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Last updated, August 2008
  • An individual's salary income is taxable, as at 2008, at the rate of 25%.The tax rate for business income is 15%.
  • An individual whose income is from a foreign shipping company pays tax in the amount of 2 minimum wages.
  • Exemptions are granted to taxpayers with specific types of income.
  • The standard rate of tax for a corporation in 2008 is 15%.


Income Tax for an Individual
  • An individual in Latvia is liable for tax on his income as an employee and on income as a self-employed person.
    In the case of an individual who answers the test of a "permanent resident" of Latvia, tax will be calculated on his income earned in Latvia and overseas.
    A foreign resident pays tax only on his income in Latvia.
  • To be considered a Latvian resident, an individual must meet the requirement of residence in Latvia for at least 183 consecutive days in a 12 month period that begins or ends in the calendar tax year. Occasionally, an individual will be considered a Latvian resident even if he is resident in Latvia for less than 183 days if he/she owns a home in Latvia that is his/her permanent residence.
  • An employer is obligated to deduct, immediately, each month, the amount of income tax and national insurance due from a salaried worker.
  • Certain payments are deducted from taxable income, as will be specified further.


CORPORATE TAX LATVIA

  • The standard rate of corporate tax in 2008 in Latvia is 15%.
  • A new company may ask for its first financial statements to be submitted for a period of up to 18 months from the date on which the company was founded.




CAPITAL GAINS

  • Foreign, non-resident, companies that sell real estate in Latvia, must deduct a final tax of 2% from the proceeds of the sale.
  • An individual who sells real estate is exempt from tax on the condition that he has held the property for at least 12 months.
  • Capital gains of companies in Latvia are added to regular income.
  • Individuals pay 25% capital gain tax on sale of real estate or shares of a real estate company. The tax rate for self employed is 15%.


REPORTING DATES AND PAYMENT

  • The tax year in Latvia ends on December 31, however companies may select a special tax period.
  • A limited company submits its annual return up until 4 months from the end of the tax year. Large companies may submit their annual reports up to 7 months from the end of the tax year.
  • The tax due must be paid within 15 days of submission of the annual return.




DEDUCTION OF TAX AT SOURCE

Taxation of Employees
  • As regards salaried employees, the employer is obligated to deduct tax at source from the salaried employee and to make additional contributions to social security.
  • In 2008, the employer's contribution to national insurance is 24.09% and that of the employee - 9%.
  • Self employed pay 28.02% for national insurance.
  • A Latvian resident who is employed in Latvia by a non-Latvian company pays national insurance at the rate of 33%.


Tax must be deducted at source for foreign residents on the following basis:
Other deductions (from the year 2004):
  • Dividend - the usual deduction is 10%.
  • Interest - for associated parties - the deduction at source - 10%.
  • Royalties - deduction at source of 5% -15%.
  • Payments to company managers and directors - 10% deduction at source.
  • Receipts from the sale of real estate in Latvia - 2% deduction at source.
  • Real estate rental - 5%.


Comments:
  • Deduction at source for payments to foreign residents is subject to the Double Taxation Prevention Treaty.
  • In most cases, there is an exemption for deduction at source on a dividend paid to shareholders who are residents of the EU.
  • In most cases, payments to foreign residents that are defined as a "tax haven" must have tax deducted at source at the standard rate of corporation tax in Latvia.







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