both tax solutions and financial mechanisms 18/03/2020

On Tuesday, March 17, the Cabinet of Ministers (CoM) resolved that for the prevention of consequences caused by COVID-19 in the social and entrepreneurial field it is necessary to act in four directions. The Ministry of Welfare is preparing proposals on how, during the COVID-19 pandemic, to provide in a solidary manner a fixed-term State aid to employers for the purposes of the payment of sick-leave certificates, performing this from the special budget funds. At the same time, tax solutions are also planned, as well as support to entrepreneurial activity in the form of financial mechanisms.

 The Minister of Finance, Jānis Reirs, points out: "The Latvian economy is stable, and strict observance of fiscal discipline has paid off. Nevertheless, currently the crisis caused by COVID-19 has shocked also our economic environment, and this economic shock must be prevented as soon as possible by means of various mechanisms. The government will support entrepreneurs and the employed; therefore, today we have submitted the first urgent proposals for the provision of support both in the field of taxes and in the availability of current assets. We continue to analyse and discuss other new types of support in a twenty-four-hour cycle, in order to, as far as is possible, preserve the functioning of our economic environment and to expediently help it to fully recover and return to normal operation."

The government proposes to support enterprises during their idle time. If the employer is not employing the employee or, alternatively, is on idle time (does not carry out the activities required for accepting the performance of the obligation of the employee), and if such conduct of the employer is in direct causal relationship with the measures laid down by the CoM, pertaining to the prevention of consequences arising from COVID-19, the remuneration to the employee will be compensated to the employer and disbursed from the central government budget funds. This arrangement will be intended for the enterprises working in the sectors defined by the CoM. The conditions for the introduction thereof and the amounts to be reimbursed will be developed by the task force established on assignment of the Prime Minister for support to enterprises and the employed under the management of the Minister for Finance, Jānis Reirs. 

In addition to the existing solutions, the government will provide for the possibility for the taxpayers in the sectors defined by the CoM to reschedule or postpone the performance of the delayed tax payments for a period of up to three years, if the overdue payment has been caused by the impact of Covid-19. Such regulation is yet to be incorporated into the statutory regulation and coordinated with the European Commission. It will refer not only to the taxpayers who have faced (will face) difficulties in payment of the current tax payments, but also to the taxpayers to whom any of the tax payment term extensions have already been granted in accordance with the law On Taxes and Duties and who have incurred difficulties in covering the relevant payments.

To requalify for the new extension of the term for tax payment, the taxpayer must meet the condition that the taxpayer actively cooperates with the tax administration and must submit a well-reasoned application containing the request to grant the new extension of the term for tax payment for the remaining (outstanding) late tax payment. When granting the referred-to extension of the term for tax payment, late interest will not be calculated for an overdue tax payment of the taxpayer for the entire period of delay.

The government also decided to facilitate refunds to entrepreneurs, stating that the State Revenue Service, when taking tax administration measures, will refund the approved value added tax (VAT) amount to all taxpayers within 30 days of the term for the submission of the VAT return, without accruing it until the end of the taxation year, effective from 1 April, 2020. Accordingly, it is also planned to refund the approved VAT amount which is currently being accrued until the end of 2020, in accordance with the VAT returns already submitted for January and February 2020. The norm regarding faster VAT surplus may be reviewed from 2021, if substantiated reasons are detected.

Taking into account the state of emergency in Latvia and elsewhere in the world and the drop in economic activity caused by it, it is planned, through the introduction of amendments to the statutory regulation, that personal income tax (PIT) payers engaged in economic activities are allowed to forego making PIT advance payments in 2020 (late interest will not be calculated for non-performance).

As an additional precautionary measure, it is intended to provide all enterprises with the possibility to extend the term for preparation and submission of their annual accounts to at least July 31.

Entrepreneurs must immediately address the State Revenue Service, via the Electronic Declaration System, concerning particular tax payment problems related to the COVID-19 crisis situation.

The CoM also provided for support mechanisms for the enterprises affected by the COVID-19 crisis - loan guarantees, as well as loans for crisis resolution, to be provided by the State Development Finance Institution Altum. Programs are yet to be coordinated with the European Commission.

Guarantee conditions (in the program there is a possibility to provide support in the amount of 100 million euro per each 10-15-million-euro risk coverage):

  • Enterprises to be supported - small and medium-sized merchants, large enterprises;
  • Has not been failing prior to the COVID-19 crisis;
  • Guarantee amount of up to 50%;
  • Maximum amount of the guarantee up to 5 million euro per enterprise;
  • Maximum term of the guarantee is up to 10 years;
  • Guarantee is issued for existing liabilities (investment loans, financial leases) by the credit institution’s postponing the payments of the principal amount for up to two years;
  • Guarantee may also be issued for the current assets’ loan for up to three years (by both the enterprise’s undertaking new liabilities and by restructuring the existing current assets’ loan granted by the credit institution).

Loan conditions for solution of the crisis (in the program there is a possibility to provide support in the amount of about 100 million euro per each 25-million-euro risk coverage):

  • Enterprises to be supported - small and medium-sized merchants, large enterprises;
  • Has not been failing prior to the COVID-19 crisis;
  • Loan for financing new current assets;
  • Maximum amount up to 1 million euro per enterprise;
  • Maximum term is up to 3 years;
  • Grace period of the principal amount is up to 12 months;
  • Collateral requirements are considerably reduced;
  • Reduced/subsidised % rate.

27/03/2020 23/03/2020 23/03/2020

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E-pasts: info@fm.gov.lv

Adrese: Smilšu iela 1, Rīga, LV-1919, Latvija

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Latvijas Republikas Finanšu Ministrija