Taxation in Latvia
Taxation in LatviaUpdated on Friday 21st August 2015
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The Law on Taxes and Fees in Latvia establishes the regulations that apply to tax payers in this country. Taxes are applied at national and local level. Individuals and self-employed persons are accountable to pay taxes on their incomes.
Permanent residents will pay the income tax on all their gains obtained in and outside Latvia, while foreign residents will pay the tax on the earnings they make in Latvia.
In the case of employees, employers are required to deduct the income tax and social security contributions from the employees’ salaries.
The rates for personal income tax are:
- 24% per salary or individual business,
- 15% per capital gains,
- 10% on other incomes, such as investments.
The Corporate Income Tax in Latvia
Companies in Latvia must pay a 15% tax rate on the corporate income. Inland companies are subject to the corporate tax on their world-wide income, while foreign companies that run a business in Latvia must pay the corporate tax on the income they make in this country.
The capital gains tax in Latvia is 15% for individuals when selling real estate properties or other assets. Foreign companies are taxed with 2% of their capital gains in Latvia, as for Latvian companies the capital gains are included in their usual income.
Other taxes in Latvia
In Latvia the immovable property tax is applied to land and buildings and it is set at 1.5% of the value of the property. Another 1.5% is applied to agricultural land that has not been cultivated. The rates for residential buildings are 0.2%, 0.4% and 0.6% and depend on the value of the property.
The micro-enterprise tax is set at 9% and it is applied to small companies if they are set up by natural persons, if their annual turnover is less than 100,000 euros and they have five employees at most.
The VAT tax in Latvia is applied to supplies of goods and services and it has a standard rate of 21%.
Latvia deduction of tax at source
Latvia has signed double tax treaties with more than 50 countries in order to avoid double taxation. Employers must deduct taxes from the employees’ salaries and contribute to social security. Employees are taxed with 11% for the national insurance contribution, while the employer must pay 24.09% for the national insurance, while self-employed persons are required to pay 32.46%. Foreigners working for foreign companies in Latvia are subject to a 33.18% rate for national insurance.
For foreign residents, the taxes are deducted as it follows:
- 0% for dividends,
- 10% for interests,
- 5% or 15% for royalties,
- 5% for property rental.
For legal advice in starting a business and tax system, you can contact our lawyers in Latvia. The representatives from our law firm in Latvia will assist you during the incorporation of a company and they will provide accounting services, if needed.