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Last partial update, May 2011
- An individual's business and salary income is taxable, as at 2011, at the rate of 25%. The tax rate for An individual's capital gain is 15%.The tax rate for other investment income is 10%.
- Exemptions are granted to taxpayers with specific types of income.
- The standard rate of tax for a corporation in 2011 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 in Latvia
- The standard rate of corporate tax in 2011 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.
Latvia 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.
- Capital gains of companies in Latvia are added to regular income.
- Individuals pay 15% capital gain tax on sale of real estate and other assets, including shares.
Latvia 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.
Latvia 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 2011, the employer's contribution to national insurance is 24.09% and that of the employee - 11%.
- 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 35.09%.
Tax must be deducted at source for foreign residents on the following basis:
- Dividend - the usual deduction is 10%.
- Interest - for associated parties - the deduction at source - 10%.
- Royalties - deduction at source of 5% -15%.
- Payments for management and consulting services - 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 or EEA countries.
- 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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