Riga
EY
Muitas iela 1A
LV-1010 Riga
Latvia
Executive contacts
Ilona Butane
Sandra Usane
Immigration contacts
Ilona Butane
Sandra Usane
A. Income tax
+371 6704-3836
Fax: +371 6704-3802
Email: ilona.butane@lv.ey.com
+371 6704-3967
Fax: +371 6704-3802
Email: sandra.usane@lv.ey.com
+371 6704-3836
Fax: +371 6704-3802
Email: ilona.butane@lv.ey.com
+371 6704-3967
Fax: +371 6704-3802
Email: sandra.usane@lv.ey.com
Who is liable. Residents are subject to Latvian personal income tax on their worldwide income. Nonresidents are subject to tax on their Latvia-source income.
Under the Latvian law, an individual is considered to be a resident of Latvia if any of the following conditions are satisfied:
• The individual’s registered (declared) place of residence is located in Latvia.
• The individual stays in Latvia for 183 days or longer in a 12-month period beginning or ending during the tax year.
• The person is a citizen of Latvia and is employed abroad by the government of Latvia.
If a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital is concluded between Latvia and another jurisdiction, its provisions prevail over the local regulations when defining residency status.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Progressive personal income tax is imposed on employment income earned by individuals at the following rates.
• Up to EUR20,004 per year (EUR1,667 per month): 20%
• From EUR20,004.01 to EUR78,100 per year (from EUR1,667.01 to EUR6,508.33 per month): 23%
• More than EUR78,100 per year (more than EUR6,508.33 per month): 31%
Income from a substantial participation in a foreign entity. Income from a substantial participation in a foreign entity that is registered in a low-tax country is subject to income tax, regardless of whether the profit is distributed to the individual.
Benefit from use of company’s car. The use of an employer’s car for private purposes is considered to be a benefit to the employee that is subject to personal income tax, unless the employer has paid tax on the use of its vehicles. The amount of tax for the use of vehicles registered after 2009 ranges from EUR33 to EUR140 per month, depending on the vehicle’s engine capacity.
Capital gains. Capital gains are taxed at a rate of 20% in Latvia.
Capital gains equal the difference between the disposal price of a capital asset and the acquisition price of that capital asset. In the event of the liquidation of a company, the capital gains on investments in share capital equal the difference between the liquidation quota and the investment value.
The following are considered to be capital assets:
• Shares, investments in partnerships and other financial instruments
• Investment fund certificates and other transferable securities
• Debt securities (promissory notes, certificates of deposit and short-term debt instruments issued by companies) and other money instruments
• Real estate (with certain exceptions)
• Investment in cryptocurrency
• A company within the meaning of the commercial law
• Intellectual property
• Investment gold and other precious metals, and transaction objects in currency trading exchanges or goods’ exchanges
Capital gains derived from the sale of real estate are not taxable if any of the following circumstances exist:
• The individual has owned the real estate for more than 60 months, and the address of the real estate had been the person’s declared place of residence for at least 12 months before the sale.
• The individual has owned the real estate since it was registered in the Land Register for more than 60 months, and the real estate had been the only real estate possessed by the individual.
• The individual had owned only the real estate declared in the Land Register and the income from the property sale is invested in functionally similar property within 12 months before or after the sale of the real estate.
Sales of other types of personal property in one-off transactions that are not part of a commercial activity are not subject to personal income tax.
Income, including sales income, from government promissory notes is not subject to personal income tax.
Deductions
Deductible expenses. Individuals may deduct the employees’ portion of social security contributions from the income reported on their tax returns. They also may deduct the employees’ portion of payments in other European Union (EU)/European Economic Area (EEA) Member States that are essentially similar to social
security contributions and that are determined by legislative acts of such states if the respective payments have not been deducted in the other state.
Personal deductions and allowances. Individuals may deduct the following expenses from the income reported on their tax returns:
• Contributions to private pension funds and to life insurance schemes with the accumulation of contributions. However, the deduction for the sum of both types of contributions is limited to 10% of annual taxable income, but not more than EUR4,000 per year.
• Contributions to life insurance schemes without the accumulation of contributions and to health or accident schemes. However, both types of contributions are limited to 10% of annual taxable income but not more than EUR750 per year.
• Medical expenses, expenses for professional education and donations to acceptable charitable organizations and governmental institutions. However, such expenses are limited to 50% of annual taxable income, but not more than EUR600 per year.
The current differentiated nontaxable minimum (used to reduce the amount of taxable income) ranges from EUR0 to EUR500 per month, depending on an individual’s income. For an individual whose monthly income does not exceed EUR500, the full amount of the nontaxable minimum applies. However, for income between EUR500 and EUR1,800 per month, the nontaxable minimum decreases, and if the income exceeds EUR1,800 per month, the nontaxable income minimum equals EUR0.
A parent may deduct EUR250 per child per month.
The above tax allowance in the amount of EUR250 cannot be applied for parents, grandparents and other family members, unless these persons have a disability status and do not receive a state pension. Effective from 1 July 2018, the allowance in the amount of EUR250 applies to an unemployed spouse if any of the following conditions are satisfied:
• He or she has a dependent child under the age of three.
• He or she has three or more children under the age of 18 or 24 and at least one child is under seven years old, until the children pursue basic, professional, higher or special education.
• He or she has five children under the age of 18 or 24, until the children pursue professional, higher or special education.
Income tax paid abroad may be credited against tax payable in Latvia. The amount of the credit is limited to the amount of the tax paid on the income in Latvia.
If a Latvian resident earns employment income for work in the EU, EEA or in a country with which Latvia has entered into a double tax treaty, and if the respective income is subject to income tax in the work country, the income is non-taxable in Latvia. As a result of the automatic exchange of information between tax authorities, Latvian tax residents who work in EU countries are exempt from the submission of an annual personal income tax return in Latvia. However, Latvian tax residents who work in other countries must declare the foreign employment
If a company from an EU/EEA Member State employs citizens of Latvia, it must register with the State Revenue Service in Latvia for the purpose of social security contributions or the employee can register as a social security contribution payer. Regulation (EC) No. 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems applies to nationals of a Member State stateless persons and refugees residing in an EU Member State who are or have been subject to the legislation of one or more of the EU Member States, as well as to the members of their families and to their survivors.
D. Tax filing and payment procedures
The tax year in Latvia is the calendar year.
Employers must withhold taxes and social security contributions on personal salary and then remit the withheld amounts to the fiscal authorities monthly on the same day the salary is paid.
Every taxpayer receives a tax code number from the fiscal authorities. Individual taxpayers must submit an annual tax return, but they may authorize a certified auditor to submit the return on their behalf. In general, the tax return must be filed during the period of 1 March to 1 June of the year following the tax year. However, if income for the tax year exceeds EUR78,100, the tax return must be filed during the period of 1 April to 1 July of the year following the tax year.
A nonresident who permanently leaves Latvia before year-end must file an annual tax declaration within 30 days after he or she stops receiving income.
If the tax payable exceeds EUR640, the tax may be paid in three equal installments. These installments are due on 23 June, 23 July and 23 August of the year following the tax year if the filing deadline is 1 June. If the filing deadline is 1 July, the installments must be paid by 23 July, 23 August and 23 September.
The following are the rules for the filing of a capital gains tax return:
• If capital gains do not exceed EUR1,000 per quarter, a capital gains tax return must be filed by 15 January of the year following the tax year.
• If capital gains exceed EUR1,000 per quarter, a capital gains tax return must be filed for the quarter by the 15th day of the month following the respective quarter.
If an individual realized capital gains and incurred capital losses during the tax year, he or she can submit an annual capital gains tax return by 1 March of the year following the tax year to calculate tax on capital gains based on a summary procedure.
E. Double tax relief and tax treaties
Foreign taxes paid may be credited against Latvian tax liability on the same income. The exemption method applies to income derived in Lithuania.
Latvia has entered into double tax treaties with the following jurisdictions.
Albania Iceland Portugal
Armenia India Qatar
Austria Ireland Romania
Azerbaijan Israel Saudi Arabia
Belarus Italy Serbia
Belgium Japan Singapore
Bulgaria Kazakhstan Slovak Republic
Canada Korea (South) Slovenia
China Mainland Kosovo Spain
Croatia Kuwait Sweden
Cyprus Kyrgyzstan Switzerland
Czech Republic Lithuania Tajikistan
Denmark Luxembourg Türkiye
Estonia Malta Turkmenistan
Finland Mexico Ukraine
France Moldova United Arab
Georgia Montenegro Emirates
Germany Morocco United Kingdom
Greece Netherlands United States
Hong Kong North Macedonia Uzbekistan
SAR Norway Vietnam
Hungary Poland
Latvia and Pakistan have signed a tax treaty, but it has not yet entered into force.
