If you plan to do business in Latvia, we offer you to acquaint with major taxes and tax rates, which must be paid in this country.

1. Micro-enterprise Tax

The micro-enterprise tax rate is 9% from the turnover of a micro-enterprise, if the micro-enterprise complies with the criteria required for it. If the micro-enterprise does not comply with the criteria required for it, it pays the micro-enterprise tax at a higher rate:

1) two percentage points for each additional employed employee are added to the 9% tax rate, if the number of employees of a micro-enterprise during a quarter is more than five;

2) the rate in the amount of 20% is applied to the exceeded turnover part, if the micro-enterprise turnover exceeds 70000.00 LVL;

3 If the micro-enterprise employee’s income exceeds 500 LVL per month, the additional tax rate in the amount of 20% is applied to the income part which exceeds 500 LVL.

2. Corporate Income Tax

Taxable income of the taxpayer – income received from business activity, from which the costs are deducted, related to business activity. The tax rate is 15 % of taxable income; 2–15 % for non-residents.

3. Personal Income Tax

Tax rate – 24 % (including income from business activity);

Tax rate – 10 % for capital income, which is not increase of capital;

Tax rate – 15 % for increase of capital.

1) income derived from employment relations;

2) income from business activity,

3) other income, accordingly to Art. 3 of the Latvian „Law on Personal Income Tax”.

4. National Insurance

Mandatory contribution rate is:

Tax rate – 35.09%, if the employer is insured for all types of social insurance, of which pay:

Tax rate – 24.09% – employer,

Tax rate – 11% – employee.

Tax rate – 30.13% for individuals who are entitled to a retirement pension, of which pay:

20.68% – employer,

9.45% – employee.

5. Value Added Tax

Tax rate – 21%

Taxation period is one calendar month, if the value of taxable transactions in pre-taxation year or during the tax year exceeds 35000.00 LVL

There are different tax rates for different categories of goods – see the Latvian „Law on Value Added Tax” from 29.11.2012.

6. Excise Tax

6.1. The excise tax on alcoholic beverages. Different tax rates – see the Law.

6.2. The excise tax on soft drinks. Different tax rates – see the Law.

6.3. The excise tax on coffee. Tax rate – 100.00 LVL – for 100 kg of coffee.

6.4. The excise tax on tobacco products. Different tax rates – see the Law.

6.5. The excise tax on petroleum products. Different tax rates – see the Law.

6.6. The excise tax on natural gas:

6.6.1. Tax rate – 12.00 LVL for 1000 m3 – for use as fuel.

6.6.2. Tax rate – 70.00 LVL for 1000 m3 – for use as petrol.

7. Real Estate Tax

Tax rate – 1.5 % of the cadastral value of the property:

1) land;

2) buildings or their parts, except buildings and their parts, referred in Article 3, paragraph 2 of the first part of the Law;

3) the engineering constructions.

Tax rate is 0.2 % of the cadastral value not exceeding 40000.00 LVL; for domestic buildings, regardless of whether they are divided on the apartment property or no.

Tax rate is 0.4 % of the cadastral value exceeding 40000.00 LVL, but not exceeding 75000.00 LVL; for parts of domestic buildings.

Tax rate is 0.6 % of the cadastral value exceeding 75000.00 LVL.

As well as a group of rooms, functional use of which is related with accommodations (garages, parking lots, basements, warehouses and household premises), if they are not used for business activity.

Interest rate of the real estate tax in the amount of 1,5% of the cadastral value of the property is applied for buildings or their parts, except taxable real property facilities mentioned in Article 3, paragraph 2 of the first part and in the part 1.2 of Article 3, utility buildings of domestic buildings and garage owners of cooperative societies, associations of garage owners and physical persons (except the garages for heavy equipment and agricultural machinery), if they are not used for business activity.

Additional rate is 1.5 % of the cadastral value of the property.

It is applied for: undeveloped agricultural land, except in cases when land area does not exceed one hectare or if the statutory acts provide restrictions of agricultural activity for this land.

8. Tax on Cars and Motorcycles

Tax on cars and motorcycles. Different tax rates – see the Law.

9. Tax on Natural Resources

Different tax rates – see the Law.

10. The Lottery and Gambling Tax and Duties.

Different tax rates – see the Law.

