Latvian Income Tax

Tax residents in Latvia are taxed on their worldwide income. Non-residents are taxed on their Latvian source income only. An individual is deemed to be tax resident if his permanent place of residence is in Latvia, or if he remains in Latvia for more than 183 days in a 12-month period beginning or ending during the tax year, or the person is a citizen of Latvia and is employed abroad by the government of Latvia. All employment income, being in the form of salary or of benefits in kind, is taxable. The employer withholds tax at source on the gross remuneration. Expenses incurred in earning the income may be deducted from the taxable income in the tax year in which they are paid. Life insurance premiums, health insurance premiums and contributions to recognised private pension funds may be deducted within certain limits. Furthermore, donations to approved cultural, educational, scientific, sporting, charitable, health, environmental and religious organizations and governmental institutions are deductible within certain limits. A resident taxpayer can also claim the following allowances: a non-taxable minimum amount of LVL 960 per year and an allowance for dependents (children and unemployed spouse) of LVL 672 per year. There is a flat tax rate of 25% on all income except on income from a business which is taxable at 15% subject to the option for lump-sum taxation. Taxable royalties are also taxed at 25%. The tax year is the calendar year. Tax returns have to be filed by the 1st of April in the year following the tax year. No special rules apply to expatriates.