According to the Latvian State Revenue Service, the Latvian government last year repaid LVL 6.1 million to residents who saved up funds, but 40% of those who have done so did not have any opportunity to receive tax relief – this according to information that has been collected by the Citadele Bank.
61,581 taxpayers submitted tax declarations in 2010 to receive reimbursement of part of their individual income tax payments, because they had deposited funds in private pension funds, accumulating life insurance policies, as well as investment funds, the State Revenue Service says. Residents declared contributions of LVL 24.5 million last year to receive tax relief, and that is what led the state to repay LVL 6.1 million to them.
A survey of Citadele clients shows that 60% of those who saved up money took advantage of the opportunity to receive the reimbursement in this regard.
“The results of the survey show that the opportunity to receive a tax reimbursement and the need to care for one’s family is the main reason why people are saving up funds,” says Jolanta Jērāne, board chairwoman of the Citadele Open Pension Fund and Citadele Life. “We surveyed these clients and found that most of them take advantage of the opportunity to receive a tax reimbursement. Clients also welcome the fact that they only have to deposit comparatively small sums of money in this regard.”
The number of taxpayers declined by 12.6% between 2010 and 2011, while the sum declared in relation to contributions to private pension funds, life insurance policies and investment funds has increased by 3.1%.
Section 10 of the law on the individual income tax says that contributions paid in by individuals to life insurance policies and private pension funds are seen as justified expenditures. That means that the individual can receive a 25% tax break on contributions, but only at a level that does not exceed 10% of the person’s gross annual income. Full tax relief can be received by making those contributions, and that means that the total amount of deposits to which the 25% tax break will be given will amount to 20% of the individual’s gross annual income. That applies to all contributions, donations and gifts. Jolanta Jērāne says that very few people are aware of the opportunity to receive the tax reimbursement, and that means that very few take advantage of it.
About Citadele Bank
Citadele is a local Latvian bank which offers banking, financial and asset management services. Citadele group is represented in the Latvian market as well as in 10 other countries. Citadele Bank is the only collaboration partner of American Express in Latvia and Lithuania who is entitled to issue American Express credit cards. In 2012 the bank was recognized as the best governed state-owned enterprise in the Baltic States according to a study conducted by the Baltic Institute of Corporate Governance. Citadele’s vision is to become the most valuable local financial group in the Baltic States. 75% minus one Citadele Bank’s shares are possessed by the State Joint Stock Company Privatization agency on behalf of the Latvian State and the owner of 25% plus one share is the European Bank for Reconstruction and Development (EBRD).