Latvia is becoming one of the top options for global investment opportunities. With that, understanding how taxes in Latvia work are vital for success.
In this guide, you will learn about:
- Who pays tax in Latvia
- Income tax in Latvia
- Latvia corporate tax rate
- Capital gains tax in Latvia
- Social tax in Latvia
- Dividend tax in Latvia
- Non-taxable minimum in Latvia for 2024
- Taxes for freelancers in Latvia
- VAT in Latvia
- Crypto taxes in Latvia
- Real estate taxes in Latvia
- Latvia double tax treaties
Who pays tax in Latvia?
The tax system in Latvia only applies to tax residents. Latvian tax residents are taxed on their worldwide income, while non-residents are only taxed on Latvian-sourced income.
To be considered a tax resident of Latvia, you need to reside in the country for more than six months (183 days or more) within any 12-month period.
An investor can stay in Latvia for up to 182 days within any 12-month period without becoming a tax resident. Staying beyond this limit will trigger tax residency status. Besides the number of days test, individuals can also become tax residents in Latvia if they are deemed to have a primary permanent place of residence in Latvia.
The Latvia Golden Visa program is increasing in popularity, and with one of the investment options being real estate, it’s essential to know how the tax residency rule apply.
Read our Latvia Golden Visa Guide
Income Tax in Latvia
Latvia has a progressive personal income tax system, meaning individuals are taxed based on their income rate. Here is the current personal income tax rate in Latvia:
Income up to €20,004 | 20% |
Income between €20,004-€78,100 | 23% |
Income over €78,100 | 31% |
Personal income tax on dividends and other income in Latvia stands at 20%. But this is only applicable if the company paying the dividends has not already paid corporate income tax. This is applicable for:
- Latvian companies and those in the EU/EEA, excluding companies from tax havens or those under the Micro-Business Tax (MBT)
- For companies outside the EU/EEA, individuals must present evidence of PIT or CIT paid abroad to claim the exemption.
- While EU/EEA dividends are assumed tax-compliant, Latvian tax authorities often request confirmation of tax paid.
Latvia Corporate Tax Rate
The standard corporate income tax rate in Latvia is 20%. Corporate income tax is only due when profits are
distributed as dividends or deemed to be distributed. In other words, all undistributed corporate profits (money not retained or reinvested into the company) are exempt. This exemption covers both active (e.g. trading) and passive (e.g. dividends, interest, royalties) types of income.
According to Latvian legislation, corporate tax in Latvia applies to both Latvian resident companies and non-resident companies’ permanent establishments (PEs) registered in Latvia.
It’s important to note that credit service providers may be liable for an additional 20% corporate tax, depending on the financial performance of the company.
Capital Gains Tax in Latvia
Capital gains are generally taxed at a rate of 20% for capital assets. Capital gains tax in Latvia applies to gains from the sale of capital asset held by individuals, including real estate, securities, and shares.
There are some exceptions, including:
- There is no capital gain due if the Latvian property has been the individual’s primary residence for at least 12 months.
- Profit obtained from property sales if the property was held for more than 60 months may be exempt under certain circumstances. For example, it the profits are used to reinvest in another property in Latvia.
Social Tax in Latvia
Social tax in Latvia, also known as social insurance contributions, are a mandatory tax covering:
- Healthcare
- Unemployment benefits
- Maternity leave
It is mandatory for all employees and employers to contribute to the social tax in Latvia, both combined equal to 34.09%. Here are the rates:
Employers | 23.59% |
Employee's | 10.5% |
There is a contribution ceiling that is set by the government annually. Taxable income that exceeds this ceiling falls within Solidarity Tax.
While the Solidarity Tax is set at the same rate of 34.09%, there is a distinct difference between the two tax types. Social insurance contributions directly fund the contributor’s personal benefits, such as pensions and social security entitlements. In contrast, the Solidarity Tax is used to fund the broader social and healthcare system.
This means that high-earning individuals who pay the Solidarity Tax do not see direct personal benefits from their contributions (since their social insurance benefits are capped), but they are still required to contribute to support the overall system.
Dividend Tax in Latvia
Dividend taxes are imposed on payments made from companies to their shareholders from company profits.
For individuals, dividends tax is set at a flat 20% personal income tax (PIT) rate for individuals. This applies to both residents and non-residents, unless there is a double taxation treaty specified for the non-resident.
For companies, if corporate taxes have already been paid on profits, then there are no dividends to be paid by shareholders. However, if corporate income tax hasn’t been paid then the company is liable for the same 20% dividends tax before the money is paid to shareholders.
Non-Taxable Minimum in Latvia for 2024
Non-Taxable minimum refers to a portion of a person’s income that is exempt from tax all together. This helps
lower income earners by ensuring they pay less or no tax if their income falls under the minimum income.
In Latvia, the non-taxable minimum for 2024 remains differentiated, depending on the taxpayer’s income level. The maximum monthly non-taxable amount is €500, applicable to those with the lowest incomes.
Higher earners, the amount reduces proportionally and phases out for monthly incomes higher than €1,800.
The plan for Latvia taxes in 2025 will see the differentiated system replaced with a fixed non-taxable minimum of incomes less than €510 per month.
Taxes for Freelancers in Latvia
Freelancers with a Latvian passport are taxed with the same personal income tax rates as all other residents. However, they can make deductions from expenses related to work. This may be up to as much as 80% of their income granted, they have the correct proof and documentation to show expenses.
Now, if a freelancer, self-employed persons, or small business has an annual revenue of up to €40,000, they may fall under the Microenterprise Tax (MET). This tax is set at a fixed 25% of revenue and covers both social contributions and all personal income taxes.
