Tax newsletter - April 2016 | KPMG | LV

Tax newsletter - April 2016

Tax newsletter - April 2016

In this article we describe the conditions for submission of Annual Personal Income Tax Return


Senior Manager, Tax Department

KPMG Baltics SIA


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Conditions for submission of Annual Personal Income Tax Return

The time has come to submit the Annual Personal Income Tax Return (hereinafter – PIT return). The PIT return for 2015 must be submitted to the State Revenue Service (hereinafter – the SRS) by 1 June 2016. The PIT return must be submitted by those, who in 2015 have:

- performed economic activities,

- generated income abroad,

- generated non-taxable income which in the taxation year amounted to more than EUR 4000,

- generated return on capital without tax deduction,

- generated income from sale of growing forests or timber.

For other taxpayers the submission of the PIT return is voluntary, and it should be submitted to recover overpaid income tax (hereinafter - Tax) from the state budget. It is advisable to submit the PIT Return for recovery of tax by those who have not already benefitted from the annual non-taxable income (EUR 900 or EUR 75 per month) or allowance for dependants (EUR 1980 per dependant), as well as by disabled and politically repressed persons and members of the national resistance movement, who are entitled to additional tax relief.

Those, who during the year have had the following expenditure:

• eligible expenditure on education and medical services;

• payment of health insurance premiums to insurance companies;

• insurance premium payments, in accordance with the life insurance contract (accumulative);

• contributions to private pension funds;

• donations and gifts to a budget institution or association, foundation, religious organization which is a public benefit organization may recover overpaid tax by submitting a PIT return.

In order to recover the overpaid personal income tax, the person must submit the PIT return together with supporting documents (bank certified payment orders, cheques, receipts) to the SRS. Since the PIT return may be submitted for three previous taxation periods, this year it is possible to recover the overpaid income tax for 2014 and 2013, if it has not been done in the previous years, by submitting the PIT return for each year separately.

The PIT return may include not only your own, but also your family member (spouse, children, parents, grandparents) eligible expenditure. However, it should be noted that the tax will be recovered on the total amount of these expenditures, which in the taxation period do not exceed EUR 215 per person. If the eligible expenditure exceeds this norm, then the amount of excess can be split between family members who are entitled to eligible expenditure, or it can be attributed to the taxable income for the next five taxation years. This restriction does not apply to expenditures for dental services and elective surgeries for which the tax is recovered in full.

If the person has made contributions to private pension funds or has made accumulative insurance premium payments, then the tax is recovered for each of these payments to the extent that does not exceed 10% of this person's annual gross income. Moreover, it should be noted that the tax will be repaid for contributions to private pension funds, accumulative insurancepremium payments and amount of donations which in total do not exceed 20% of the annual gross income.

Since, by submitting a PIT return, person is recovering overpaid tax, then the amount of recovered tax may not exceed the amount of tax paid in the taxation period.

It should be noted that the tax for eligible expenditure may not be recovered by an economic operator and a licence payer. The tax is not recovered for the part of income which is subject to reduced rate (10% or 15%) or micro-enterprise tax.

It is advisable to submit the PIT return electronically via the SRS' Electronic Declaration System. In this case the system prepares the PIT return by using the data which is available to the SRS, and the person has to adjust the information if it is incorrect, and indicate the amount of eligible expenditure by attaching the supporting documents. When the SRS has reviewed the submitted PIT return and has accepted the tax overpayment, the person receives the overpaid amount of tax in the bank account which is provided in the PIT return. The overpayment must be repaid within three months from the date of submission of the PIT return.

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