Taxation in Latvia
The taxation system in Latvia had been harmonized in accordance with the European Union standards over the last 10 years. However, it still remains a pretty complex and complicated system, which is sometimes undiscovered even for the most experienced businessmen.
The main law, which includes general tax regulation, is the Law about taxes and fees. However, there is a separate law, which regulates each tax and its rate, so the tax legislation in Latvia is not unified and includes several legal acts. So if you need a tax consultation it is better to contact a local lawyer or accountant.
Currently in the Republic of Latvia there are following taxes and fees:
- Excise tax
- Nature resources tax
- Electro energy tax
- Personal income tax
- Micro enterprise tax
- Real estate tax
- VAT (value added tax)
- Vehicle usage tax
- Corporate income tax
- Company light vehicle tax
- Compulsory state social insurance contributions
- Light car and motorcycle tax
Excise tax in Latvia
The legal act, which regulates the excise tax and its rate is the Excise tax law. The following products are the subjects of an excise taxation in Latvia:
- Alcohol dinks
- Tobacco products
- Oil products
- Nature gas
- Soft drinks and coffee
The excise tax rate are very different and depend on many factors, including the amount of imported goods.
Micro enterprise tax in Latvia
Micro enterprise is a status, not a type of legal entity, which can be acquired for the LLC if it meets all the requirements, provided by legal regulations. In case your company obtains micro company status, the amount of taxes paid by the company will be much lower. The case is regulated by the
Micro company tax law. Micro enterprise must be paid once per taxation year and it includes company’s corporate income tax, compulsory state social insurance contributions and company shareholders personal income tax for his share of the enterprise. Micro enterprise tax rate is 9%. The status of a micro enterprise can be acquired by the limited liability company, individual enterprise, individual merchant, agricultural or fishing farms.
In order to acquire micro company status, the following requirements have to be met:
- The amount of employees does not exceed 5 employees
- Planned total annual turnover does not exceed LVL 70,000
- Micro company wishes to pay micro company tax under terms stipulated by the Micro company tax law
- All the shareholders are natural persons
- All the member of the board are employees of the company
If you want to acquire a micro enterprise status now contact us now!
Value added tax (VAT) in Latvia
The standard VAT rate in Latvia is 21%, which is the same as the average VAT rate in the European Union (21,2 %). The main legal act, regulating VAT in Latvia, is the Value added tax law.
Subjects to VAT taxation are:
- The supply of goods for a reward (payment)
- Provision of services for a reward (payment)
- Import of goods
- Movement of goods within the territory of EU member States
- Purchase of a new vehicle on the territory of the European Union by a person who is not registered as a VAT payer or, who is not a VAT payer
- Irregular supply of new vehicles to the other EU country
The Value added tax law provide two possible schemes on VAT payment: common and reversed. Each of these payment schemes has its pros and cons. However, the reversed payment scheme is possible only if the deal is taking place between subjects, when both of them are registered as VAT payers in Latvia.
Corporate income tax in Latvia
Corporate income tax rate in Latvia is 15%, which is one of the lowest in Europe. The main law, regulating corporate income tax, is the Corporate income tax law.
The following tax must be paid by the registered enterprises and other legal entities, who gain income from their activity, foreign companies, natural persons (in some cases) and foreign representative offices.
Starting from the January 1st year 2014, corporate income tax will not apply to the interest payments and payments for the usage of an intellectual property, made to the none residents of Latvia. The corporate income tax is also not applied to the paid out dividends.
You can read more detailed Latvian tax system overview here!