Tax in Latvia

Who is the tax authority and where do filings live?

Latvia's Valsts ienemumu dienests (VID, State Revenue Service), under the Ministry of Finance, administers Latvia's tax and customs system [SC1]. Filings flow through the Electronic Declaration System (EDS) at eds.vid.gov.lv. The credentialed Latvian tax-and-accounting professions are CA Latvia regulated by the Latvian Association of Certified Auditors. Substantive law: Personal Income Tax Law (Iedzivotaju ienakuma nodokla likums), Corporate Income Tax Law 2017 (Uznemumu ienakuma nodokla likums, distributed-profits-only model effective 1 January 2018), VAT Law (Pievienotas vertibas nodokla likums), Tax Procedure Law, and successive amendments. Latvia has been an EU member since 2004 and applies the EU VAT Directive 2006/112/EC; euro adoption 1 January 2014; Schengen since 21 December 2007.

What is the tax year and when are returns due?

The individual tax year is the calendar year. Personal income tax returns are due 1 April to 1 July of the year following the tax year (or by 1 October for high-income filers) via EDS [SC1]. Corporate distributions trigger monthly tax-event filings under the Estonian-model framework. VAT returns are filed monthly by the 20th of the following month under the standard regime. Annual financial statements are required for in-scope corporations.

Who is a Latvian tax resident?

Under the Personal Income Tax Law, an individual is tax resident in Latvia if (a) maintaining their permanent residence (declared residence) in Latvia, OR (b) being physically present in Latvia for at least 183 days in any 12-month period [SC2]. Residents are taxed on worldwide income; non-residents on Latvian-source income at flat or schedular rates. Treaty tie-breakers apply.

What are the personal income tax rates?

Personal income tax brackets for 2024: 20 percent up to EUR 20,004 of annual taxable income; 23 percent on EUR 20,004-78,100; 31 percent above EUR 78,100 [SC1]. Personal allowance up to EUR 6,000 annually (tapering above income thresholds). Investment income (dividends from Latvian companies) generally tax-exempt at shareholder level under the Estonian-model framework (since corporate-level tax has been paid on distribution). Capital gains face 20 percent flat. Mandatory social security contributions add 10.5 percent (employee-side) and 23.59 percent (employer-side).

How does Latvia's corporate tax work?

Latvia adopted the Estonian-model distributed-profits-only corporate income tax effective 1 January 2018 [SC2]. The headline rate is 20/80 (25 percent gross distribution-event base) for 2024. Withholding tax on dividends to non-residents is 0 percent under the distributed-profits-only model (with limited exceptions for distributions to specified low-tax/non-cooperative jurisdictions). Pillar Two QDMTT is pending implementation under the delayed-implementation election (Latvia, like Estonia, elected the EU Directive 2022/2523 Article 50 delayed implementation effective 31 December 2029). Tax loss carryforwards: not applicable under Estonian-model. R&D super-deduction and various sectoral incentives apply.

What about PVN (VAT)?

The standard VAT (Pievienotas vertibas nodoklis, PVN) rate is 21 percent under the VAT Law [SC3]. Reduced rates: 12 percent (basic foodstuffs, pharmaceuticals, books, accommodation, certain other categories) and 5 percent (specified categories). Zero-rated supplies include exports. Registration threshold is EUR 50,000 annual turnover. Reverse-charge mechanism applies. EU OSS/IOSS regimes apply.

How are cryptoassets taxed?

Latvia taxes individual cryptoasset disposal gains under the Personal Income Tax Law as 'income from capital' at 20 percent flat [SC2]. Mining and staking are 'self-employment' or 'business income' at applicable rates. EU MiCA Regulation applies from 30 December 2024 with crypto-asset service providers supervised by the Latvian Bank.

What is the treaty network and what are the audit triggers?

Latvia has approximately 60 active double tax treaties [SC4]. EU directives apply alongside treaties. Latvia ratified the OECD MLI on 29 September 2017 with modifications entering force from 1 February 2018 onward. Audit triggers include disproportionate VAT credits, transfer-pricing non-compliance, undeclared bank deposits flagged via DAC2/CRS, and EDS-data reconciliation. Standard SOL is 3 years; 5 years for material errors; extended for fraud.

What are the common penalties and pitfalls for foreigners?

The Latvian penalty framework imposes administrative-fine sanctions for late filings, failure to file, incorrect declarations, and failure to maintain accounting records [SC5]. Default interest accrues at the prevailing rate plus statutory margin. Tax-evasion criminal exposure under the Criminal Law carries fines and imprisonment for grossly-significant evasion. Common foreign-national pitfalls: (1) the Estonian-model distributed-profits-only corporate framework requires careful distribution-event tracking — corporate-level tax is triggered only on distributions, not on retained profits; (2) Pillar Two QDMTT pending under delayed-implementation election effective 31 December 2029; (3) the three-bracket PIT 20/23/31 percent above thresholds catches expat-package compensation; (4) the 31 percent top above EUR 78,100 monthly is meaningful for high-income roles; (5) MiCA from 30 December 2024 introduced CASP-licensing; (6) MLI ratified 2017 introduces PPT and other anti-abuse rules; (7) social security 10.5 employee + 23.59 employer; (8) PVN 21 percent registration threshold EUR 50,000; (9) EU member status brings full acquis-coordinated tax framework; (10) cross-border digital-services VAT under EU OSS/IOSS.