Self employed persons, individual entrepreneurs

1. Register before starting business activities.

2. PIT on income from business activities is calculated as the difference between revenue and expenses.

   The tax rate is:

   • 20 % on income under EUR 20 004
   • 23 % on income between EUR 20 004 and EUR 78 100
   • 31% on income over EUR 78 100
3. Bookkeeping entries for income and expenses are recorded in the simple entry system.
4. Annual tax returns are filed between 1 March and 1 June of the year following the taxation year. If total annual income exceeds EUR 78 100, persons may file from 1 April to 1 July.

5. Tax is paid into the single account within 15 days of filing the return. Deadlines are:

   • 23 June if tax payable is less than EUR 640
   • 23 June, 23 July, and 23 August if tax payable is more than EUR 640 (payable in three installments)

6. The non-taxable minimum amount, tax breaks, and justifiable expenses can be applied to business income because it is calculated together with all other yearly income.

   Self-employed pay a minimum of EUR 50 by 23 June if no there was no taxable income or the calculated tax is below EUR 50.

   The minimum tax amount of EUR 50 does not apply to taxpayers who pay income tax or social contributions for their employees or for themselves.

   Minimum tax is not applied in the taxation year when business activity was registered, in the following year, and in the year business activity is terminated.

   Information can be found on our homepage in the section Taxes > Personal income tax –“Due dates for submitting annual personal tax returns”.

Micro-enterprise tax paid by Micro-enterprise Taxpayers (MET) includes contributions to MSSIC and PIT. An MET may not be registered as a VAT payer. If an MET becomes or is required to become a registered VAT payer in accordance with the Value Added Tax Law, it loses its MET status the following taxation year.

The object of micro-enterprise tax is the turnover of micro-enterprise. The micro-enterprise tax rate in 2024 for the micro-enterprise turnover is 25%.

If the micro-enterprise did not have turnover in the taxation period (calendar year) or the calculated amount of the micro-enterprise tax does not exceed 50 euros, a micro-enterprise taxpayer shall pay the micro-enterprise tax into the budget in amount of 50 euros

Micro-enterprise tax is paid on quarterly revenue:

• submit a MET return by the 15th date of the month following the quarter
• calculated tax must be paid into the single tax account by the 23rd of the month following the quarter, i.e., 23 April, 23 July, 23 October, 23 January

A MET cannot simultaneously pay personal income tax or the reduced patent fee for economic activity. A MET must maintain records on income and expenses.

If a MET hires an employee, all employee income is subject to labour taxes, i.e., PIT and MSSIC.

If a MET doesn’t have employees, he/she can use the Commercial Activity Income Account (SDI) to automate tax payment.

A private individual may pay the reduced licence fee if:

• the person has been granted old-age pension and has the right to apply the pensioner’s non-taxable minimum or has been assigned Group I or II disability status
• income from business activities is below EUR 3 000
• the person does not pay micro-enterprise tax or tax on business activities
• the person does not employ others and does not pay salary taxes

The payer of the reduced licence fee need not file an annual tax return.

The reduced licence fee must be paid for six months (EUR 9) or for one calendar year (EUR 17) only.

If income is earned from property (e.g., leasing or renting, selling tenancy rights, sale, or payment for use restriction of use of natural resources), the private individual must inform the SRS within five business days of concluding the contract:

• tax rate on rental income is 10%
• revenue from business activities
• if income from property is obtained from a legal entity, tax must be withheld at the time of payment
• if tax is not withheld, the private individual must calculate the tax and pay as for PIT payments
• annual non-taxable minimum, tax breaks and expenses do not apply
• the private individual is not considered to be self-employed and MSSIC are not paid;
• the person must register as a VAT payer if the total value of transactions subject to VAT within the preceding 12 months exceeded EUR 50 000.

Business income may be exempt if it is derived from a backyard garden or auxiliary farm or from mushrooming, berry-picking, collection of wild medicinal plants and flowers or wildlife farming (e.g., escargot – Helixpomatia) and does not exceed EUR 3000 per year. Accounting records must be kept to determine amount of annual income.

When annual income reaches EUR 3000, this business activity must be reported to SRS within five business days.

A private individual engaged in business activities is considered to be self-employed under the law On State Social Security.

Self-employed individuals must submit a report by the 17^th date of the month following the quarter.

Mandatory State Social Insurance Contributions (MSSIC), including pension insurance contributions, are made quarterly by the 23^rd date of the month following the quarter into the single account.

