🇱🇻 Latvia Tax Guide — Income, Corporate & VAT Rates

Tax rates in Latvia range from 20% to 31.4% for personal income tax, with a corporate tax rate of 20%, and the country has a relatively straightforward tax system with various incentives for businesses and individuals.

Tax System Overview

Latvia has a territorial taxation system, which means that residents are taxed on their worldwide income, but non-residents are only taxed on their Latvian-sourced income. To be considered a tax resident in Latvia, an individual must have a permanent home in the country, or spend more than 183 days in a calendar year in Latvia. The tax system is relatively straightforward, with a focus on simplicity and ease of compliance.

The tax authorities in Latvia are responsible for collecting taxes, and the country has a well-developed tax infrastructure, with online filing and payment options available. Taxpayers can also seek assistance from tax professionals or consult the tax authorities directly for guidance on tax-related matters. Latvia is a member of the OECD and has implemented various international tax standards, including the Common Reporting Standard and the Foreign Account Tax Compliance Act.

Personal Income Tax

Corporate & Business Tax

• The corporate tax rate in Latvia is 20%, which applies to all types of businesses, including limited liability companies and joint stock companies.
• Small businesses with annual turnover of less than EUR 40,000 are eligible for a reduced tax rate of 10%.
• Latvia has several free zones, including the Riga Free Port and the Ventspils Free Port, which offer exemptions from corporate tax, customs duties, and other taxes.
• Businesses must register with the State Revenue Service and obtain a tax identification number within 30 days of commencing operations.
• Companies must file annual tax returns and pay taxes by the end of the fourth month following the end of the tax year.

VAT / Sales Tax

• The standard VAT rate in Latvia is 21%, which applies to most goods and services.
• A reduced VAT rate of 12% applies to certain goods and services, including food, pharmaceuticals, and hotel accommodation.
• Exemptions from VAT apply to certain services, including financial services, education, and healthcare.
• Tourists can claim a refund of VAT paid on goods purchased in Latvia, provided they meet certain conditions, such as spending at least EUR 50 in a single transaction.

For Expats & Foreign Workers

• Expats are considered tax residents in Latvia if they spend more than 183 days in a calendar year in the country.
• Double taxation treaties are in place with over 60 countries, including the UK, US, and Canada, to prevent double taxation of income.
• Social security contributions are mandatory for all employees, including expats, and are used to fund pensions, healthcare, and other social benefits.
• Expats are entitled to various tax deductions and allowances, including a deduction for foreign-earned income.
• Remittance rules apply to foreign-earned income, and expats must report their worldwide income to the Latvian tax authorities.
• Expats can claim a foreign tax credit for taxes paid in other countries, provided they meet certain conditions.

Crypto & Investment Income

• Investment income, including dividends, interest, and capital gains, is subject to income tax in Latvia.
• Cryptocurrency is considered a financial instrument and is subject to capital gains tax, with a tax rate of 20% applying to profits from the sale of cryptocurrency.
• Taxpayers must report their cryptocurrency transactions to the tax authorities and pay taxes on any profits made.
• Exchange-traded funds and other investment funds are subject to corporate tax, with a tax rate of 20% applying to profits made by the fund.
• Taxpayers can claim a deduction for losses made on investments, provided they meet certain conditions.