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Latvia

Taxes

Updated 02/2011

Legal requirements

Taxes and duties in Latvia are governed by the Law On Taxes and Fees, specific taxing Acts and Cabinet Regulations issued pursuant to these Acts.

The tax and duty system consists of:

  • national taxes ;
  • national duties ;
  • local authority duties.

The taxation system

Direct taxes

The Law On Personal Income Tax and the relevant Regulations of the Cabinet of Ministers govern the charge to personal income tax. Natural persons are subject to the tax on their income. The rate of income tax rate depends on the nature of the income: the rate on capital gains is 15%, the rate on other income from capital - 10%, and on other income - 25%.

           Corporate income tax is governed by the Law On Enterprise Income Tax and the related Regulations of the Cabinet of Ministers. The law applies to resident enterprises and to the permanent establishments of non-residents. The tax rate is 15%.

The Law On Immovable Property Tax and the related Cabinet regulations govern the charge to immovable property tax. Land, buildings and constructions located in Latvia are subject to immovable property tax. The tax rate is 1.5% of the cadastral value of the property. Uncultivated agricultural land is subject to an additional rate of 1.5%, the rates on residential property are 0.2%, 0.4% and 0.6% depending on the cadastral value of the property.

The Law On State Social Insurance governs the amount of the mandatory payments of state social security contributions. The combined rate is 35.09% of which 24.09% is the employer's rate and 11% is the employee's rate.

Micro-enterprise tax is governed by the Law On Micro-Enterprise Tax. The micro-enterprise tax rate is 9%. Where the micro-enterprise tax payer has exceeded the statutory criteria of turnover, employee number or income, an additional rate is applied.

For a micro-enterprise to be able to pay the micro-enterprise tax, it must meet the following criteria:

  • its members (if any) should be natural persons. in the case of a limited-liability company – its members and the members of the board should be natural persons;
  • its annual turnover does not exceed EUR 100,000;
  • the number of employees may not exceed five at any given time. Employees who are absent or made redundant are not counted as employees.

Indirect taxes

The Law On Value Added Tax and the related Cabinet regulations govern the charge to value added tax (VAT) in Latvia. Individuals required to pay VAT may be:

  • natural persons;
  • legal persons and state-financed institutions carrying on activities subject to VAT;
  • a group of persons connected by agreement or a representative of a person;
  • a VAT group;
  • a partnership;
  • a fiscal representative.

The standard rate is 21%. The reduced rate is 12%. A zero rate is also applied.

The Law On Excise Duties and the related Regulations of the Cabinet of Ministers govern the application of excise duties.

Excise duty is paid by importers, authorised bonded warehouse keepers, approved consigners, approved consignees, temporarily registered consigners or traders placing an order, persons who import or receive excisable goods from another EU Member State which have been released for free movement in another EU Member State, and individuals importing non-alcoholic beverages, coffee or natural gas.

Tobacco products, alcoholic beverages, petroleum products, natural gas, coffee and non-alcoholic beverages are subject to excise duties.

Natural gas is not subject to excise duties from 1 September 2010 until 30 June 2011.

The Law On Car and Motorcycle Duty and the related Regulations of the Cabinet of Ministers govern the charge to car and motorcycle duty. The first registration in Latvia of cars and motorcycles is subject to the tax.

Customs duty is set pursuant to European Union regulations. The Latvian Customs Law and related Cabinet regulations govern separate customs provisions not regulated by the European Union.

The Law On Vehicle Operation Tax and Company Car Tax governs the charge to vehicle operation tax (the tax rate depends on car engine capacity, gross vehicle weight and engine power) and to company car tax (the tax rate depends on engine capacity).

The Law On Electrical Energy Tax governs the charge to electrical energy tax. Electrical energy tax is charged on electricity supplied to end-users as well as electricity supplied for own use. The rate of the tax is LVL 0.71 per megawatt-hour.

Other taxes

The Law On Natural Resources Tax and the related Regulations of the Cabinet of Ministers govern the charge to natural resources tax in Latvia.

In the Republic of Latvia natural resources tax is charged on the extraction of natural resources, landfill, air pollution and greenhouse-gas emissions produced by stationary technological equipment not included in the emission quotas, as well as on goods polluting water and environmentally harmful goods, e.g. lubricants and other goods and substances.

The Law on Lotteries and Gambling Fee and Tax governs the charge to the tax on lotteries and games of chance. The tax on lotteries and games of chance is paid by enterprises in receipt of a special permit (licence) to organise and maintain lotteries and games of chance.

A special tax regime in Latvia applies to commercial activities carried on in free ports (Riga and Ventspils) and special economic zones (Liepaja and Rezekne). The application of the special tax regime is regulated by law.

 

Administrative procedures

Taxpayer registration

Partnerships, companies and a foreign trader's branches as legal entities and sole traders shall be registered with the Commercial Registrer according to procedures prescribed by the Commercial Law. Other legal persons shall be registered in the Enterprise Register according to the procedures prescribed by the Law on the Enterprise Register of the Republic of Latvia. A legal person and a sole trader shall be allocated a unified registration code and a registration certificate which also serves as a taxpayer certificate.

The Commercial Register and the Enterprise Register shall,  within one business day after registration, forward the information about the registered person electronically to the  State Revenue Service (VID) within one business day after registration.

Persons not requiring registration with the Commercial Register or Enterprise Register shall be registered as taxpayers with the VID, e.g. notarial practices and advocates’ practices, as well as the permanent establishments of foreign traders.

Persons liable to pay value added tax shall be registered with the VID as prescribed by law on the basis of that person's application, which may be submitted electronically using a safe electronic signature. The decision to register a person as a taxable person with VID register of VAT taxable persons is published on the VID website.

Filing your tax return

All taxes have certain deadlines stating when the tax return must be filed with the State Revenue Service.

Information on tax return deadlines can be accessed on the State Revenue Service website:

Resources

The Ministry of Finance website provides general information on taxes and duties applicable in Latvia.

The State Revenue Service website provides information on taxes, duties and their administration.

The Lotteries and Gambling Supervision Inspection website highlights issues related to lotteries and games of chance.

The Ministry of Welfare and the State Social Insurance Agency provide information on social security contributions.

The Ministry of Environmental Protection and Regional Development provides information on natural resources tax.

Help & advice

Help & advice

Tax consultants who have formed an association can help you to find a tax consultant.

Advice in tax matters can also be provided by audit firms, law firms, advocates' practices and certified accountants.

SOLVIT helps businesses deal with problems that arise when national authorities wrongly apply EU market rules.

E-mail a business organisation near you

The EU runs a network (Enterprise Europe Network) of local business organisations in most European countries that may be able to help you.

Choose your country and town and enter your enquiry below.

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