11. Electricity Tax

Electricity tax. Tax rate is 0.71 LVL per megawatt/hour since 01.01.2010.

Electricity delivered to the end customer.

Electricity delivered for own consumption.

12. The Vehicle Operation Tax and Company Car Tax

The company car tax is paid in accordance with the engine capacity in the following amount:

12.1. Tax rate – 19.00 LVL per month – under 2000 сm3;

12.2. Tax rate – 30.00 LVL per month – from 2001 to 2500 сm3;

12.3. Tax rate – 40.00 LVL per month – over 2500 сm3

There are many nuances in the taxation of the Republic of Latvia that you need to know in order not to violate the law, as well as not to overpay taxes. Please contact the specialists of Business Consulting Group, who will help you to plan taxes in such a way so that would be the most profitable for your company! 

The external borders between Latvia and other countries of the EU were cancelled after Latvia joined the European Union in 2004; thus guaranteed the free movement of goods within the common market. Customs formalities are abolished between the member states of the EU; it means that customs procedures are not applied while delivering goods from one country of the EU to another one.

At the same time, Latvia`s Russian and Belarusian frontier, as well as airports and railway stations of receiving and delivery of goods are the external border of the EU, where the customs operations, execution and control of freights, vehicles and physical persons are carried out.

Customs procedures in Latvia likewise in other member states of the EU are determined by customs regulations – the EU regulations. National legislation regulates only those areas which are not regulated by the regulations.

The EU customs regime is mainly based on the following documents:

Customs duties and measures of trade policy are applied only to those goods, which are imported from countries, which are not the member states of the EU. Since the amount of customs duties are the same throughout the EU, the importer pays the customs duty in accordance with the amounts determined by the EU regulations.

Other taxes on goods are paid by the importer in accordance with the rates determined by the legislation of the corresponding member state of the EU.

If you are interested in drawing up any documents or consulting related to trade relations with Latvia, please contact our specialists in Business Consulting Group!

We already wrote about the forms of business that exist in the Republic of Latvia. Also, you can use the possibility of preferential taxation and register your activity as a micro-enterprise.

Micro-enterprise may be:

●     individual merchant;

●     individual enterprise, the peasant or fishing farms;

●     physical person, registered in the State Revenue Service as the person conducting the business activity;

●     limited liability company.

The following criteria must be complying in order to be eligible to choose a tax on a micro-enterprise:

●     income of economic activity or turnover in a calendar year does not exceed 100 000 EUR;

●     only physical persons may be participants of a limited liability company;

●     board members of a limited liability company may be employees of only a micro-enterprise;

●     the number of employees may not exceed five at any moment (the number of employees does not include absent or dismissed employees);

●     employee’s income does not exceed 720 EUR per month.

Micro-enterprise tax is a single tax payment which includes the following taxes:

●     mandatory state social insurance contributions, personal income tax, business risk state fee both for business and employees of a micro-enterprise;

●     corporate income tax, if the micro-enterprise meets the criteria of the payer of corporate income tax;

●     personal income tax of the micro-enterprise owner of the income part of the micro-enterprise economic activity.

The micro-enterprise taxpayer calculates and pays micro-enterprise tax, but does not separately calculates and pays personal income tax, corporate income tax, the risk fee to the budget, as well as does not pay mandatory contributions.

Registration of micro-enterprise taxpayers

The status of a micro-enterprise taxpayer can be got:

●     along with registering the company in the Register of Enterprises by applying for acquisition of the status of a micro-enterprise taxpayer;

●     a physical person commencing economic activity and registered as an economic operator by the State Revenue Service may choose whether to pay the micro-enterprise tax;

●     individual merchant, individual enterprise, the peasant or fishing farm, physical person, registered as conducting the business activity or limited liability company by submitting an application to the State Revenue Service before December 15 of the pre-taxation year.

The State Revenue Service within five working days after receiving an application related to issue the status of a micro-enterprise taxpayer or after receiving information from the Register of Enterprises decides on appropriation the status of a micro-enterprise taxpayer or a decision to refuse the status of a micro-enterprise taxpayer, if the State Revenue Service has information, that the submitter does not meet the criteria of the Micro-enterprise Tax Law.

Object and the micro-enterprise tax rate

The object of the micro-enterprise tax is the micro-enterprise turnover.