*The following are not subject to mandatory contributions:

Owners of farming (fishing) enterprises who receive old-age pensions or who have group I or II disability status.

Private individuals who manage their immovable property or who are registered as performers of business activities and receive an old-age pension or who have group I or II disability status or whose permanent residence is not in Latvia.

The minimum mandatory contribution for a quarter is based on three minimum monthly salaries.

Self-employed persons (who are not also employees) must make minimum mandatory contributions to state pension insurance, based on State Social Insurance Agency (SSIA) calculations. SSIA informs SRS of this sum, and SRS informs the taxpayer through EDS.

If a self-employed person has calculated that his/her income will fall below the minimum, then he/she must inform SRS:

• simultaneously with registration of economic activity,
• by 17 January for the year,
• by 17 January for the 1^st quarter,
• by 17 April for the 2^nd quarter,
• by 17 July for the 3^rd quarter,
• by 17 October for the 4^th quarter, or
• within 15 days of losing employee status.

If a self-employed person has not filed any reports, SSIA will calculate and inform SRS of the required payment by the 1^st July of following year, but calculated MSSIC must be paid by the 23^rd of October of the following year.

This minimum payment also applies to METs.

The following Cabinet Regulations prescribe organising of accounting by performers of economic activities as well as the procedure of maintaining of accounting by the simple entry system:

• Regulations of the Cabinet of Ministers of 31 May, 2022 No. 322  "Procedure in which individual merchants and other natural persons performing economic activity, individual companies, farmers' and fishermen's farms keep accounts in a simple record system"

• Regulations of the Cabinet of Ministers of 1March, 2022 No. 145 "Procedure in which companies, which maintain accounting in a double-entry system and are personal income taxpayers for income from economic activity, prepare and submit a financial report"

• Regulations of the Cabinet of Ministers of 21 December, 2021 No. 877 "Regulations on arranging accounting" 

• Regulations of the Cabinet of Ministers of 14 September, 2021 No. 625 "Requirements for documents justifying cash receipts and cash expenses and for organizing the cash book” 

1. Registering the business activities, the natural person can also get registered at the SRS VAT payer register and make VAT payments irrespective of not achieving the registration threshold of EUR 50 000 set by the VAT law.
2. However if the total value of VAT taxable supplies of goods and services during the preceding 12 months has exceeded EUR 50 000, the natural person is obliged to get registered at the SRS VAT payer register and must charge VAT on the transactions carried out
3. If the natural person acquires goods in the territory of European Union and if the total value of these goods without tax has achieved or exceeds in the current calendar year the amount of EUR 10 000, the person has to get registered at the SRS VAT payer register and charge VAT on the acquisitions made in that period.
4. If the natural person provides services to taxpayers of another EU Member State, the place of supply of which is determined in accordance with Section 1, Art 19 of the VAT law, the person must get registered at the SRS VAT payer register before rendering these services.
5. If the natural person of another Member State or of any third country or territory not doing business in the domestic territory receives services the place of supply for which is determined in accordance with Section 1, Art 19 of the VAT law, the person must get registered at the SRS VAT payer register before receiving these services.
6. The registered taxpayers using simple entry accounting system, use a log to record the VAT. The form of the log is approved by the Cabinet Regulations No.17 of 3 January 2013 “Procedure of application of VAT law provisions and certain requirements concerning payment and administration of the VAT” (Appendix 6 to the Regulations).
7. If the registered taxpayers whose total value of the VAT taxable transactions over the preceding taxation year has not exceeded EUR 100 000, the entries in the log-book of revenues and expenditure of the payers of personal income tax or micro-enterprise tax are made electronically. The taxpayer can instead of keeping the log-book mentioned in Appendix 6 to the Cabinet Regulations No.17 of 3 January 2013 “Procedure of application of VAT law provisions and certain requirements concerning payment and administration of the VAT” make additional boxes in the log-book of revenues and expenditure of the payers of personal income tax or micro-enterprise tax in order to register the calculated tax amounts paid during the taxation period in accordance with the invoices received from other registered taxpayers

Please find the useful information in the SRS homepage section Taxes/Value Added Tax

The reports and returns must be filed electronically using the Electronic Declaration System (EDS). Natural persons can receive free of charge consultations regarding the application of tax legislation electronically, in written form, verbally in person or by phone, or by attending the regular seminars for performers of business activities arranged by the SRS Client Service Centres.