Latvia legal and accounting and tax considerations in 2023
- Corporate tax in Latvia is levied at a rate of 15%. Microenterprises with i) annual turnover not exceeding €100,000 ii) less than 5 employees and iii) less than €700/month salary per employee, pay corporate tax at a reduced rate of 9%;
- Capital gains are subject to a tax rate of 15% but capital gains derived from sale of shares are tax exempt;
- The standard VAT rate in Latvia is 21%, with exemptions for certain goods and services. Resident companies are obliged to register for VAT if their VAT-taxable transactions exceeded €50,000 in the previous 12 months. VAT returns must be filed by the 15th of the following month;
- Business losses can be carried forward indefinitely with no carry back option;
- All Dividends received are exempt from corporate tax, unless received from a black list jurisdiction which include Bermuda, Hong Kong, Jersey and UAE;
- Latvia does not levy any withholding taxes on payments as dividends, royalties and interest. However, a 15% withholding tax is levied on all payments to countries from black list jurisdictions;
- Businesses must be audited if they fall under two of the following three criteria i) over €700,000 in annual turnover ii) €350,000 in assets iii) average of 25 employees during the year;
- Properties in Latvia are taxed at a rate of 1.5% of the value of land and buildings;
- Tax year in Latvia coincides with the calendar year. SMEs must file their tax returns within April and large companies must file by June of the following year. Latvian companies must submit monthly advance tax payments by the 15th of the month, based on the profit incurred the previous year;
- Late payment of taxes results in interest charge at 0.05% per day. Furthermore, penalties as a result of tax audit can reach up to 300% of unpaid tax;
- Employers are required to make monthly social security contributions of 24% of an employee’s salary. Furthermore, they must withhold personal income tax at a rate of 24% of the employee’s salary;
- Employers are required to withhold and remit to the State Revenue Service 24% of employee’s remuneration as payroll tax;
- Latvia has signed 55 double taxation treaties with countries including China, Germany, Singapore, U.K. and the United States;
- Healy Consultants will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records iv) preparing forecasts, budgets, and sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
Healy Consultants’ Compliance Department assists our Clients to fulfill all annual legal and tax obligations.
- The minimum wage in Latvia is €320 per month;
- Employers are required to make monthly social security contributions of 24% of an employee’s salary;
- Employers must withhold personal income tax at a rate of 24% of the employee’s salary;
- Probation period shall not exceed 3 months for employees;
- Standard working time is 40 hours a week. Overtime work is accepted at standard pay, but should not exceed 48 hours in a month;
- Employees are entitled to 4 weeks of paid vacations per year;
- Latvian law bars discrimination in matters of employment on the grounds of gender, sexual preferences, ethnicity or race, religion and political or union affiliation;
- Employers are required to give a 1 month notice for termination of employment.
- Transfer pricing rules follow OECD guidelines. Consequently, companies with more than €1 million annual turnover are required to i) disclose to the State Revenue Service transactions larger than €10,000 and ii) retain transaction documents for up to 5 years;
- Any change in the company board or shareholders registry must be disclosed to the Register of Enterprises.
- Latvian LLC requires at least 1 director and 1 shareholder, who can be of any nationality. Furthermore, the minimum paid up capital for an LLC registration is €2,800;
- Only fully-paid up shares can be transferred in Latvia, unless specifically stated in the Articles of Association;
- Firms must adhere to the Anti-money Laundering Law in Latvia, which outline customer due diligence when dealing with foreign Clients. A Client’s money laundering risk is assessed based on i) country of residency ii) type of company established in Latvia iii) operational activities of the company iv) personal activities of the Client.