Accounting for companies in Latvia and cooperation with the State Revenue Service
Every company in Latvia is obligated to maintain accounting records, in which all company's economic transactions, as well as each change to the state of the company's property must be clearly indicated.
Accounting in Latvia is governed by the Law ''On Accounting''. At the same time, the form of accounting is governed by the ''Annual Accounts Law''. Companies which are subject to the ''Annual Accounts Law'' organise their accounting according to the double-entry bookkeeping system and draw up annual reports for each taxation year. However, individual merchants (IK), sole proprietorships (IU) and farms (Z/S) not subject to the above Law can do accounting according to the single-entry system - by filling in the income and expenditure account book. When accounting is done in accordance with the single-entry system, an economic income and expenditure account book must be maintained.
Accounting can be done by a person hired specifically for this purpose (a relevant employment contract must be signed), by an outside accounting agency (a relevant company contract must be signed) or by a head of the company himself if legislation allows it.
Before setting up business in Latvia the most vital thing is to find out, what kind of authorizations, licences, and other documents will be necessary for the company to operate in compliance with the laws and regulations. The easiest way is to go to the State Revenue Service (SRS), where such information can be obtained.
To promote the cooperation with taxpayers, the SRS has created a website containing all the necessary tax-related legislative acts and methodical instructions and ensuring an opportunity to send written questions to consultants of the SRS. Also, application forms and tax declaration forms can be found on the website.
In compliance with the tax laws, entrepreneurs must calculate the taxes and pay them into the state budget according to the declarations and reports submitted to the SRS. Tax declarations can be submitted in written form, as well as in electronic form using Electronic Declaration System (EDS) which has been established to ease the work for entrepreneurs and the SRS. It can be used from any place in the world where a person can get access to the Internet. To become a user of EDS, a head of the company must fill in an application form and a contract, which must be submitted to the customer service centre of the Tax and Customs Administration Office of the State Revenue Service's Tax Administration, or register online by using the e-signature smart card issued by the state joint-stock company ''Latvia State Radio and Television Centre'' or ''Latvijas Pasts''. After signing of the contract with the SRS, all tax declarations, changes to the company's registration data and applications can be submitted to the SRS electronically. By sending the first document, the electronic signature, which has legal force, is obtained.
All national and municipal institutions in Latvia are obligated to use EDS. All other legal entities are required to submit declarations and reports by using the EDS, unless a company is located in an area where no Internet connection is available.
Starting from 1 January 2012 Value Added Tax declarations may be submitted only electronically. A natural person will be obligated to submit reports through the EDS starting from 1 January 2014.
The following declarations and reports must be submitted electronically:
- annual report of the company; annual report of associations, foundations and trade unions; annual report of individual merchants and other annual reports - the annual report of associations, foundations and trade unions must be submitted at the end of the year or until 31 March of the next year. Companies are required to submit their annual reports in the first four months of the next year, but not later than a month after confirmation of the annual report;
- declaration of corporate income tax - must be submitted together with the annual report
- corporate income tax advance calculation - must be submitted together with the declaration of corporate income tax
- annual income declaration (personal income tax)
- information on employee movement - must be submitted one day before an employee starts to work for a company. For example, if an employee starts to work on Monday, the report must be submitted on the previous Friday
- report on the use of receipts confirming transactions; report on the use of tickets - both of them must be submitted until the twenty-fifth day of each month after the end of the taxation quarter
- report on state compulsory social insurance contributions paid from income of employees, personal income tax and entrepreneurship risk state duty in the taxation month - must be submitted until the day of the next month determined by the Cabinet of Ministers
- announcement on amounts paid to natural persons - must be submitted after dismissal of an employee until the fifteenth day of the next month; if an employee continues to work, then the declaration for each year must be submitted until 1 February of the next year
- declaration of VAT taxation period - must be submitted until the fifteenth day of the period following the taxation period, if the declaration is submitted in paper form, and until the twentieth day, if it is done by using the EDS
- micro-enterprise tax return - must be submitted for each quarter until the fifteenth day of the next month
- state official declaration - a person must submit it upon taking office and losing the status of a state official. The relevant annual declaration must be submitted until 1 April of the following year
- declaration of income from capital - must be submitted until the fifteenth day of the month following the month of transaction, if the taxable profit exceeds LVL 500, and until the fifteenth day of the month following the quarter of the transaction, if the taxable profit is less than LVL 500
- declaration of transactions in cash - must be submitted until the fifteenth day of the month after the end of a taxation month
- excise tax declarations
- announcement on production of excise goods
- announcement on wholesale trade turnover of excise goods
- report on the estimated natural resources tax
- declarations of gambling tax
- forms of amendments to the taxpayer registration data
- application for the reception of a specific authorization for operation with excise goods.
The EDS provides a possibility for the taxpayers to see the situation with their payments into the state budget, which allows verifying if there is any debt or tax surplus in regard to the budget.
Cooperation. Consultants of the SRS educate taxpayers how to use the EDS. The customer service centres regularly (once a month) provides free seminars for both new taxpayers and experienced entrepreneurs during which taxpayers are educated about declaration issues and the tax calculation and are informed about the changes to the legislative acts. At the same time, a person can receive consultation by calling the SRS info line 1898, as well as at the customer service centres. These consultations are free of charge.