Tax system in Latvia
The Ministry of Finance shall develop state tax and customs policy, as well as prepare recommendations for institutions responsible for tax and customs administration on implementation of tax and customs policy activities.
Taxes and fees system in Latvia consists of:
- state taxes, object and rate of which shall be set by the Saeima;
- state fees which shall be applicable according to Law "On Taxes and Fees" (LV) specific other laws and regulations of the Cabinet of Ministers;
- local government fees which shall be applicable according to Law "On Taxes and Fees" (LV) and binding regulations issued by the council of local government;
- directly applicable taxes and other obligatory payments set in the European Union regulatory enactments.
Enterprise Income Tax
Shall be paid by legal entities and non-resident permanent establishments for their income. Tax rate is 15%.
Personal Income Tax
Shall be paid by natural persons for their income. Tax rate is 23%.
State Social Insurance Mandatory Contributions
Shall be paid by insured persons and their employers.Total rate is 34,09% which varies for different categories of insured persons.
As of 1 January 2017 a microenterprise tax rate is 12% if a turnover of a microenterprise is up to 7000 euro, in turn, a microenterprise tax rate is 15%, if a turnover of a microenterprise is from 7000,01 until 100 000 euro. Microenterprise tax includes:
- state social insurance mandatory contributions, personal income tax and State fee of the business risk for micro-enterprise employees,
- enterprise income tax, if the micro-enterprise conforms to the features of the enterprise income taxpayer,
- personal income tax of the micro-enterprise owner for the part of the micro-enterprise revenue from the economic activity.
The information on the registration of the microenterprise tax payers is available at the State Revenue Service homepage in section Nodokļi/ Mikrouzņēmumu nodoklis.
The following entities may become a microenterprise tax payer:
- an individual merchant,
- an individual undertaking,
- a farm or fishing enterprise,
- a natural person registered at the State Revenue Service as performing economic activities,
- limited liability company.
In order an entity would be entitled to pay a microenterprise tax, a microenterprise shall comply with the following criteria:
- The participants (if any) are natural persons.
- The turnover does not exceed 100 000 euros in a calendar year.
- The number of employees does not exceed five at any time. An employee who is absent during employment relationship and who does not receive income from the micro-enterprise for the period of time, as well as employees suspended from work shall not be included in the number of employees.
- Members of the board of directors of a limited liability company may only be employees of the micro-enterprise.
- The natural or legal person referred to in this Clause is not a member of a partnership.
Pursuant to the Microenterprise tax law a micro-enterprise is entitled to opt for payment of the micro-enterprise tax, if the income of a micro-enterprise employee from the taxpaying micro-enterprise does not exceed 720 euros per month.
Within the meaning of the Microenterprise tax law a term microenterprise employee shall mean a natural person employed by a micro-enterprise on the basis of an employment contract and the micro-enterprise owner, as well as a procuration holder.
Real Estate Tax
Shall be paid by real estate owners or legal possessors. General tax rate is 1,5% from cadastral value of property unit. Residential property is taxed at a rate 0,2%-0,4%-0,6% depending on value of the property.
Value Added Tax
Shall be paid by legal entities and natural persons. Standard tax rate is 21%, reduced tax rate – 12%. On 1 January 2013 new Value Added Tax Law has entered into force. Value Added Tax Law replaces the Law On Value Added Tax, which was into force from 1995 till 2012.
Shall be applied to oil products, natural gas, alcoholic drinks, beer, tobacco products, coffee and non-alcoholic drinks (except natural juices and mineral water).
Shall be paid by persons supplying electricity to the end-users and self-governing producers. Tax rate shall be set in lats per megawatt-hour.
Shall be paid by legal entities and natural persons who own, possess or hold a vehicle, which is registered or is going to be registered in Latvia, or whose owned, possessed or held vehicle is given transit number plates or person who has declared in Latvia and use car which has registered outside of Latvia.
Company Car Tax
Shall be paid by merchant, foreign merchant branch and farm which own or hold passenger vehicle or truck with the total weight up to 3000 kg and which have more than three seats (included driver seat) and which is used also for personal needs of employees and/or proprietaries.
Shall be paid by natural persons and legal entities when importing goods into the EU.
Shall be paid by legal entities and natural persons if extracting natural resources, distributing or importing environmentally unfriendly goods or which are allowed to perform such activities.
Lottery and Gambling Tax
Shall be paid by lottery and gambling providers.