Tax Card 2015: Personal income tax in Latvia

Structure

Personal income tax is imposed on income acquired by a natural person, and it consists of:

• salary tax calculated from the income acquired by the employee and is paid by the employer;
• fixed income tax regarding income from economic activity;
• tax for income from economic activity where it is not the object of the enterprise income tax, and tax from other sources of income;
• tax for income from capital, including tax from increase of capital;
• licence fees for the performance of separate types of economic activities; and
• the parts of the micro-enterprise tax in accordance with the Micro-enterprise Tax Law.

Taxpayers

Personal income tax is paid by natural persons:

• domestic taxpayers (residents) who have obtained income in the Republic of Latvia and/or foreign states during the taxation period;
• foreign taxpayers (non-residents) who have obtained income in the Republic of Latvia during the taxation period;
• the owners of individual businesses, including farms and fisheries, who have gained income during the taxation period what is not imposed with corporate income tax;
• owners of micro-enterprises in accordance with the Micro-enterprise Tax Law. 

Taxable objects

Personal income tax is applied to the domestic tax payer’s amount of the taxable income of the taxation period. The object of the salary tax shall be the monthly taxable income of the tax payer. The part of a micro-enterprise income shall be imposed with the tax in accordance with the Micro-enterprise Tax Law.

The taxable income of the foreign taxpayer (non-resident) is employment income, income from professional activities, income from the professional activities of artists, sportsmen or trainers, income from the performance of duties in a council or board of directors of a capital company etc.

Tax rate in Latvia

The tax rate is 23% from the annual taxable income, from monthly taxable income and income of economic activity. To get more information on reduced tax rates, please contact Gencs Valters Law Firm.

Tax is calculated and paid into the budget:

• Salary tax of the payer is paid by the employer;
• If the payer is employed by an employer – a foreign tax payer, the salary tax is paid by the employer or the payer himself; and
• Salary tax of such payer whose work is remunerated from foreign financial or technical assistance or loans from international financial institutions – is paid by the employer or the payer himself.

The payer pays the tax in conformity with the declaration in accordance with summary procedures. Advance payments of the tax are made during the taxation year.

For a natural person – non-resident, with the acquisition of the status of a resident, the final tax shall be the tax calculated and paid into the budget.

Tax declarations 

The calculation of tax and payment of tax into the budget shall be performed by the payer. Tax shall be calculated for the total amount of the annual taxable income and not later than within 15 days from the day of the submission of the declaration, a payer shall pay the amount of the calculated tax into the budget. If the amount of the calculated tax exceeds 640 EUR, the payer may pay it into the budget in three payments – up to 16 June, 16 July and 16 August paying in each time one third of the amount. The State Revenue Service verifies the reliability and correctness of the data presented in the declaration, performs control of the payment of personal income tax and completeness and correctness of the income and expenditure.

Tax relief

The payer has the right to not submit the declaration if:

• the payer during the taxation year in the Republic of Latvia has received income, from which tax has been deducted at the place of payment,
• if the total amount of non-taxable income received by him does not exceed four time the amount of the non-taxable minimum specified for the taxation year,
• payer does not need to indicate in the declaration income acquired in accordance with PIT Law,

The mentioned conditions are applicable to cases established in PIT Law.

A foreign taxpayer (non-resident) does not have to submit the declaration, except in the cases where the non-resident:

• receives the income established in PIT Law, as well as receives income from employer who is not a resident of Latvia or who does not have a permanent representation in Latvia, or receives the income from commercial companies, which are not residents of the Republic of Latvia;
• receives the income referred to in PIT Law from natural persons who are not referred to in PIT Law;
• receives the income for which tax has not been withheld in place of payment; or
• being a resident of another Member State of the European Union or a European Economic Area state, in the taxation year has acquired more than 75 per cent of his total income in Latvia and wishes to apply in the taxation year the non-taxable minimum in accordance with PIT Law, the tax relief in accordance with PIT Law and the eligible expenditures in accordance with PIT Law.

The relief for the declaration of income is not applicable to payers obtaining income from economic activity.

Budgetary Competence  

The amounts of the tax are included into the budget of the local government of the tax payer’s place of residence and into the State basic budget according to the allocation specified in the Annual State Budget Law.

Taxation treaties

In Republic of Latvia are in force and are applied Taxation treaties with more than 50 countries.

For full TAX CARD 2015: Personal tax in Baltics click below: