The Farmers' Parliament calls for farmers' subsidies not to be taxed

On Wednesday, February 3, the Saeima Budget and Finance (Tax) Committee will consider amendments to the law “On Corporate Income Tax” jointly submitted by the association “Farmers’ Saeima” (ZSA) and MP Edgars Putra. The submitted proposal provides that until 2020 (inclusive), income subject to corporate income tax (CIT) may be reduced in relation to amounts paid in the form of subsidies such as state support for agriculture or European Union support for agriculture and rural development.

The ZSA believes that the amendments are only natural, as Latvian farmers have been receiving the lowest direct payments in the entire EU for several years, which reduces the competitiveness of Latvian farmers among farmers in other EU countries. Further non-taxation of subsidies for CIT payers would be a real step towards promoting the development of Latvian agriculture.

"Every euro that a farmer can invest in the development of his farm is important. In order to reach the level of agriculture in other European countries, Latvian rural entrepreneurs need to use every opportunity to make farms more competitive, more innovative and more environmentally friendly. Both our dairy industry, which has the lowest prices in the entire EU, and grain farming, where market prices have fallen to their lowest level in the last three years, are currently facing serious problems. We hope for the understanding of the Saeima members so that farmers who are CIT payers, similar to current PIT payers, will not be taxed on subsidies," This is how ZSA Chairman Juris Lazdiņš comments on the situation.

Saeima Member Edgars Putra believes that the amendments would promote the development of agriculture: "At the end of last year, a similar decision was already made in the Saeima – not to tax subsidies received by personal income tax (PIT) payers. In my opinion, what has been started should be continued and the norm should also be applied to CIT payers. The area payments received by Latvian farmers, both now and by 2020, will not be at the level of either the EU or the other Baltic countries. Taxing farmers' support – subsidies – will further burden farmers who are already in difficulties."

We remind you that at the end of last year, the Saeima supported the amendments to the Law "On Personal Income Tax" prepared and submitted by ZSA and E. Putra, in which we called for determining that subsidies for those farmers who are PIT payers would not be taxed until 2019.

For information:
The average European Union level of area payments per hectare is currently approximately 256,- EUR/ha, but Latvian farmers currently receive approximately 88,- EUR/ha. In 2020, in the best case scenario, this amount in Latvia could reach approximately 132,- EUR/ha, thus not even reaching the average European Union level. Also, transitional state support in agriculture will decrease already in 2016 and in the following years. If in 2015 it amounted to 51 million EUR, then in 2016 it is 26 million EUR, but in 2017 it is only 1.5 million EUR.