Tax laws Latvia
Latvia's taxation system comprises various taxes levied by both national and local governments. Below is an overview of the key tax laws and rates:
1. Personal Income Tax:
Flat Rate: Latvia imposes a flat personal income tax rate of 23% on all income.
Allowances: Taxpayers are entitled to a standard allowance of €900 per year and an additional €1,980 per year for each dependent.
2. Corporate Income Tax:
Distributed Profits: A 20% corporate income tax is applied to distributed profits.
Undistributed Profits: Undistributed profits are exempt from corporate income tax.
Small Businesses: A reduced rate of 15% is available for small businesses.
3. Social Security Contributions:
Employee Contributions: Employees contribute between 10.5% and 11% of their wages to social security.
Employer Contributions: Employers contribute between 22.59% and 24.09% of an employee's wages to social security.
4. Value Added Tax (VAT):
Standard Rate: The standard VAT rate is 21%.
Reduced Rates: Reduced rates of 12% apply to certain goods and services, such as medications and heating expenses.
Exemptions: Certain goods and services, including education, medical care, financial transactions, and rent, are exempt from VAT.
5. Excise Taxes:
Wine: Subject to an excise duty of €64.03 per 100 liters.
Coffee: Subject to an excise duty of €142.29 per 100 kg.
6. Recent Developments:
- Electronic Cigarettes Taxation: In December 2024, Latvia, along with 15 other EU countries, called for the inclusion of electronic cigarettes and other new tobacco products in the EU's tobacco taxation law. This initiative aims to standardize taxation across member states and address market fragmentation.
Note: Tax laws and regulations are subject to change. For the most current information, it is advisable to consult the State Revenue Service of Latvia or seek professional tax advice.
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