General

From 2016 tax payers that provide leasing and credit services will have a duty to submit a declaration on the lease and/or loan payments and the interest payments made by private individuals (the amount of which exceeds EUR 360 per month or the total amount of which during a calendar year exceeds EUR 4320) to the State Revenue Service. The duty will also extend to enterprises, producers, sellers, service providers and merchants, providing leasing and lending services (other than credit institutions).

Enterprise Income Tax

Recent changes to the law on Enterprise Income Tax provides that non-residents may submit an enterprise income tax recalculation for;

  • income gained from the provision of management and advisory services; and
  • income received from the use of property in Latvia.

Non-residents can now deduct expenses by applying the 15% tax rate. The amendments have been introduced to the regulations upon implementation of the Enterprise Income Tax Law.

The Regulations have also been supplemented to explain the steps to be taken by a non-resident in respect of payments made to other non-residents from which tax has not been withheld. Where tax has not been withheld from payments which are included in the income statement, the amount of taxable income must be increased to reflect this payment. Conversely if the payment made to a non-resident is not included in the income statement, the tax payer must pay late charges. This change came into force on 29 May 2015.

Micro-enterprise Tax Law

Amendments have also been made to Micro-Enterprise Tax Law. According to these amendments an enterprise is no longer entitled to choose to pay micro-enterprise tax or call itself a micro-enterprise tax-payer if it performs economic activity in any of the sectors outlined by the Cabinet of Ministers.

From 1 January 2015 the micro-enterprise tax rate for a micro-enterprise business with a turnover between EUR 7000,01 - EUR 100 000,00 for the first, second and third fiscal year (when the tax payer acquires the micro-enterprise status) will be 9%. From the fourth fiscal year of economic activity since acquiring the micro-enterprise status, the tax rate will increase to 12%.

From 1 January 2016 the micro-enterprise tax rate for a micro-enterprise with a turnover between EUR 7000,01 - EUR 100 000,00 will be 13%. However from 2017 the tax rate will increase again to become 15%.

If in the first, second or third taxation year of economic activity since acquiring the micro-enterprise tax payer status the micro-enterprise employs at least one employee who has been employed by a micro-enterprise tax-payer for three years and more, the micro-enterprise is not entitled to apply the statutory tax rate for the first three years of economic activity.

If a micro-enterprise was entitled to apply the tax rate of 9% but lost the micro-enterprise tax-payer status, by repeatedly opting to apply the micro-enterprise tax rate it will no longer be entitled to apply the 9% tax rate.

However all the afore mentioned will not apply if respective amendments to the laws on state social insurance have not entered into force by 1 January 2016.

The law now explicitly states that employees of enterprises paying micro-enterprise tax shall be socially insured.