Eligible expenditure is an indirect way of assisting people who pay personal income tax (IIT). If a person has not paid an IT during a given year, the refund of that tax may not be received for that year. However, these costs can be included in your statement by family members who have paid the IT (more than checking the payment of the IT under “When should the annual income statement be made on a voluntary basis?”).

The limit of eligible expenditure per person and the conditions for reimbursement are applied on the basis of the legislation in force in the year in question, which is therefore different depending on the year for which the declaration is made.

Eligible expenditure has:

1. Expenditure on education, including education of interests for children. Before completing the annual income statement in order to recover the overpaid population income tax on the education of children's interests, see a list of interest education programmes to which the local government has issued licences. Information on interest education programmes registered in the Register of Educational Institutions is available at the State Education Information System.
2. Costs of medicated services, including dental care.
3. Health and life (through fundraising) insurance.
4. Donations and gifts made, including to Latvian political parties.
5. Contributions made to private pension funds and payments of insurance premiums.

In order to recover part of the personal income tax (IIT) paid for the eligible expenses of you or your family members, the declaration must be accompanied by appropriate payment documents or copies thereof showing the personal identity number, given name, type of expenditure paid, document number, date and publisher's registration number.

Eligible expenditure may be based on the following payment documents:

1. cash check;
2. a receipt in addition to the cash receipt and the cash receipt, if the cash receipt does not specify the name, surname and personal identity of the natural person or his or her family member;
3. a numbered and registered receipt in the State Revenue Service;
4. cash receipts orders;
5. a payment order or an account statement.

If the annual income statement requires the addition of a proof of payment document on the education of the interests of children, the document must contain the name, surname and personal identity of the natural person or his or her family member, as well as the type of eligible expenditure for the purpose of the payment (the name of the association). The annual income statement, together with the supporting documents, must be submitted to the parent who is the IIT payer. For example, if the mother has paid for the education of the best interests of the child, but is herself on parental leave, when submitting the annual income statement, the spouse of the mother of the child is entitled to include the payment in her eligible costs (because the mother does not have to apply the eligible costs).

If it is necessary to clarify the personal identity codes of the family members:

• use the free e-service My data in the register.

• write an application, sign with confidence  electronic signature and send to the OCMA's  e-address or to pasts@pmlp.gov.lv;
• on-site at the OCMA.

Note that you can only obtain this information about your spouse, children, parents, custody and custody.

Prepare payment documents for eligible expenditure, if any, in the year for which you will make the declaration:

1. scan or photograph each check separately and save it to your computer in a place you know.
2. make sure that each check contains the name, surname, personal identity number. If the service provider does not have the option to indicate the personal identity number in the check, ask for an additional write of a strict accounting receipt containing all the information.
3. make sure you can read the service provider's registration number, check number, date, amount paid.
4. if you're using a mobile app "Eligible expenditure", photograph the eligible expense payment documents, or select them from your device gallery and enter the required document data in the fields for it. With the application, you can store payment documents and add them to the declaration, but you cannot submit your own declaration. For more about using your mobile app, see “Submit your Annual Income Statement.”

Note that if you are working in micro-enterprises (as of 1 July 2021, the limit applies only to the owner of a micro-enterprise), you are a seasonal farm worker or a reduced patent payer, or you pay an IIT only for income from capital gains, you will not be able to recover the tax overpayment because in these cases the full income tax rate is not paid. Your expense documents may be added and submitted to your statement by your family members who have paid the full rate of income taxes on their residents.

The annual income statement shall include in full all income and expenditure generated during the year and, taking into account the size of the tax rate applied, the non-taxable minimum, benefits, eligible expenditure, etc., the amount of the personal income tax (IIT) premium or overpayment is calculated.

