Latvia's Budget and Finance Committee has backed proposed amendments to the country's personal income tax legislation that would clarify the tax treatment of cashback, while maintaining different rules for gambling and lottery operators.
The committee gave its conceptual support to the amendments on 22 September as part of a wider effort to simplify tax administration and update personal income tax rules.
Under the proposal, cashback received through customer loyalty programmes would generally not be treated as taxable income when it is unrelated to economic activity. This would include money returned to consumers following purchases made using bank payment cards.
However, cashback or refunds provided by gambling and lottery operators would not qualify for the exemption, maintaining separate tax treatment for payments connected to those activities.
The legislation includes several other changes unrelated to gambling. It would broaden exemptions for gifts between certain family members and simplify the tax treatment of utility and similar payments collected on behalf of third parties by some economic activity providers.
Tax-free compensation limits for volunteers and certain personnel of religious organisations would also rise from €1,000 (US$1,142) to €3,000 annually.
The proposal comes during a wider period of change for Latvia's gambling regulatory and tax framework.
Earlier this year, the Gambling and Lottery Supervision Inspection was incorporated into the State Revenue Service, consolidating gambling supervision and tax administration within the same authority. Licensing, compliance and legal matters are now handled alongside dedicated inspection functions within the revenue service.
Latvia also raised several gambling taxes at the beginning of the year. The general gambling tax increased from 15% to 18%, while the rate applied to interactive gambling revenue rose from 12% to 15%.
The proposed personal income tax amendments will require approval in three readings by the Saeima before becoming law.
Latvia increased its interactive gambling tax rate from 12% to 15% earlier this year
