Income tax in Latvia
July 13, 2017
Residents are taxed on their worldwide income. An individual becomes a resident of Latvia if (1) he has a permanent place of residence in Latvia, (2) he is present in Latvia for 183 days or more during any 12-month period, or (3) he is a national of Latvia employed abroad by the Latvian government. Married couples are taxed separately.
Income is generally categorized into the following: (1) income from employment, salaries, and wages, (2) income from business activities, which is levied on business income not subject to corporate income tax, and (3) income from property and other sources. Taxable income is generally an aggregate of all kinds of income less expenses incurred in the generation of income.
Residents in Latvia are liable to pay income tax at a flat rate of 23% on all earned income and business income.
Residents are entitled to the following deductions and allowances:
An allowance of LVL45 (€85) per month or LVL540 (€1,014) per year, called “the non-taxable minimum amount”, is deductible for each taxpayer.
- An allowance for dependants, most importantly children and unemployed spouse, at LVL80 (€107) per month or LVL960 (€1,280) per year for each dependant as of 01 July 2013. The allowance for dependants is LVL70 (€93) per month or LVL840 (€1,120) per year for each dependant until 30 June 2013.
- Life and health insurance premiums, as well as contributions to approved private pension funds are deductible within certain limits
- Donations to approved cultural, educational, scientific, sporting, charitable, health, environmental and religious organizations, as well as governmental institutions are deductible up to 20% of taxable income
- Medical and educational expenses incurred on behalf of the taxpayer and his or her immediate family, within prescribed limits
Rental income is taxed at the standard income tax rate of 23%. Property taxes and depreciation expenses are deductible. The annual tax depreciation rate of buildings is allowed up to 10% of the property value.
Gains from the sale of real estate property are taxed at a special rate of 15%. Taxable capital gains are computed as selling price less acquisition costs and other related expenses.
Capital gains from the sale of a taxpayer’s private residence are not taxable.
Real Estate Tax
Real estate tax is levied in Latvia at 1.5% for properties used for business activities. The tax is levied on the cadastral value of the property, as calculated by the local authorities.
As of 01 January 2013, local authorities can set the rate of real estate tax on their jurisdiction within a range of 0.20% to 3%. If the local authorities do not announce a different rate, the standard real estate tax rate of 1.5% will apply.
Real estate tax paid is also deductible for income tax purposes if the real estate property is used for business or commercial purposes.
As of 01 January 2010, residential houses and apartments not used for business purposes are also subject to real estate tax. Progressive rates have been set for residential properties.
REAL ESTATE TAX FOR RESIDENTIAL PROPERTIES
|TAX BASE, LVL (€)||TAX RATES|
|Up to 40,000 (€53,333)||
|40,000 - 75,000 (€100,000)||0.4%|
|Over 75,000 (€100,000)||0.6%|
|Source: Global Property Guide|
Income and capital gains earned by corporations are taxed at 15%. Income-generating expenses and depreciation expenses are all deductible. The annual tax depreciation rate of buildings is allowed up to 10% of the property value.