Voluntary submission of the annual income declaration: repayment of tax overpayment, eligible expenditure for education and therapeutic services
There are cases where it is not mandatory for the taxpayer to submit the annual income declaration, but it is in his or her interests to submit the declaration in order to receive the overpaid tax.
In which cases is it in the taxpayer’s interests to submit the annual income declaration?
The taxpayer has the right to submit the declaration and receive a tax overpayment from the State budget in the following cases:
- If, during the taxation year, the whole of the annual non-taxable minimum specified in Section 12 of the Law on Personal Income Tax or all of the reliefs specified in Section 13 for dependent persons, or an additional relief for disabled or politically repressed persons or members of the national resistance movement has not been applied.
- If, during the taxation year, he or she has had the following, as provided for in Section 10:
- eligible expenditure for education and therapeutic services and health insurance payments to insurance companies established and operated in accordance with the Law on Insurance Companies and Supervision Thereof;
- donations and gifts;
- payments into private pension funds;
- insurance premium payments pursuant to a life insurance contract (with savings of funds);
- purchase costs of investment certificates of investment funds, if such certificates have been in the taxpayer’s ownership for at least 60 months.
It should be noted that, when declaring the eligible expenditure for education and therapeutic services and health insurance payments and completing the 2014 income declaration, the applicable rate of eligible expenditure is EUR 213,43.
Example 1: The natural person was not employed from January to June, but started employment as from 1 July. At his or her place of employment a non-taxable minimum for 6 months is applied (EUR 450 for the period from July to December). Submission of the annual income declaration and application of the full annual non-taxable income (EUR 900) results in a tax overpayment in the amount of 24 % of EUR 450 (900-450) = EUR 108. This overpaid amount can be recovered from the State budget.
Example 2: Within the year, the natural person had a child in his or her dependence, but no entry has been made in the payroll tax booklet regarding granting a relief; hence, no relief for a dependent person was applied at the place of employment. Submission of the annual income declaration and application of a relief for a dependent person (EUR 1980) results in a tax overpayment in the amount of 24 % of EUR 1980 = EUR 475,20. This overpaid amount can be recovered from the State budget.
Example 3: Within the year, the natural person acquired a health card for EUR 170 and paid EUR 40 for therapeutic services and EUR 110 for dental services. By submitting the annual income declaration reflecting the eligible expenditure justified by supporting documents, 24 % of (EUR (170 + 40) + EUR 110) = EUR 76.80 can be recovered from the State budget.
Example 4: The natural person whose annual non-taxable income exceeds EUR 3415 has made payments into a private pension fund amounting to EUR 30 per month during the year. By submitting the annual income declaration which reflects the payments made into the private pension fund, 24 % of EUR 30 x 12 = EUR 86.40 can be recovered from the State budget.
Where should the declaration be submitted?
The annual income tax declaration together with the appended documents justifying the eligible expenditure should be submitted to a SRS customer service centre.
The annual income declaration may also be submitted by using the SRS’s electronic declaration system, i.e. electronically with an electronic signature. The documents (copies thereof) to be appended to the annual income declaration are to be sent electronically by adding them in the form of files as photographs (by previously photographing the supporting documents and uploading them to a computer), or as scanned documents, or submitted personally at a SRS customer service centre, or sent by post.
In order to ensure a more convenient and simple electronic submission of the annual income declaration by using the EDS, the SRS has developed a new annual income declaration form where the taxpayer’s information at the SRS’s disposal will be generated automatically. The new electronic annual income declaration form in the EDS will be a substantial time-saver for taxpayers, since it will generate automatically the data regarding the taxpayer's income, non-taxable income, information from credit institutions regarding payments to pension funds, information from insurance companies regarding payments for life insurance services, as well as eligible expenses for education and therapeutic services carried over from the previous years.
In order to help the taxpayer to understand which columns and annexes to the annual income declaration must be completed, the new electronic annual income declaration form has an integrated wizard or help: Prior to the completion of the declaration the system will ask the user to answer several questions, and, on the basis of the answers provided, the user will be offered to complete only those annexes and columns of the annual income declaration which refer to him or her.
Declaration form and its completion
The annual income declaration form consists of Declaration D and its eight annexes:
- Annex D1 “Income in the Republic of Latvia during the taxation year”;
- Annex D11 “Income during the taxation year subject to a reduced tax rate”;
- Annex D2 “Income of a natural person (resident) abroad”;
- Annex D21 “Income of a natural person (seafarer) employed (is in employment relations) on an international transportation ship”;
- Annex D3 “Income from economic activity”;
- Annex D31 “Income from economic activity if the taxpayer keeps accounts according to the double entry system”;
- Annex D4 “Eligible expenditure for education and therapeutic services”;
- Annex D5 “Declaration of income from economic activity for a taxpayer who pays the fixed income tax”.
If the taxpayer has been in paid employment and he or she has had eligible expenditure for education or therapeutic services, rows 06 and/or 07 of Declaration D, as well as Declaration D4 must be completed.
The payer must complete Declaration D and the annexes which refer to him or her. It should be noted that a separate annex form to Declaration D4 must be completed for the taxpayer and each family member.
What documents must be submitted and where in order to receive the overpaid personal income tax?
In order to receive a repayment for eligible expenditure, supporting documents and the annual income declaration must be submitted at a customer service centre of the SRS (see “Contacts” section).
The overpaid personal income tax (eligible expenditure) may be justified by the following supporting documents:
- a cashier`s check, if the payment was made in cash, using a payment card or other proof of payment, and if the cashier’s check specifies, in addition to the mandatory details to be included, the name, surname and personal identity number of the natural person or his or her family member;
- a cashier`s check and a receipt prepared in addition to the cashier’s check, if the name, surname and personal identity number of the natural person or his or her family member is not specified in the cashier’s check. The receipt prepared in addition to the cashier’s check must specify all the mandatory details to be included in a supporting document, as well as the number and date of the cashier’s check and the name, surname and personal identity number of the natural person or his or her family member;
- a numbered receipt which has been registered in the SRS, if the service payment was made in cash and the service provider can prove the payment received with a numbered receipt registered in the SRS (for example, an insurance intermediary who has received a payment for services provided at a permanent place of activity [structural unit]);
- a cash income order, if the service payment was made in cash at an institution which is able to prove the payment received for the service by a cash income order (for example, insurance companies for the services provided);
- an approved payment order or account statement, if the service payment was made by a bank transfer (for example, by using Internet banking services) or by paying a cash amount to the service provider’s (for example, education or medical treatment institution’s) account opened with a credit institution. In this case, the approved payment order or account statement must specify the name, surname and personal identity number of the natural person or his or her family member.
The payer who wants to receive a tax repayment should note that, if necessary for the purposes of establishing the justification of the tax repayment, officers of the SRS are entitled to request other supporting documents (for example, contracts concluded, invoices received, statements, etc.) in addition to those already submitted.
When declaring payments made into a private pension fund or insurance premium payments, it is not necessary to submit supporting documents for the above-mentioned payments or to submit the statement regarding the life insurance contract (with savings of funds) concluded by the natural person and insurance payments made pursuant thereto, if the private pension fund or the insurance company has concluded a contract with the SRS for sending information in electronic form and has sent the necessary information.
The annual income declaration is prepared on the basis of:
- statement on payroll tax (to be issued by the employer or income payer);
- statement on sickness benefits in accordance with Sick-Leave Certificate B (to be issued by the State Social Insurance Agency);
- statement on pension (to be issued by the State Social Insurance Agency).
A repayment of personal income tax for eligible expenditure may be received if the resident has been employed and has paid the personal income tax.