Latvian Tax Laws and Regulations
Latvian Tax Laws
Latvia enjoys access to huge markets in Western Europe, Scandinavia, and the Baltic States. It is a growing hub for businesses and start-ups, and encourages social entrepreneurship, as well as sustainable social development. However, if there is one aspect that counteracts your business goals it will tax penalties but filling in wage returns and calculating the correct wage taxes can be comprehensive.
Overview of Taxes in Latvia
- Individual Income Tax: 20-34.1% (Progressive)
- VAT: 21%
- Corporate Income Tax (only on capital interests): 20%
- Employer Social Security Contributions: 34.09% (23.59 – employer; 10.5 – employee)
Latvia Individual Tax – Single, Married
Any individual earning an income must pay local taxes in Latvia, regardless of their residential status. Permanent residents are taxed on their worldwide income, whilst foreign nationals living and working in Latvia are only taxed on the income they receive in Latvia.
Individuals are subject to pay Income Tax. Income tax can be withheld by the employers and paid to the State Revenue Services monthly or paid by the individual in certain cases.
Income Tax in Latvia is progressive, depending on one’s annual income. It starts at 20%, with a maximum of 31%.
Income (EUR) Percentage
- Up to 20,004: 20%
- 20,004 – 62,800: 23%
- Over 62,800: 31.4%
Besides income tax, individuals in Latvia are also subject to pay for social security, which amounts to about 11% of their income. Earnings from capital such as interest, gains and dividends and royalties are subject to income tax at 20%. Non-residents attract a fixed income tax rate of 23%.
Income Tax should be withheld from an employee’s salary and paid by employers monthly, so the individual is not obliged to file an annual tax return. If they have received income outside of employment, an individual must file an annual tax return between 1 March and 1 June of the following year.
If the annual tax return exceeds the personal income tax threshold, the due dates range from 1 April to 1 July.
Capital gains of an individual must also be reported by the 15th of the following month if they exceed EUR 1000 in a quarter. If not, the report must be submitted by the 15th of January of the following year.
Filling tax returns can be done in person at the nearest State Revenue Service office, but it is generally done online via Electronic Declaration System (EDS). For tax-filing in Latvia, it is mandatory for a taxpayer to obtain a personal identification code (PIC).
Non-residents are subject to income tax from income earned through a permanent base in Latvia, as well as other income derived in Latvia, such as:
- Employment income.
- Income from profits, dividends, shares, etc.
- Royalties, including copyright and auxiliary rights.
- Rent received from real estate in Latvia.
- Income on sales of immovable property and movable property that is subject to mandatory registration in Latvia.
Non-Latvian tax residents are required to file their personal income tax return to the tax authority monthly, by the 15th of the following month. Capital gains earned by foreign taxpayers must submit a capital gains declaration by the 15th of the following month (unless tax is deducted at the time of payment.