When submitting an annual income statement, SRS Electronic Statement System (SRS EDS) automatically calculate the corresponding tax rate and the amount of the annual differentiated non-taxable minimum, taking into account the income actually generated during the year and the non-taxable minimum projected by the SRS at the main source of income (read more in the section “Income tax exempt minimum and tax overpayment or premium”). In the case of the calculation of the personal income tax (IIT) premium (debt), by adding cheques on eligible expenditure to its annual income statement, it is possible to delete or reduce the tax difference which, in some cases, should be returned to the State by charging the non-withholding tax.

Conditions for recovery of eligible expenditure

These changes shall apply only to the annual income statements submitted for 2018 and subsequent years.

Annual income statements and checks for previous years (for 2017 and 2016) continue to be covered by the conditions to be met on the SRS website.

Starting in 2018 and in subsequent years, the eligible expenditure limit, or the total amount from which part of the personal income tax paid can be recovered, has been increased from EUR 215,00 to EUR 600,00 per annum, provided that the eligible expenditure does not exceed 50% of the annual income of the worker before tax. This EUR 600,00 includes all types of eligible expenditure, including education, medicine, dental care, scheduled operations, donations and gifts, including political parties.

If more than EUR 600,00 has been spent during the year on eligible expenditure, the remaining eligible expenditure on education and medical services will move to the next 3 years. In order to receive the amount transferred, the annual income statement is to be submitted next year.

You will continue to be able to include life insurance (through fundraising) premiums in eligible costs, however, provided that the life insurance contract has a duration of not less than ten years. However, this does not apply to contracts concluded before 31 December 2017, the duration of these contracts may still be five years.

Eligible expenditure will include contributions to private pension funds and accruing life insurance premiums, which together do not exceed 10% of taxable income but not more than EUR 4000,00 per annum.

Non-taxable minimum and overcharging or premium

In cases where income is variable and is different from the income of the previous year, a situation may arise where, during the year, a higher non-taxable minimum or lower IIT rate is applied than when calculating the tax for the total income actually received throughout the year. In both cases, there is a difference in tax, which must be paid in the State budget.

When submitting the statement of income for 2018 and beyond, the tax gap may arise mainly for the following population groups:

• for persons who have not worked for a full year in the past year or for persons who have not previously had income:
  1. for example, mothers returning to work after parental leave may find themselves in a position to continue to benefit from tax relief, which will result in a refund next year;
  2. persons who have only recently started working;
• persons with multiple sources of income (in addition to wages and salaries also receive royalties or pensions);
• for individuals who have changed their employer.

If your income is variable through your VID EDS account, you can fix an additional tax bill in good time:

1. Connect to your VID EDS account;

2. Go to the “Sale Tax Book” section.

3. Depending on the situation, please refer to it: “Do not apply the monthly non-taxable minimum” or “Apply the 23% personal income tax rate”.

Non-taxable minimum and progressive IIT rate

The year has been introduced in Latvia since 2016 differentiated non-taxable minimum (GDNM). This means that the amount of the non-taxable minimum, i.e. the part of the remuneration which is not subject to an IIT, depends on the amount of revenue generated during the year.

Starting in 2018, on the basis of the data at the disposal of the SRS on the income generated during the previous period, the projected non-taxable minimum for each citizen is determined individually - twice per year. This makes it possible to determine and apply immediately the amount for which the IIT is not withheld each month. You can see the amount of your projected untaxed minimum VID EDS, wages in the tax book. You are also able to mark if you want or do not want your income to be subject to the forecast non-taxable minimum.

IN turn, GDNM, depending on the amount of personal income, applies once a year when the annual income statement is submitted. GDNM may differ from the estimated monthly minimum amount applied during the year. This may lead to a difference, which means that the amount of tax to be paid will increase or decrease (when submitting an annual income statement, the tax will have to be increased or repaid to you). Even if your earnings were variable during the year, it is possible that the projected non-taxable minimum of the SRS is higher, which means that the tax is paid less than necessary.

The difference in tax may also occur if the actual amount of personal income was applied during the year, i.e. a lower rate of IIT. In 2018, it is stipulated that:

• for annual income up to EUR 20 004,00, it is 20%;
• income of EUR 20 004,00 and up to EUR 55 000,00 – 23%;
• but for income above EUR 55 000,00 per annum – 31,4%.

