The amendments envisage a reduction in social contributions from the current 35.09 percent to 34.09 percent – by 0.5 percentage points for both employers and employees. Thus, the contribution rate for the employer is planned to be 23.59 percent, but for the employee – 10.50 percent.
The amendments also envisage the introduction of the minimum object of mandatory state social insurance contributions from next year – from the amount of the minimum wage, which is planned in the amount of 500 euros from next year. The minimum social contributions are planned to be 170 euros per month.
It is envisaged that the minimum social tax will have to be paid quarterly from three minimum wages. If a person will work for several employers or will be both self-employed and an employee at the same time, the declared income will be added together. If they are less than three minimum wages in a quarter, the difference between the paid social tax and the minimum tax will be covered by the employer from his own funds, the bill provides.
If a person will work for several employers, then it is planned that employers will pay the mandatory minimum social contributions in proportion to how much and with what salary a person works for each employer.
From July 2021, the contribution rate for pension insurance by the self-employed is set at 10 percent of income instead of the current five percent. For the self-employed, whose monthly income will not reach the minimum wage, mandatory contributions are also provided in the amount of 10 percent of the pension insurance from the minimum wage.
Those self-employed whose income exceeds the minimum wage will have to make mandatory contributions for the self-employed specified types of insurance at least from the minimum wage and in the amount of 10 percent of the income difference. Upon reaching the income of 20,004 euros per year, mandatory contributions will have to be made from the excess part, but from 2023 – mandatory contributions from the entire income, the amendments envisage.
It is also envisaged that from 1 July next year, a socially insurable person as a self-employed person will be a micro-enterprise taxpayer, while employees of a micro-enterprise will be insurable as employees in accordance with the general procedure.
The amendments stipulate that the minimum mandatory contributions will not apply to convicts employed in the place of serving a custodial sentence, persons who have reached retirement age or have been granted an old-age pension, persons with group 1 and 2 disabilities, persons with a child registered in the payroll tax book. up to the age of three or persons who are studying, working in a social enterprise or providing an assistant service.
The self-employed person will not be able to pay the minimum contributions if he or she has been granted the status of a needy person. Also, the minimum contributions will not have to be made for seasonal agricultural workers, as well as for employees of a foreign employer, the amendments provide.
It is planned to introduce minimum mandatory contributions in order to ensure a sustainable state social insurance policy, stipulating that for all taxpayers who actively participate in economic life, mandatory contributions would be made at least at the level of minimum mandatory contributions. It would also prevent the use of an exceptional model of different tax regimes for tax optimization, according to the annotation of the draft law.
The Saeima has yet to decide on amendments to the law in the second – final – reading. It is planned that the changes will take effect on January 1, 2021.
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