Value-added tax (VAT)
The following VAT rates apply in Latvia:
|Description of goods||VAT (%)|
|The standard rate on supplies of goods and services, commodity imports, services rendered by non-residents and treated as supplied in Latvia, and intra-Community acquisitions of goods.||21|
|A reduced rate on listed medicaments, medical devices, specialised baby food, domestic public transport services, household heating charges, firewood and wooden heating material for households, and accommodation services.||12|
|A 5% VAT rate applies to supplies of foodstuffs that are fresh fruits, berries, and vegetables that have been washed, peeled, shelled, cut, and prepacked, but not thermally or otherwise treated (i.e. frozen, salted, or dried), textbooks (in force till 31 December 2023), and supply of books and magazines in printed or electronic form, including online or by download.||5|
|Exemption with credit on intra-Community supplies of goods to taxable persons registered for VAT in other member states.||0|
|Exemption with credit on commodity exports and supplier goods not released for free circulation in the European Union, supplies of goods and services to diplomats, and supplies of goods and services financed by foreign aid.||0|
|0% VAT rate applies to COVID-19 vaccines and in vitro diagnostic medical devices for the diagnosis of COVID-19 (applicable until 31 December 2022).||0|
A number of services are exempt, including education, financial, medical, and insurance services; nursery fees; and the sale of used real estate, including land (except for building land, which is taxable).
Customs duty is levied on goods imported into Latvia. The rate of customs duty is generally between 0% and 20% of the value of imported goods, depending on their type and origin. Exports are generally exempt.
Excise is levied on specified categories of goods, mostly as a fixed amount per unit. Excise applies to the following goods, whether made in Latvia or imported:
|Oil and oil products||Up to EUR 594 per 1,000 litres, depending on the type of the product.|
|Alcohol||EUR 64 to EUR 1,724 per 100 litres, depending on the type of alcohol.|
|Beer||EUR 8.2 (EUR 4.1 for small breweries) for each percent of absolute alcohol, but not less than EUR 15.20 per 100 litres of beer.|
|Tobacco products||EUR 115.20 per 1,000 cigars or cigarillos.|
|EUR 98 per 1,000 cigarettes less than 80 mm in length plus 15% of the maximum retail selling price, but not less than EUR 128.40 per 1,000 cigarettes.|
|EUR 196 per 1,000 cigarettes plus 15% of the maximum retail selling price for cigarettes between 80mm and 110mm in length, but not less than EUR 256.80 per 1,000 cigarettes.|
|EUR 294 per 1,000 cigarettes plus 15% of the maximum retail selling price for cigarettes between 111mm and 140mm in length, but not less than EUR 385.20 per 1,000 cigarettes.|
|EUR 392 per 1,000 cigarettes plus 15% of the maximum retail selling price for cigarettes exceeding 140mm in length, but not less than EUR 513.60 per 1,000 cigarettes.|
|EUR 85.90 per 1,000 grams of fine-cut smoking tobacco intended for the rolling of cigarettes.|
|EUR 207 for other smoking tobacco.|
|E-liquid||EUR 0.16 per 1 ml liquid.|
|Coffee||EUR 142.29 per 100 kg.|
|Certain soft drinks||EUR 7.40 to EUR 14 per 100 litres, depending on the amount of sugar per 100 ml.|
|Tobacco substitutes||EUR 100 per 1,000 grams.|
|Natural gas||EUR 1.65 per 1 MWh for use as heating fuel.|
|EUR 1.91 per 1 MWh for use as fuel.|
Real estate tax (RET)
RET is payable annually on:
- Business properties, such as land and buildings used for economic activities, as well as engineering structures, such as motorways, streets, roads, parking places, bridges, elevated highways, tunnels, pipelines, communication lines, and power lines.
- Buildings that form part of a private dwelling house development (also if owned by a company but not used for living purposes).
Municipalities may determine a rate between 0.2% and 3%. A rate above 1.5% may be applied to buildings that are not maintained according to maintenance requirements.
If a municipality does not announce rates by 1 November before the tax period, then statutory rates will apply.
Statutory RET rates are as follows:
- The standard rate of 1.5% on the cadastral value of land, buildings, and engineering structures.
- A progressive rate on dwelling houses, their parts, and any parts of a non-residential building that are functionally used for living and not used in trade or business:
- 0.2% of cadastral values up to EUR 56,915.
- 0.4% of cadastral values between EUR 56,915 and EUR 106,715.
- 0.6% of cadastral values exceeding EUR 106,715.
- Up to 3% on uncultivated land capable of agricultural use, unless it is up to one hectare in area or subject to statutory restrictions on agricultural activity. By law, uncultivated land capable of agricultural use is agricultural land that is not used for making or growing agricultural products (including harvesting, grazing, and keeping animals for agricultural purposes) or is not kept in a good agricultural and environmental condition. Municipalities may also determine an extra rate of 1.5% on uncultivated land, and so the total rate on such land may reach 4.5%.
