Amendments to regulatory acts regarding the implementation of partnership from July 1, 2024, what awaits us?

On November 9, 2023, the Saeima adopted the regulation of cohabitation of unmarried couples and conceptually supported amendments to several laws that provide for the introduction of a partnership institute in Latvia – this will be a new way to legally strengthen the relationship of two adults, including same-sex couples, and provide them with a certain social and economic protection. When cohabiting or establishing a joint farm, close personal relationships based on mutual responsibility, care for each other, loyalty, understanding and respect can be formed between two adults, express the authors of the draft law, emphasizing that the basic law of our country – the Constitution – requires ensuring this legal, economic and social protection of relations.

Subsequently, from July 1, 2024, amendments to the Notary Law will enter into force, introducing the partnership regulation, which will allow unmarried (including same-sex) couples to legally strengthen their relationships and provide them with social and economic protection.

The amendments to the Notary Law provide that two adult persons will be able to enter into a partnership before a sworn notary, certifying that they have developed close personal relationships, have a joint household, and have the intention to take care, as well as provide and support each other. Both persons who have decided to enter into a partnership must appear at the notary in person. Persons, who have not registered marriage, are not relatives in a direct line and have no brothers, sisters, half-brothers, or half-sisters can enter into the partnership. Partnership is not the same as marriage. Amendments to the Law on the Register of Natural Persons provide that information on the establishment of a partnership is entered in this register, which means that these persons are recognized as partners in the eyes of the state. Therefore, the state and municipal authorities will be able to identify persons who registered and terminated the partnership. But it must be understood that Partnership will be a separate model of cohabitation relations, which will not be compatible with the concept of marriage.

The partnership will be officially terminated upon the occurrence of the following factual circumstances, that is, with the death of a person, if the court declares one of the persons to be dead, with the marriage of one or both persons, with the expression of the will of both persons to a notary public, or with a court judgment. The notary will include this information about the registration or termination of the partnership in the Register of Natural Persons.

Amendments will also enter into force in several laws, but in this article, we will focus on amendments to laws that apply to the application of taxes and related issues, that is, amendments to the Law “On Personal Income Tax” (IIN) and the Law “On State Social Insurance”, which provides several reliefs for persons who have entered into partnerships.

Those who have registered a partnership (with a notary) are subject to the following exemptions set by the IIN:

  • A loan granted by a merchant to an individual or his partner to cover medical or educational expenses shall not be treated as income. The condition is that such a loan must be received in the form of non-cash payments and its correct use must be justified by the loan recipient with justification documents.
  • A loan received from the other partner will not be considered a partner’s income either. Also, information about such a loan does not need to be declared to the SRS.
  • Gifts given to a natural person by a person with whom it is bound by a partnership will not be subject to IIN, except if the gift is given within the scope of economic activity, or if the gift is like compensation.
  • Supplementary pension capital formed from contributions made by the individual or partner to private pension funds by licensed pension plans and paid to their members will also be considered non-taxable income.
  • For the alienation of the real estate left in the partner’s inheritance, IIN will not be paid even if it meets the conditions of the law regarding the sole property or the property previously owned for a certain period and indicated as the declared place of residence. It must be considered to be in the partner’s possession from the day the relevant property is registered in the land register as the property of the bequeather, or the property of the other partner. The advantage that the partner will be able to quickly sell the property owned by the other partner (bequeather) for more than 60 months and for at least 12 consecutive months (in the said 60-month period) until the day of signing the expropriation agreement, is the Partner’s declared place of residence (which is not declared as an additional address); or who has been the Partner’s sole owner for 60 months up to the date of expropriation.
  • An exemption from VAT may be applied for the sale of agricultural land donated by a partner.
  • Partners will have the right to include in the annual income declaration and receive a VAT refund from the expenses for raising the partner’s qualifications, obtaining a specialty, obtaining an education, using medical services and paying health insurance premiums. Eligible expenses may also include medical and educational expenses paid by the partner.
  • Tax relief may apply for a dependent partner who is not working and is recognized as a person with a disability. In addition, relief is provided for a non-working partner who is dependent on a minor child recognized as a disabled person, or a child under the age of three, or three or more children under the age of 18 or under the age of 24, of whom at least one is younger than for seven years, while the child continues to obtain general, professional, higher or special education.

Therefore, it can be concluded that if the persons have registered their partnership in the Register of Natural Persons, then all the same norms of the IIN Law will apply to these persons as to those registered by marriage, or relatives up to the third degree in the sense of the Civil Law – parents, children, grandchildren, grandparents, brothers, sisters, great-grandchildren, grandparents, children of brothers and sisters.

With the amendments to the Law “On State Social Insurance”, the partner of a person registered in the Register of Natural Persons has the rights specified by the law.

It is intended that persons whose partner performs diplomatic and consular service abroad and who stay in the relevant foreign country as the partner of a person performing diplomatic and consular service will also be subject to mandatory social insurance, including pension insurance and unemployment insurance; persons who are in the relevant foreign country in the status of a partner of a soldier on duty, except for the case when the soldier participates in an international operation, military exercises, maneuvers or is on a business trip; persons staying in the relevant foreign country as a partner of a Euro just representative or liaison officer.

A person who has a partnership with a person who has been granted a social insurance service, a state social benefit, or a retirement pension is entitled to receive support in certain life situations, for example in the event of a person’s death. In addition, the self-employed partner will be able to voluntarily join pension insurance, disability insurance, maternity and sickness insurance, and parental insurance.

The partner will also have social guarantees, such as receiving the pension calculated for the other person, which has not been paid until his death, and receiving a benefit due to the death of the pensioner.

In addition, deviating from tax issues, we will briefly outline amendments to other laws, such as amendments to the Patient Rights Act, which will provide for the right of the partner to receive information and make decisions related to the treatment of the other partner, the treatment method to be used or the refusal of it.

Amendments to the Insolvency Law will stipulate that the administrator cannot undertake and perform the duties of an insolvency administrator in the specific insolvency process if the administrator performs activities related to the administrator’s duties in the insolvency process of a legal entity or in the insolvency process of a natural person, which could involve persons with personal or financial interests with whom the administrator has a partnership, as well as in relation to a creditor or debtor whose participant, shareholder, member, member of the supervisory, control or executive body is a person with whom the administrator has a partnership, likewise, the insolvency administrator will not be able to perform his duties in cases where the administrator’s partner has a personal or material interest in them.

With the amendments to the law “On prevention of conflict of interest in the activities of state officials”, it is established that the official’s partner will be subject to the same restrictions as are currently imposed on the official’s relatives. The partnership will need to be listed in the public official’s declaration.

If reading the article raises additional questions, please contact the INNOVATOR team via the contact form.

©INNOVATOR 16.02.2024.

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