Company formation and accounting in Latvia
Last updated: 2017-12-21

Corporate income tax (tax on company profit)

Until Year, 2018 the tax rate - 15% from profit, calculated in the company income tax declaration. Starting from Year, 2018 effective tax rate is 25%, but company can work paying zero company income tax.

Payers are legal entities: limited liability company, joint stock company.

For period, that ends on 31st December, 2017.
Taxation period is the accounting year, according to the Annual Report law.
Along with the annual report, the taxpayer prepares and submits a declaration of company income tax.

The tax, which is calculated in a tax return, the taxpayer pays to the governmental budget within 15 days after the filing (submission) the tax return. During the next year (after taxation period) the taxpayer must pay monthly advance payments. The amount of advance payments (which must be paid during the next year) is approximately equal to the calculated company income tax for the previous taxation period. The tax calculated for the current year for the payment to the governmental budget, is reduced by the amount of the paid advance payments.

Starting from 1st January, 2018.

Value added tax.

Standard rate - since 01/07/2012 rate is 21% (until 01/07/2012 rate was 22%)
Reduced rate - 12%
Export - 0%.

In case of delivering goods and providing services to a person registered in another EU country, the value added tax (VAT) usually must be paid by the receiver of the goods and services (VAT reverse charge).

That means, the seller (or the person providing services) does not charge VAT and does not indicate it in the tax bill (invoice).

The buyer (or recipient of services) for (on) the amount of goods (services), calculates VAT at the rate that is applicable in the buyer's (recipient of services) country.
If the received goods and services are used for transactions subject to VAT (VAT applicable transactions), then in the same VAT return, the calculated VAT at the same time is subtracted from the amount of tax payable to the governmental budget.
As a result for the transaction VAT is not payable.

But if, for example, the buyer resells the goods inside of the buyer’s country, then the buyer is obliged to charge VAT on the amount of resale.

VAT payers usually are persons that are registered in a special VAT register.

Taxation period depends on the type and the amount of transactions. In Latvia, the taxation period may be a month or three months.

Mandatory State Social Insurance Contributions

Payers are employees, employers and individuals conducting business activities ("self - employed"). The employer withholds the tax from the employee's salary and pays the tax to the governmental budget. "The self-employed" persons themselves calculates the tax from the taxable amount.

During Year, 2017 the most common rate is 34.09%. Starting from Year, 2018 the most common rate is 35.09%. Tax is applied to the salary of an employee. Smaller part of the tax must be withheld from a salary and larger part of the tax additionally pays an employer. For the "self - employed," and certain other categories of employees a different rate is applicable.

The taxable amount. In the case of salary a taxable amount is the calculated salary before taxes (gross salary). In the case of "self - employed" in most cases taxable amount is monthly profit, if it exceeds the minimum monthly salary. The minimum taxable amount in such case is at least the minimum monthly salary.

The taxation period. In the case of a salary the taxation period is a month. For the "self - employed" the taxation period is three months.

Personal income tax

Tax rate.
For period, that ends on 31st December, 2017.
The basic rate for Year, 2017 is 23% (until 01/01/2013, - 25% and until 01/01/2015 - 24%). For income from capital, which is not capital gain (e.g., dividends) 10% rate is applicable. For income from capital gain (for example, profit from the sale of shares, real estate) 15% rate is applicable.

Starting from 1st January, 2018.

The taxable amount. Until Year, 2018 in the case of salary the taxable amount is the calculated salary, minus the mandatory state social insurance contributions (employee’s part), minus non taxable minimum and minus benefits for dependents. Starting from Year, 2018 at first from gross salary must calculate PIT according to corresponding rate. From the result must subtract 20% from social contribution payments and exemptions (privilegies). The result is PIT for payment.

In the case of economic activities the taxable amount is profit.
In the case of income from capital, the taxable amount is the sale price, minus the purchase price and minus the costs related to the income from capital.

Payers are the individuals that received the taxable income (salary, profit).
The taxation period. In the case of a salary the taxation period is a month. In the case of economic activities the taxation period is one year (but there is an obligation to pay advance payments in case of profit).

Immovable property tax (tax on real estate)

The tax rate is from 0.2% to 3%. In relation to housing (flats, apartments) the tax rate is from 0.2% to 0.6% depending on the cadastral value of a flat.
If a flat (house) is used for economic activities (for example, rented to some company), then tax rate is 1.5%.
In relation to a land the standard tax rate is 1.5%. The tax rate of 3% is mainly applied to agricultural land if the land is uncultivated.

Taxable amount is the cadastral value.

Tax payers are owners (legal possessors) of real estate.

Taxation period is one year. Municipality sends a notice that contains the amount and terms for tax payments.

Microenterprise Tax (micro company tax)

The basic rate is 9% (until 2017). Starting from 1st January 2017 tax rate increases to 12% - 15%. There are different nuances and conditions relating to the rate.
Starting from Year, 2018, tax rate is 15%.
Taxable object is the net turnover.
Taxpayers are persons (natural and legal persons) that are doing economic activities and are registered as payer of the microenterprise tax.
Taxation period is calendar year. But the tax must be paid every three months.

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