A 3% RET applies on buildings under construction if the permitted construction period has expired. The tax is applicable until the building is accepted for use. The rate will be charged on the cadastral value of the related land or on the cadastral value of the building, whichever is higher.
Residential property owned by companies is eligible for reduced rates (0.2% to 0.6%), but only where such property is rented out and tenancy rights properly entered on the Land Register of Latvia.
Stamp duties are levied on certain legal and other kinds of services, such as court trials, company formation and registration, licences for certain types of business activity, provision of information, notary services, operation of bills of exchange, and registration of real estate at the Land Registry (e.g. if real estate is sold, stamp duty is 2% of the deal value or the cadastral value, but not more than EUR 50,000).
Stamp duty is not payable if registration of real estate at the Land Registry is necessary because of a reorganisation. Stamp duty payable to register ownership of immovable property in the case of a contribution in kind to a company’s capital is 1%, but not more than EUR 50,000.
The employer is responsible for withholding personal income tax (PIT) at a rate of 20% on income up to EUR 20,004, at 23% income between EUR 20,004 and EUR 78,100. For the annual income exceeding EUR 78,100, the applicable rate is 31%, which is applied via submission of the individual annual tax return.
National social insurance contributions (NSIC)
The employee’s part of NSIC, at a rate of 10.5%, is deducted from gross employment income. The employer’s part of NSIC, at a rate of 23.59%, is calculated on top of gross employment income. NSIC is payable on annual income up to EUR 78,100. A solidarity tax applies to annual income over EUR 78,100 at the same rates as NSIC.
Natural resource tax
Any natural resources acquired as a result of economic activities (e.g. surface and underground water, dolomite, quartz sand), the collection of edible park snails, taking advantage of useful features of the bowels of the earth by pumping natural gas or greenhouse gases into geological structures, pollution (waste, emissions, and pollutants), products harmful to the environment (e.g. lubricating oil, electric batteries, oil filters, tyres), electrical and electronic equipment and appliances, radioactive substances, packaging, disposable tableware, means of transport, the volume of emitted greenhouse gasses that is not included in the number of emission quotas surrendered, coal, coke, and lignite are subject to a natural resource tax in Latvia. The rates are specific for each product and are based on weight, volume, or the amount of the product.
The taxpayer may reduce one’s tax liability by taking part in recycling programmes for packaging, products harmful to the environment, electrical and electronic equipment and appliances, and means of transport. Taxpayers do not have an obligation to recycle themselves to be entitled to relief; instead, they can conclude an agreement with a recycler.
On some of the products, the taxpayer must also pay disposal tax at varying rates.
There are three vehicle taxes in Latvia, a vehicle usage tax, a light corporate vehicle tax, and a foreign-registered vehicle tax. The first is payable on the use of all vehicles (except tractors, car trailers not exceeding 3,500 kg, trams, trolleybuses, off-road vehicles, snowmobiles, mopeds, and bicycles). The second is payable on light vehicles held or owned by a company. The third is for M1 and N1 category vehicles registered abroad.
Vehicle usage tax
Vehicle usage tax is payable annually on the use of vehicles, and it must be fully paid before the state technical inspection.
The amount of vehicle usage tax depends on the classification of vehicles according to their features under statutory provisions. The tax charge depends on various criteria, such as date of first registration, gross weight, engine volume, maximum engine power, carbon dioxide (CO2) emissions per kilometre, etc.
Light corporate vehicle tax (LCVT)
LCVT is paid on vehicles owned or held (e.g. rented) by a person engaged in economic activity, which are registered for the first time after 1 January 2005 and have details of engine volume on their registration certificate. There is a fixed rate of LCVT calculated according to the engine volume. The fixed monthly rates of LCVT are as follows:
- EUR 31 up to 2,000 cc.
- EUR 49 between 2,001 cc and 2,500 cc.
- EUR 66 between 2,501 cc and 3,000 cc.
- EUR 82 over 3,000 cc.
LCVT on a vehicle in which, according to its construction, power from an electrical energy/power storage device (e.g. battery, capacitor, flywheel, generator) inside the vehicle is used as its only mechanical propulsion power, will be EUR 10 per month.
LCVT on vehicles not mentioned in the above criteria is EUR 49 a month.
Foreign-registered vehicle tax
Foreign-registered vehicle tax is paid on the use of foreign-registered M1 and N1 category vehicles in Latvia. The tax is calculated according to the following formula: vehicle operation tax for the year x 1/12 x the estimated number of months during which a car will be used in road traffic in Latvia.
Lottery and gambling tax
A lottery and gambling tax is levied on licensed organisers of games or lotteries. Licence fees range from EUR 2,000 to EUR 427,000. Game organisers, gambling places, and gambling machines are subject to gambling tax. The rates depend on the number and type of gambling machines or percentage of income for several gambling types.
Electricity tax is levied on electricity supplied to final consumers or consumed by suppliers. The rate is EUR 1.01 per MWh. Exemptions are available to producers of electricity and for electricity used by domestic public transport and households.
Certain activities are subject to local duties (e.g. construction permits).