Salary tax benefits for innovative companies
Salary tax benefits for innovative companies
On Thursday, March 14, the business conference "ACCOUNTING AND TAXATION 2024" took place online, where the most knowledgeable experts in the field shared not only practical explanations and recommendations on legislative changes, but also looked into the latest accounting trends. The conference was closed by BDO's senior tax consultant Svetlana Nesinova, who spoke more about the possibilities of salary tax relief for innovative companies.
She pointed out that there are several state support options for payroll taxes for companies that develop an innovative product or improve an existing one, using innovative technologies and approaches, the purpose of which is to promote the formation of start-ups in Latvia, to promote research, as well as the use of innovative ideas, products or processes in economic activity.
Currently, payroll tax credits (IIN and VSAOI) are available for companies, if the company or its parent company has no tax debts above EUR 150 and the insolvency process has not been declared. Innovative companies or companies with a qualified venture capital investor can receive such support.
"If a start-up company plans to make a fixed payment for an employee, when concluding an employment contract, it informs the applicant in writing that the employer is a start-up company, that a fixed payment is made for the employee and that the employee of the start-up company is obliged to make additional mandatory contributions to the state pension for insurance or contributions to a private voluntary pension scheme. This information is included in the employment contract," said S. Nesinova.
She emphasized that innovation is a prerequisite for receiving support, but it does not necessarily have to be technological innovation.
According to the data collected by the Investment and Development Agency of Latvia, the recipients of "salary tax rebates" are mostly IT service companies (45%) and then companies whose field is the production of irradiation, electromedical and electrotherapy equipment, the construction of recreational and sports boats, the development of construction projects, production of electric motors, generators and transformers, production of agricultural animal feed, metal surface treatment and coating, conducting research and experimental developments in biotechnology and production of communication equipment.
As an example of such support, she mentioned a company that employs 20 employees, where the gross salary for 10 employees is EUR 2,000 and for 10 employees - EUR 3,000. For such a company, the annual salary tax credit is EUR 176,995. %, which can be directed to the development of the company's innovations," said S. Nesinova.
At the same time, she also pointed out the nuances that should be taken into account within the scope of tax support: "At least 10% of pension contributions are made through the company. The employee informs the employer of his choice to make either additional mandatory contributions to the state pension insurance or contributions to the private voluntary pension scheme. And if the employee's calculated income exceeds EUR 78,100 per year, the solidarity tax is calculated."
Lilita Beķere, head of the accounting outsourcing service providers committee of the Accountants Association of the Republic of Latvia, Ilmārs Šņucins, deputy state secretary of the Ministry of Finance for tax, customs and accounting issues, certified accountant, lecturer of tax and accounting courses at the Latvian University of Biosciences and Technologies, also participated in the business conference "ACCOUNTING AND TAXATION 2024". , outsourced accountant Aļona Irmeja, partner in business development of "Orients Audit & Finance", member of the Latvian Association of Tax Consultants Jekaterina Novicka, member of the board of the Association of Accountants of the Republic of Latvia Ilze Palmbaha, accounting and tax expert, consultant, head of the Latvian Accounting Club Jadviga Neilande, accounting and labor legislation expert, lecturer, manager of SIA BRUTO 7, guest lecturer of Alberta College Līga Alberliņa, accounting and tax expert, head of training center Inga Pumpure, Latvian Rural Consulting and Education Center accounting expert Linda Puriņa.
She pointed out that there are several state support options for payroll taxes for companies that develop an innovative product or improve an existing one, using innovative technologies and approaches, the purpose of which is to promote the formation of start-ups in Latvia, to promote research, as well as the use of innovative ideas, products or processes in economic activity.
Currently, payroll tax credits (IIN and VSAOI) are available for companies, if the company or its parent company has no tax debts above EUR 150 and the insolvency process has not been declared. Innovative companies or companies with a qualified venture capital investor can receive such support.
"If a start-up company plans to make a fixed payment for an employee, when concluding an employment contract, it informs the applicant in writing that the employer is a start-up company, that a fixed payment is made for the employee and that the employee of the start-up company is obliged to make additional mandatory contributions to the state pension for insurance or contributions to a private voluntary pension scheme. This information is included in the employment contract," said S. Nesinova.
She emphasized that innovation is a prerequisite for receiving support, but it does not necessarily have to be technological innovation.
According to the data collected by the Investment and Development Agency of Latvia, the recipients of "salary tax rebates" are mostly IT service companies (45%) and then companies whose field is the production of irradiation, electromedical and electrotherapy equipment, the construction of recreational and sports boats, the development of construction projects, production of electric motors, generators and transformers, production of agricultural animal feed, metal surface treatment and coating, conducting research and experimental developments in biotechnology and production of communication equipment.
As an example of such support, she mentioned a company that employs 20 employees, where the gross salary for 10 employees is EUR 2,000 and for 10 employees - EUR 3,000. For such a company, the annual salary tax credit is EUR 176,995. %, which can be directed to the development of the company's innovations," said S. Nesinova.
At the same time, she also pointed out the nuances that should be taken into account within the scope of tax support: "At least 10% of pension contributions are made through the company. The employee informs the employer of his choice to make either additional mandatory contributions to the state pension insurance or contributions to the private voluntary pension scheme. And if the employee's calculated income exceeds EUR 78,100 per year, the solidarity tax is calculated."
Lilita Beķere, head of the accounting outsourcing service providers committee of the Accountants Association of the Republic of Latvia, Ilmārs Šņucins, deputy state secretary of the Ministry of Finance for tax, customs and accounting issues, certified accountant, lecturer of tax and accounting courses at the Latvian University of Biosciences and Technologies, also participated in the business conference "ACCOUNTING AND TAXATION 2024". , outsourced accountant Aļona Irmeja, partner in business development of "Orients Audit & Finance", member of the Latvian Association of Tax Consultants Jekaterina Novicka, member of the board of the Association of Accountants of the Republic of Latvia Ilze Palmbaha, accounting and tax expert, consultant, head of the Latvian Accounting Club Jadviga Neilande, accounting and labor legislation expert, lecturer, manager of SIA BRUTO 7, guest lecturer of Alberta College Līga Alberliņa, accounting and tax expert, head of training center Inga Pumpure, Latvian Rural Consulting and Education Center accounting expert Linda Puriņa.