RIGA, Jan 1 (LETA) - This year amendments to the Personal Income Tax Law come into force, which provide for a fixed non-taxable minimum income and an increase in the personal income tax rate.

The Finance Ministry has explained that the law is aimed at increasing the competitiveness of the labor force and reducing the tax burden on low- and medium-income earners, as well as simplifying the application of the personal income tax.

Together, all these changes will result in a loss of EUR 191.1 million for the state and local budgets in 2025, EUR 254 million in 2026, EUR 287.5 million in 2027 and EUR 293.2 million in 2028.

The changes will reduce the amount of tax payable by workers with gross earnings of up to EUR 4,000 per month, and therefore increase net earnings, the ministry noted. The planned changes in labor taxes will have a positive impact on 95 percent of workers.

According to the ministry, the overall changes will also affect all types of pension beneficiaries - about 46.2 percent of all types of pension beneficiaries will be positively affected.

A fixed non-taxable minimum income for all salaries of EUR 510 per month will be introduced from 2025, rising to EUR 550 from 2026 and to EUR 570 in 2027. For pensioners, the tax-free minimum is to rise from EUR 500 to EUR 1,000 per month next year.

The minimum wage will rise from EUR 700 to EUR 740 a month in 2025, to EUR 780 a month in 2026, EUR 820 a month from 2027 and to EUR 860 a month from 2028.

To balance the tax-free minimum income with the personal income tax rates and to simplify the labor tax system, a personal income tax rate of 25.5 percent will be applied to income up to EUR 105,300 per year or EUR 8,775 per month. For incomes over EUR 8,775 per month, the solidarity levy of 33 percent will be maintained. As the amount of the non-taxable minimum will remain unchanged regardless of the size of the salary, people will have more money "on hand" despite the fact that the personal income tax rate will increase from 20 percent and 23 percent currently to 25.5 percent, explained the Finance Ministry.