Taxation of incomes gained from deposits does comply with the Satversme
The Constitutional Court has adopted a judgment in the case No. 2010-25-01 “On Compliance of Section 6 of the Law “Amendments to the Law on Personal Income Tax” of 1 December 2009 (Provision Envisaging Crossing out of Section 9 (1) (3) of the Law “On Personal Income Tax” and Section 8 (3) (13) and Section 16.1 (9) of the Law “On Personal Income Tax” with Article 1 and Article 105 of the Satversme of the Republic of Latvia”
Two cases initiated having regarding to applications of Mārtiņš Trautmanis and Mārtiņš Draudiņš were merged into the particular case. The applicants indicated that the contested norms infringe their property right and they do not comply with the principle of legitimate expectations because it provides that personal income tax shall be imposed on incomes gained from deposits disregarding the fact that the deposits were made before adoption of the contested norms. The contested norms came into effect on 1 January 2010, whilst previously such incomes were not taxed.
The Constitutional Court concluded that personal income tax is imposed on incomes gained from deposits rather than on deposits as such. The Court indicated that the general principle of the Law envisages that incomes of persons are imposed the same tax that is effective at the time of gaining incomes. Consequently, incomes of a person from a paid labour are imposed personal income tax that is effective upon the date of disbursing the wage rather than the one that is in force at the date of concluding a labour agreement.
The Court took into consideration the fact that the regulatory framework effective before 2010 established a particularly beneficial circumstances for incomes from interest if compared to other kinds of incomes (like, labour wage). The Court concluded that persons had to count with the fact that in case if economical situation of the State deteriorates, tax rates and tax reliefs may change.
Consequently, the Constitutional Court recognized the contested norms as compliant with Article 1 and Article 105 of the Satversme.
The judgment of the Constitutional Court is final and not subject to appeal. The Judgment shall come into force upon the date of publishing it in the newspaper “Latvijas Vēstnesis”.
Linked case: 2010-25-01