Latvia has the lowest effective tax rate in the EU. On average, every taxpayer contributes one third of their income to various taxes. Read on for the main information on tax payments and refunds for individuals living in Latvia. If you are interested in more in-depth information on the Latvian tax system, please consult the homepage of the Ministry of Finance.
If you are an EU citizen and are concerned about your income being taxed twice, refer to the Your Europe guide on avoiding double taxation.
Latvia does not have a progressive income tax, independent of the income the individual income tax is 23%. The tax-free threshold is 75 EUR a month plus 165 EUR a month for each dependent. Additional income from capital is taxed at the rate of 10%.
Annual income declarations are not mandatory but can be submitted voluntary to receive refunds for tax overpayment on money spent on education, private pension funds, health or life insurance, therapeutic services, or donations. The applicable rate of eligible expenditure is 213 EUR.
Only individuals registered as self-employed have to report their income to the State Revenue Service. They have to register as taxpayers and choose their preferred way of paying tax on income: either tax on income from economic activity (23%), patent fee for certain economic activities, or micro-enterprise tax (9% of the turnover).
An individual can choose not to report their income if it is generated by one of the following economic activities: property, agricultural production in a home farm, mushroom picking, berry picking, or collection of wild medicinal plants and flowers.
The income declaration and the supporting documents that justify eligible expenses need to be submitted to the State Revenue Service either in person at a customer service center or electronically (only with electronic signature). More detailed information about the income declaration as well as the relevant forms can be found on the homepage of the State Revenue Service.
The Value Added Tax (PVN in Latvian) is included in the price of the goods and services. The current VAT tax rate is 21%.
A reduced VAT rate of 12% is applied to medicines and medicine equipment, baby food, books, newspapers, and periodicals, transport of passengers, and hotel accommodation.
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