I am a Micro-Enterprise Taxpayer

 Published: 28.12.2020. 12.02

On December 11, significant changes to the Micro-Enterprise Tax Law were adopted, which will affect Micro-Enterprise Taxpayers (MET) as of 2021.

To allow entrepreneurs to become acquainted with the changes and decide on future activities, SRS has extended the deadline by which a MET must notify the SRS whether it will to continue operate as a MET in 2021, or not.

You can apply to discontinue your MET status until 20 January 2021 by submitting an application in the Electronic Declaration System (EDS).

A micro-enterprise is an individual merchant, individual enterprise, farmer or fish famer, or a private individual registered with SRS as a MET (if not registered as a VAT payer).

As of 1 January 2021, METs will no longer have limited liability company (SIA) status and those who are currently registered as such will lose their MET status and become corporate income tax payers.

  • What are the micro-enterprise tax rates?
      • annual turnover under EUR 25 000 - 25%
      • annual turnover over EUR 25 000 - 40%

      If the MET was registered in the 2nd quarter or later of 2020, the turnover rate of 25% will be reduced proportionally in 2021:

      • registered in the 2nd quarter: under EUR 18 750 - 25%; over EUR 18 750 - 40%
      • registered in the 3rd quarter: under EUR 12 500 - 25%, over EUR 12 500 - 40%
      • registered in the 4th quarter: under EUR 6250 - 25%, over EUR 6250 - 40%
  • What is the procedure for employing people in a micro-enterprise?
    • Persons who are registered as employees of a MET at the end of 2020 may continue to work in this status until 30 June 2021. After 1 July 2021, all employee income is subject to labour taxes, i.e., PIT and mandatory state social insurance contributions (SSIMC) as follows:

      • PIT 20%-23% on monthly income under EUR 1667
      • PIT 23% on monthly income exceeding EUR 1667
      • SSIMC 34.09% in the general case (23.49% - employer share, 10.50% - employee share);

      There will also be a state fee for business risk – EUR 0.36 per month.

      ! Please note - If you hire an employee after 1 January 2021, payroll tax and SSIMV must be paid immediately.

      ! Please note - Existing METs with SIA status may continue to operate in this status in 2021. However, as of 1 January 2022, the SIA will lose its MET status and will automatically become a corporate income tax payer.

  • What is the maximum turnover for METs?
    • As of 1 January 2021, turnover restrictions will change for METs.

      If a MET becomes or is required to become a registered VAT payer in accordance with the Value Added Tax Law, it loses its MET status in the next taxation year.

      Information on registration in the VAT register is available here.

  • How do I declare and make MET payments?
    • METs pay tax four times a year for turnover in each quarter.

      A MET must submit a quarterly micro-enterprise tax return by the fifteenth day of the month following the quarter, indicating the quarterly turnover by months and the calculated tax.

      The quarterly MET tax return must be submitted for the reporting quarter in which the MET has had turnover (even if turnover occurred only in one or two months of the reporting quarter).

      The MET must pay the MET tax to the State by the 23rd day of the month following the quarter.

  • What are the restrictions for METs?
    • If an individual is the owner of a farm or fishery and also an individual entrepreneur or a performer of economic activity registered with SRS, MET tax can be paid by only one of these types of business (e.g., tax can be paid either as a farmer or an individual entrepreneur, but not both).

      The MET tax can be applied only to one person - the owner of the micro-enterprise.

      A MET that has chosen to pay the MET tax cannot simultaneously pay personal income tax or the reduced patent fee for economic activity. This does not apply to a MET, a lessor of real estate, who exercises the right not to register a business by notifying SRS that a 10% tax rate applies to rental income (Law on Personal Income Tax).

      A MET who has ceased economic activity and payment of the tax during a taxation period cannot decide to choose to pay the MET tax in that same taxation period or in the following taxation period or for another year thereafter.

      A VAT payer may not become a MET.