The micro-enterprise tax rate is 9%. This rate applies to the turnover, which in the taxation year does not exceed 100 000 EUR.

If the micro-enterprise turnover exceeds 100 000 EUR, the tax rate in the amount of 20% is applied to the exceeding part.

If the micro-enterprise employee’s income exceeds 720 EUR per month, the additional tax rate in the amount of 20% is applied to the exceeding income part.

If the number of employees of a micro-enterprise during a quarter is more than five, then two percentage points for each additional employed employee are added to the 9% tax rate.

Micro-enterprise pays the micro-enterprise tax four times per year, for taxation period turnover of each quarter to the fifteenth of the following month of the quarter.

If you are interested in this form of business, please contact the specialists of Business Consulting Group. We will help you to understand all the nuances of the issue, as well as to prepare all the necessary documents to register a micro-enterprise.

There are 4 forms of entrepreneurial activity in the Republic of Latvia: an individual merchant or IM (IK); Limited Liability Company – LLC (SIA); Joint-Stock Company - JSC (A/S) and a Branch Office / Representation. All forms are registered in Commercial register.

An Individual Merchant

An individual merchant (IM) is a physical person, who is economically active and is registered in Commercial register as Merchant.

Individual person doing business is obliged to declare himself for registering in Commercial register as Individual Merchant if:

• turnover of year from business deals exceeds 200000 Ls;
• turnover of year from business deals exceeds 200000 Ls and more than 5 employees while doing business are employed to do this business.

Individual Merchant for liabilities in business is fully and absolutely responsible with own property.

Limited Liability Company

Limited Liability Company (LLC) is a commercial company which fixed capital consists of sum of nominal value parts of fixed capital. LLC is a closed company; its shares are not subject to public circulation.

Minimum fixed capital of LLC is 2000 Ls. It is necessary to pay at least half of provided fixed capital before submitting an application to Commercial register, the rest should be paid within one year from the date of entry the company in Commercial register. Fixed capital could be paid with money or property input. The share provides to the participant of LLC the right to participate in management of the company, distribution of profit and division of property in case of liquidation of the company, as well as other statutory and law rights.

Joint-Stock Company

Joint-stock company (JSC) is a commercial company which fixed capital consists of sum of nominal values of shares. Joint-stock company is an open company; its shares can be subject to public circulation. The company is a legal entity.

The minimum amount of capital of JSC shall be not less than 25.000 Ls. Before the registration of joint-stock company all the fixed capital must be signed, set by shareholder`s agreement, but paid-up capital shall be not less than 25 000 Ls and less than 25% of the signed fixed capital (the rest should be paid within one year from signing the shareholder`s agreement). Fixed capital could be paid with money or property input, however, before submitting an application for registration the paid fixed capital of JSC could be paid only with money.

Shares may be of different categories, each of which certifies participation of a shareholder in the company`s fixed capital and gives him the right to participate in the company`s management in accordance with the category of a corresponding share, receive dividends or liquidation quota in case of liquidation of the JSC. The liability of both shareholders and participants of LLC is limited to the value of the company`s shares they own.

Branch Office and Representation

A branch of a foreign company is an independent and separated part of a foreign merchant, located on the territory of Latvia. The branch may conduct business, but it is not a separate legal entity. Claims and demands towards the branch are claimed to the parent company in accordance with legislation.

Representation is an independent entity that has no right to be engaged in commercial activity and it is not a legal entity. Usually the purpose of opening a representative is advertising and presentation of a foreign merchant, search of customers and preliminary approval of contracts.

Registration

All the companies doing business must be registered in Commercial register of Latvia. You have to fill out an application, provide a shareholder`s agreement, Statute, notarized samples of signatures of member of the board, the receipts of payment of fixed capital and state tax, as well as the receipt for the registration announcement in an official journal „Latvian Herald” (Latvijas Vēstnesis) and some other documents. The amount of state tax depends on the chosen form of activity, for example, the tax related to entry of limited liability company in Commercial register is 100 or 50 Ls. Consideration of an application is carried out within 3 working days. Paying the state tax in the triple amount, the application is considered within one working day.

Please contact Business Consulting Group if you need assistance in registering any form of entrepreneurial activity. We will help you not only to choose the right form of business, but to draw up and submit all the required documents as well.