Company formation and accounting in Latvia
Last updated: 2017-11-12

Legislation changes, adopted in 2017.

The changes come into force on January 01, 2018.
  • Tax rate is 15%.
  • Maximum allowed turnover is 40 000 euro per year (if certain conditions fulfilled, then during Year 2018 and 2019 maximum turnover is 52 000 euro per year).
  • A natural person can be an employee only in one company - micro enterprise tax payer. Exception: during 2018 a natural person can work in those companies - micro enterprise tax payers, in which the employee was in employment relationships on 31st December, 2017.
    According to informative material of the State revenue service, if an employee, who worked in more than one company - micro enterprise tax payer on 31st December, 2017, continues to work in more than one company - micro enterprise tax payer in Year 2019, then:
    • during Year 2019 tax rate increases by 2% for each such employee and
    • from Year 2020 company loses status of a payer of the micro - enterprise tax.
  • An employer in employment contract must include information that:
    • an employer is payer of the micro-enterprise tax;
    • personal income tax and state mandatory social contributions are calculated, based on turnover of a company;
    • an employee has rights voluntary to participate in state social insurance.
  • If a payer of the micro - enterprise tax calculates dividends, then company must pay personal income tax for the calculated dividends. Tax rate would start from 20%. Basis: 12. и 121 point of part 3 of article 8 and part 5 of article 15 of the Law on personal income tax.
    According to point 130 of Transitional provisions of the Law on personal income tax, companies - payers of corporate income tax, during Year 2018 and 2019 can apply tax rate 10% to dividends, calculated from profit, earned until 31st December, 2017. But the before mentioned provision is not applicable to companies - payers of the micro - enterprise tax (point 135 of Transitional provisions).

Legislation changes, adopted in 2016.

The changes come into force on January 01, 2017.
  • Tax rate increases and 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 7001 euro.
  • If number of employee during a quarter increases 5, then for each additional employee must pay 2% from turnover (total tax rate would be 15%, plus 2% for each additional employee).
  • If turnover increases 100 000 euro per year, then 100 000 euro are taxed with rate 15% and amount increasing 100 000 is taxed with rate 20%.
  • If salary of employee increases 720 euro per month, then additionally to 15% must pay also 20% from salary (income) that increases 720 euro per month.
    Exception. If monthly salary increases 720 euro because of termination of employment relationships or compensation for unused vacation, then no obligation to pay additional tax.
  • If during a year, company has no turnover, then such company must pay tax 50 euro per year and from next year, the company loses status of a payer of the micro-enterprise tax. Exception in cases if during the year a company is registered or finished a process of liquidation.
  • If a company without basis used status of a payer of the micro-enterprise tax, then during the period tax rate is 20%.
    For example, company submitted report and according to the reports a turnover is less than 100 000 euro per year. In the next year the company also uses status of a payer of the micro-enterprise tax. But in the next year the company found an error, corrected reports and according to the corrected reports, turnover increases 100 000 euro. In such case the company without basis uses status of a payer of the micro-enterprise tax during the next year.
  • Declaration must submit until 15th day of a month, following a quarter (15th January, April, June, October).
    During a month after deadline for submission of the declaration, a company has rights 2 times to correct the declaration.
    After the previously mentioned month a company has rights to submit only corrections that do not change or increases amount of payable tax.
  • Increases part of tax, that is used for state mandatory social contributions (since 01st January, 2017 to 70.4% and since 01st January, 2017 to 80%).

During Year, 2016 there were many discussions related to micro - enterprise tax.

Parliament (Saeima) there were different opinions about the future of the micro-enterprise tax.
There were plans to stop the regime starting from 01st January, 2019. And until 01st June, 2017 government planned to find a solution to support start-up entrepreneurs and enterprises with small annual turnover.
Also there were plans to prohibit the tax regime in most industries (economic activities).
Were plans that a payer of the micro - enterprise tax additionally to the tax also pays state mandatory social contributions.
During Year, 2017 plans changed and parliament decided to maintain (keep) regime of the micro-enterprise tax for all industries (economic activities) according to legislation.

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