Latvia has initialed but not yet signed tax treaties with Andorra, Bosnia and Herzegovina, Egypt, Liechtenstein, Mongolia, and Tunisia.
Latvia is currently negotiating double tax treaties with Australia, Jordan, Lebanon and Sri Lanka.
Starting from 1 January 2024, the convention between the government of Latvia and the government of the Russian Federation lost its validity based on Article 31 of the convention.
F. Entry visas
All Member States of the Schengen Agreement have unified procedures and conditions for issuing Schengen visas. The Schengen visa is a visa that provides to a foreigner the right to stay in Latvia and in other Schengen Member States for a period indicated in the visa sticker.
Types of visas. The types of Schengen visas are described below.
Airport transit visa (Category A). An airport transit visa (Category A) may be issued for a stay in an international transit zone at the airport of a Schengen Member State An airport transit visa is required for nationals of certain countries who need to change an airplane at the airport of a Schengen Member State or whose airplane lands in the airport of a Schengen Member State on the way from one non-Schengen Member State to another nonSchengen Member State.
Short-term visa (Category C). A short-term visa (Category C) is issued for a short-term visit to Schengen Member States or for transit through such states. Depending on the purpose of the visit, it may be issued for one, two or multiple entries. An entry means crossing the border between a Schengen Member State and a
employment or commercial activity and investments), who was employed in Latvia in the last three months before requesting a repeated temporary residence permit and for whom personal income tax payments were made and who continues to exercise the granted right to employment
For citizens of Belarus, a more favorable procedure for issuing residence permits entered into force, a ban on issuing repeated temporary residence permits was established, and the circle of persons to whom this ban does not apply was expanded. These amendments took effect on 24 September 2022.
First-time and repeated temporary residence permits can be requested for the following:
• A private visit (once a calendar year for six months to a Latvian citizen, a non-citizen, a foreigner who has received a permanent residence permit or a relative
• An individual merchant, self-employed person, official registered in the commercial register, representative of a representative of a foreign merchant or founder of a startup company
• An employed person (for any type of employment)
• A pupil, student, researcher or intern
• A person placed in an inpatient treatment facility
• Family reunification
• A person granted stateless, temporary protection or alternative status in Latvia
• A person performing a religious activity
• A person who has been granted the status of a permanent resident of the EU in Latvia or has been granted such status in another EU Member State
• Any person, regardless of the reason for the temporary residence permit issued to him (including, but not limited to, startup, employment or commercial activity and investments), who was employed in Latvia in the last three months before requesting a repeated temporary residence permit and for whom personal income tax payments were made and continues to exercise the granted right to employment
Citizens of the Russian Federation and Belarus can request temporary residence for one year.
The amendments to the Immigration Law also provide for broader possibilities to refuse or revoke residence permits if either of the following apply:
• The foreigner has publicly glorified, denied or justified genocide, crimes against humanity, crimes against peace or war crimes.
• The foreigner has provided substantial financial, material or propaganda support or other forms of support to persons or states that undermine or threaten the territorial integrity, sovereignty and independence or constitutional order of democratic states or the foreigner has committed such acts or has otherwise acted contrary to the interests of national security or public order and safety.
H. Family and personal considerations
Family members. Spouses and dependents of expatriates may apply jointly with the expatriate for residence permits as well as
work permits. They must provide legalized copies of marriage and birth certificates to obtain Latvian visas or residence permits.
Marital property regime. The default marital property regime in Latvia is one of community property. Spouses may establish, alter or terminate their property rights by marital contract before or during the marriage. Under the community property regime, property owned by a spouse prior to marriage and property acquired during the marriage is community property, unless specifically reserved as separate property by contract.
Forced heirship. Forced heirs in Latvia include a surviving spouse and any descendants, or the most closely related ascendants. The amount of their legal portion varies, according to the number of forced heirs surviving.
Driver’s permits. Latvia recognizes foreign driver’s licenses in accordance with the European Convention on Road Transport, including international driver’s licenses. In other cases, if a foreign national resides in Latvia longer than 12 months, he or she must exchange the foreign driver’s license for a Latvian driver’s license. To obtain a Latvian license, the foreign national must take a driving test. Licenses issued by EU-member countries are valid in Latvia.