For foreign nationals working as freelancers in Latvia you can apply for a long stay visa in Latvia for up to a year, as long as you are employed by a company situated in a member state of the Organization for Economic Cooperation and Development.
Foreign remote workers in Latvia are exempt from paying taxes as long as they acquire the correct documents, including:
- Proof of current employment from the tax office or social insurance institution of an OECD member state.
- A certificate from the employer confirming six months of prior employment, a salary of at least €3,843 per month, and the ability to work remotely.
Alternatively, if you’re looking for a more permanent option, Latvian citizenship is achievable through naturalization, marriage, and descent.
VAT in Latvia
Value added tax (VAT) is a consumption tax included in the cost of services and goods. VAT in Latvia is set at 21%, but there are some reduced VAT rates for specific goods and services, including:
Item | VAT rate |
Medical products and supplies | 12% |
Books and press publications | 12% |
Hotel services | 12% |
Fresh produce | 5% |
Important to note: As a member of the EU, all items imported into Latvia from outside the EU are subject to customs duty as set out by the EU’s customs tariff, including VAT.
Crypto Taxes in Latvia
Profits made from cryptocurrencies are generally taxed as capital gains tax in Latvia. The capital gains rate is set at 20%. However, if a company is trading crypto in Latvia, this may be seen as corporate tax rather than capital gains.
Real Estate Taxes in Latvia
Real estate taxes in Latvia are based on the value of the building, land, or structure owned. There are various real estate tax rates depending on the type of property, including:
Residential properties
Property value | Tax rate |
Up to €56,915 | 0.2% |
Between €56,915-€106,715 | 0.4% |
Exceeding €106,715 | 0.6% |
Land and commercial property
Land and commercial property in Latvia are typically taxed at 1.5% of the total tax base value.
Tax on selling property (Capital Gains Tax)
If you have capital gains from selling a property, you must pay 20% of the total sale amount. But there are some exemptions, including:
- If you have owned the property for more than five years and reinvested the money into purchasing another property within 12 months,
- If the property was your primary residence for a minimum of 12 months before the sale.
Property transfer tax in Latvia
A transfer tax of 3.75% is charged when buying real estate in Latvia. The tax is based on the highest value among the purchase price, the property’s cadastral value, or its valuation for a mortgage.
Latvia Double Tax Treaties
Latvia has signed double tax treaties (DTTs) with 63 countries to prevent double taxation and fiscal evasion concerning taxes on income and capital. Latvia has signed DTTs with:
- All European Union countries
- USA
- Canada
- Australia
- Switzerland
- Japan
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Frequently Asked Questions About Taxes in Latvia
Does Latvia have high taxes?
Taxes in Latvia are moderate compared to other European countries. The personal income tax system uses progressive rates ranging from 20%-31%, and the standard VAT rate is 21%, which is similar to many EU nations.
What is the property tax rate in Latvia?
Property tax in Latvia varies based on property type and value. Residential immovable property tax ranges from 0.2%-0.6% based on property value. Commercial properties and land are taxed at a flat rate of 1.5%.
How do taxes work in Latvia?
Taxes in Latvia are applicable to those considered tax residents. Tax residents in Latvia are required to pay income tax, social contributions, property tax, and VAT.
What is the income tax rate in Latvia for 2024?
The income tax rate in Latvia is dependent on the personal income rate and works as follows:
- Income up to €20,004: 20%
- Income between €20,004-€78,100: 23%
- Income over €78,100: 31%
How is Latvia’s progressive income tax system structured?
Latvia’s progressive income tax system is structured in three tiers, with different tax rates applied based on annual income levels. Dividends are taxed separately at a flat rate of 20%.
What is the corporate tax rate in Latvia in 2024?
The standard corporate income tax rate in Latvia in 2024 is 20% which can be paid to the Latvia State Revenue Service annually.
Are there any tax incentives for companies in Latvia?
Yes, corporate income tax is 0% on reinvested profits, making Latvia attractive for businesses.
What are the social tax rates in Latvia for employers and employees in 2024?
It is mandatory for all employees and employers to contribute to the social tax in Latvia, both combined equal to 34.09%. Employers are liable for 23.59% and employees are liable for 10.5%.
Is there a tax on dividends in Latvia for residents and non-residents?
For individuals, dividends tax is set at a flat 20% personal income tax (PIT) rate for individuals. This applies to both residents and non-residents, unless there is a double taxation treaty specified for the non-resident.
What is the non-taxable minimum income in Latvia for 2024?
The non-taxable minimum in Latvia for 2024 remains differentiated, depending on the taxpayer’s income level. The maximum monthly non-taxable amount is €500 for lower incomes. For higher incomes, this phases out for monthly income higher than €1,800.
Do freelancers from the USA need to pay taxes in Latvia?
This depends on the tax residency status. If you are a non-tax resident you are only liable for taxes on Latvian-sourced income. There is also a double tax treaty between Latvia and the USA which helps avoid being taxed twice.
How does Latvia tax income earned from cryptocurrency?
Profits made from cryptocurrencies are generally taxed as capital gains tax in Latvia. The capital gains rate is set at 20%. However, if a company is trading crypto in Latvia, this may be seen as corporate tax rather than capital gains.
How are foreign nationals taxed on property income in Latvia?
Those that obtain income from rent are taxed at 20% if it exceeds €2,250 per year for foreigners in Latvia. Capital gains tax is 20% on profit from selling property unless exemptions apply, and there is 21% VAT on new property sales.
Does Latvia offer any tax exemptions for foreign investors in real estate?
Latvia does not offer specific tax exemptions for foreign investors in real estate. However, there are general provisions, such as the capital gains tax exemption for primary residences and reinvestment, that could benefit foreign property owners in Latvia.