In view of the rates applicable to a certain amount of income, each person may adjust the situation in good time by noting Salaries in tax book “to apply a population income tax rate of 23%”.

The annual income statement may be submitted from 1 March of each current year for the preceding three years. Persons who are required to make the annual income statement must make it during the period from 1 March to 1 June. If the annual income exceeds EUR 55 000,00, the declaration shall be submitted from 1 April to 1 July.

In the case of both voluntary and compulsory declarations of income, a separate annual income declaration shall be submitted for each year.

The annual income statement may be submitted:

1. by electronic means VID EDS;
2. on-site at the SRS in Customer Service Centers (irrespective of the declared place of residence);
3. on-site at the State and local governments in single customer service centres.

Submitting a declaration using the SRS EDS makes it possible to save time because the declaration will automatically reflect your earnings, non-taxable income, information from credit institutions on contributions to pension funds, information from insurance companies on contributions made to life insurance services, and the eligible expenditure transferred on education and medical treatment services from previous years. The declaration shall automatically read from the database information on payments made by universities, contributions to private pension funds, health and life insurance.

The procedures and requirements for submitting declarations for 2016 and 2017, which differ from 2018, can be consulted on the SRS website.

In order to submit a voluntary annual statement of income electronically:

1. connect VID EDS and go to the Annual Income Statement section on the home page.
2. select the preparation of the declaration and indicate the year for which you will submit the declaration;
3. mark the sections that you will make in the declaration.
4. if you want to add additional supporting payment documents, press “Add payment document”.
5. specify the current contact details and check the correctness of the data.
6. mark whether the declaration was first or specified (correction to the previous one);
7. submit the declaration by clicking the Submit button.

Select a simplified way to complete the declaration in order to get overpaid on eligible costs and to check or align the payment of the IIT.

If you have earned income abroad and other income subject to IT (see “When should the annual income statement be made mandatory?”), choose a detailed way to complete the declaration.

The SRS employees will check the details of the submitted declaration and will invite you to correct them and submit an updated version if the shortcomings are identified. You will receive the overpaid refund within three months from the date of submission of the declaration.

Documents supporting eligible costs can be easily saved and added to the declaration via a mobile app Eligible expenditure. It allows you to photograph checks, receipts, etc. payment documents and send them to your SRS EDS profile. Checks that have been sent, will not fade, will not be missed and will always be in the appropriate size and format of your SRS EDS profile. You can store checks in your mobile app until the declaration is submitted.

You can connect to the “Eligible expenses” mobile application using your VID EDS user name and password. In the application, you can also identify with the QR code found in the Profile section of the VID EDS:

1. open the profile page with the QR code displayed on it.
2. in the mobile app, select Implement with QR code and bring the QR code scanner opened in the app closer to the QR code displayed on the computer screen until the code is read and a successful connection has occurred.
3. once you have connected to a user name and password or QR code, your mobile app will identify your profile and have two sections available in your app. One in which you can add photographs of the supporting documents and the other in which you can provide information about your family members.

The required completion and submission of an electronic annual income statement is different from the voluntary completion and submission of the annual income statement, with the need to fill in more sections where you must indicate the income from your business or any other revenue that is required to be declared.

After submitting an electronic declaration to the e-mail provided by you, and  e-address (if you are the user) you will receive a message about accepting or rejecting the declaration (more detailed information about the reasons for rejection will be available in your SRS EDS profile).

Annual income declaration

Electronic declaration system

Mobile app Eligible expenditure simpler submission of the Annual Income Statement

Law On personal income tax

Cabinet Regulation No. 662, Regulations Regarding the Declarations of Personal Income Tax and Procedures for Filling It

The State Revenue Service (SRS)

The Office of Citizenship and Migration Affairs (OCMA)

The Ministry of Education and Science (MES)

The State Social Insurance Agency (SSIA)

The National Health Service (NHS)

The State Land Service (SLS)