Company formation and accounting in Latvia
Last updated: 2015-11-09
During 2016 where many discussions and changes regarding micro-enterprise tax and "final" result for 2017 and is that tax rate is 12% from income (turnover) while turnover is less than 7000 euro per and 15% from income (turnover) when turnover at least 7000 euro. For example, turnover is 8000 euro. In such case must pay 12% from 6999 euro and 15% from 1001 euro.
For 2018 tax rate is planned 15% for all companies.

Below you can read some "history", related with micro-enterprise tax.

Need to note, that in the Parliament (Saeima) there are discussions regarding future of the micro-enterprises tax. It is possible, that the below mentioned changes will enter into force latter (from Year, 2017). But the below written shows trends related with the micro-enterprises tax.
Government from 01st January, 2019 plans to stop the regime of the micro - enterprise tax. Until 01st June 2017, Latvian government plans to find a solution to support business start-ups and businesses with small annual turnover.

In April 23 and November 30, 2015 the Parliament of the Republic of Latvia adopted changes to the Law on the micro-enterprises tax. The essential (most important) changes are the following.

In 1 January, 2017 comes into force a legal norm (of the Law on micro-enterprise tax) which provides that an employee of the payer of the micro-enterprise tax, additionally to the prescribed in legislation, is socially insured person according to the law "On governmental social insurance" (that means, that payer of micro-enterprise tax additionally pays the mandatory state social insurance contributions for each employee).

Starting from 1 January, 2017 micro-company tax rate will be 5% from the net turnover, if the net turnover does not exceed 7000 euro per year.
If the net turnover exceeds 7000 euro per year, then tax rate remains 5% for the first, second and third taxation year (calendar year, after the moment, when a company became a payer of micro-company tax). But starting from the fourth taxation year, tax rate for the net turnover, exceeding 7000 euro per year, is 8%.

The above mentioned rate does not include the mandatory state social insurance contributions. That means, that a company for each month additionally must pay the mandatory state social insurance contributions from monthly minimum salary.

If until 31 December, 2014 a company received status of the payer of micro-enterprises tax, then the above mentioned 3 years term starts from 1 January, 2015 (i.e until 31 December, 2017 tax rate will be 5%, if the net turnover does not exceed 100 000 euro per year). To keep status of the payer of the micro-enterprise tax, must comply with additional requirements (for example, not more than 5 employees, salary (income) of each employee does not increase 720 euro per month, owners of a company must be only natural persons, net turnover does not exceed 100 000 euro per year, etc.).

Starting from 1 January, 2018, payer of micro-enterprise tax has no rights to apply 5% tax rate, if the tax payer employs at least one employee for period longer than 3 years.

Industries (sectors) for which has no rights to obtain the status of the payer of micro-enterprises tax

Starting from 1 January, 2017 a taxpayer, operating in the below mentioned industries, has no rights to obtain status of a payer of the micro-enterprise tax (point 9 of transitional rules). This means that the taxpayer will have to pay taxes as usual / in the standard regime (must pay separately company income tax and taxes from salaries).

If a taxpayer until 30 April, 2015 has received status of payer of the micro-enterprises tax and the taxpayer operates in any of the below mentioned industries, then the tax payer has rights to keep the status until 31 December, 2018, if there are no other circumstances because of which the taxpayer loses the status of payer of the micro-enterprises tax.

If a taxpayer has received status of payer of the micro-enterprises tax during period from 01 May, 2015 until 31 December, 2015 (for example, registering a new company) and the taxpayer operates in any of the below mentioned industries, then the tax payer has rights to keep the status until 31 December, 2016, if there are no other circumstances because of which the taxpayer loses the status of payer of the micro-enterprises tax.

List of industries in which do not apply the regime of the micro-enterprises tax (after name of industry follows code of the classificator NACE 2-nd edition (division, group or class)).
  • Forestry. 02.20 (class).
  • Supporting activities for forestry. 02.40 (class).
  • Supporting activities related to the mining industry. 09 (division).
  • Manufacture of tobacco products. 12 (division).
  • Manufacture of coke and refined petroleum products. 19 (division).
  • Production of basic substances of pharmaceutical products and pharmaceuticals. 21 (division).
  • Manufacture of fabricated metal products except manufacture of cutlery, locks, hinges, tools, products for fixing clamps and bolts and unclassified ready metal products. 25 (division), except 25.71, 25.72, 25.73, 25.94 and 25.99 (class).
  • Production of motor vehicles, trailers and semi-trailers, with the exception of the production of parts and related products for motor vehicles. 29 (division) except 29.32 (class).
  • Construction of buildings . 41 (division).
  • Engineering Construction. 42 (division).
  • Demolition and preparation of construction site. 43.1 (group).
  • Electrical work, installation of pipelines and other similar activities. 43.1 (group).
  • Other operations on completion of construction. 43.39 (class).
  • Wholesale. 46 (division).
  • Air transport. 51 (division).
  • Telecommunications. 61 (division).
  • Computer programming, consultancy and related activities. 62 (division).
  • Information Services. 63 (division).
  • Activities in the field of financial services. 64 (division).
  • Insurance, reinsurance and of savings for pensions. 65 (division).
  • Complementary activities for financial services and insurance, except activities of insurance agents and brokers. 66 (division) except 66.22 (class).
  • Sale and purchase of own immovable property. 68.10 (class).
  • Legal and accounting services. 69 (division).
  • Activities of head offices; consultations related with business and management. 70 (division).
  • Architectural and engineering services. 71 (division).
  • Scientific research. 72 (division).
  • Advertising and market research services. 73 (division).
  • Other professional, scientific and technical services, with the exception of photo services, translation services and services of translators. 74 (division), except 74.20, 74.30 (class).
  • Searching of employees and providing a personnel. 78 (division).
  • Activities in relation to personal security. 80.10 (class).
  • Administrative activities of offices and other types of support for businesses, with the exception of packaging services. 82 (division), except 82.92 (class).
  • Public administration and mandatory social insurance. 84 (division).
  • Healthcare. 86 (division).
  • Social services with accommodation. 87 (division).
  • The activities of public, political and other organizations. 94 (division).



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