Grant Thornton Latvia can assist expatriates and their employers with Latvian tax and employment related matters including advice on tax planning opportunities, management of assignment policies and the provision of tax filing services.
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For EU nationals there are almost no restrictions to enter into, stay and work in Latvia. EU nationals may start working as soon as an employment contract is signed. Those EU nationals who wish to stay in the Republic of Latvia for more than three months continuously must be registered with the Office of Citizenship and Migration Affairs and must obtain a certificate of registration, however, there is no need in such a registration for the period of up to six months if stays for the purpose of finding a job.
As to the employment of third-country nationals, there is a number of restrictions both with regard to entering (visa), staying (residence permit), and employment (right to employment), while the employer is fully responsible both for the foreigner’s employment (including restrictions related to wages and salary), staying (including the place of residence and health care), and removal costs, if any.
Non-EU nationals are permitted to be employed in Latvia only if a residency permit (visa or temporary residence permit) with rights to work has been granted.
Non-EU nationals have to apply to the Office of Citizenship and Migration Affairs of Republic of Latvia via Latvian Embassy or directly, if legally residing in Latvia.
Prior to applying, employer must file an invitation approval inviting applicant to work for employer in Latvia.
In order for the non-EU national to be employed in Latvia, employer must have actual presence in Latvia as legal entity (capital company, branch, permanent establishment, etc.).
For EU nationals employer entity may be also registered as foreign employer registered in Latvia for tax purposes.
To work in Latvia, a non-EU national must hold a valid residence permit that entitles him/her to work.
Non-EU/EEA/Swiss nationals intending to work in Latvia for a short period of time must obtain a form of short-term work authorization:
However, if there is a necessity for extended stay in Latvia, employee can apply for a Temporary Residence Permit (TRP) or an EU Blue Card.
Non-EU/EEA/Swiss nationals intending to work in Latvia must obtain a form of long-term work authorization. The most common long-term work authorizations in Latvia are:
Long-term permits are valid for up to 5 years depending on which one you need (EU Blue Card – up to 2 years).
More information available in homepage of the Office of Citizenship and Migration Affairs of Republic of Latvia.
Grant Thornton Latvia can help with applying non-EU nationals for visa with rights to work for sort-term employment, residence permit for long-term employment, as well as with EU national registering in Latvia.
The tax year in Latvia is a calendar year.
Between 1 March and 1 June of the year following the assessment year, Latvian residents can submit an annual income tax return to claim a refund of overpaid Personal Income Tax (PIT) or to declare any outstanding tax liabilities.
If the annual income exceeds EUR 78,100 in 2024 (EUR 105,300 from 2025), the tax return must be submitted between 1 April and 1 July of the following year to recalculate PIT and Solidarity Tax.
Progressive PIT (employment income, income from Self-employment, etc.):
Tax residents of Latvia are taxed on worldwide income, whereas non-residents are taxed on Latvia source income only (e.g. employment performed in Latvia, income from real estate located in Latvia).
Generally, according to Latvian tax legislation, an individual is considered a Latvian tax resident if the individual’s registered place of residence is located in Latvia or if they stay in Latvia for at least 183 days within any 12-month consecutive period.
Treaty residency principles are applied in case double tax treaty is in place.
Employment-related taxable income encompasses salaries, wages, bonuses, lump-sum payments, allowances, and other monetary compensation derived from employment.
Employers are required to withhold personal income tax and submit it, along with social security contributions, to the Latvian tax authorities on a monthly basis.
Employment income is considered to arise in the country where the individual physically performs their work duties.
Remuneration received for serving as a board member or director of a Latvian company is subject to taxation in Latvia.
Fringe benefits include goods, services, in-kind remuneration, or any other monetarily quantifiable advantages provided to an employee in connection with their employment or service relationship, regardless of when they are granted. These benefits are subject to taxation as employment income.
There are no specific concessions for expatriates in Latvia.
In Latvia, double taxation is avoided through the exemption method or the tax credit method, depending on the type of income and the provisions of applicable double tax treaties (DTTs).
Exemption Method – Certain types of foreign income, such as dividends and employment income (under specific conditions), may be exempt from taxation in Latvia.
Tax Credit Method – If foreign income is subject to taxation in Latvia, a tax credit may be granted for foreign taxes paid, up to the amount of Latvian tax payable on the same income.
Double Tax Treaties – Latvia has an extensive network of DTTs, which may specify whether the exemption or credit method applies to specific types of income.
Latvian tax resident may apply for the following reliefs:
And additional reliefs through annual income tax return:
Income tax is withheld after the deduction of non-taxable minimum and employee’s social security contributions.
Income tax and social security contributions are reported by the employer to the Tax authorities on monthly basis by 15th day following the taxation period.
Capital gains are taxed with 25.5% income tax.
Social tax rates are as follows:
In accordance with Latvian legislative acts, employer-provided stock options is exempt from tax if certain conditions are met.
However, income from the sale of shares or stock options are subject to capital gain tax of 25.5%.
If the income (the difference between the purchase and sale price) from the disposal of share purchase options or shares and other income from transactions with capital assets does not exceed EUR 1,000 per a quarter, the beneficiary shall submit a “Declaration of capital gains for the reporting period” (hereinafter – the capital gains declaration) by 15th January of the following year.
If the income is not generated (the difference is 0 or there is a loss), the beneficiary of the income is not obliged to submit a declaration.
If the income (the difference between the purchase and sale price) from the disposal of share purchase options or shares and other income from transactions with capital assets exceeds EUR 1,000 per quarter, the beneficiary shall submit a capital gains declaration by the 15th day of the month following the end of the relevant quarter.
If other transactions with the sale of capital assets (except for virtual currency) have been made during the year and loss has been incurred in any of them, the beneficiary may submit an “Annual Capital Gains Adjustment Declaration” by 1st day of March of the following year and recover the capital gains tax overpaid during the year.
In general the first - in, first - out (FIFO) method or the weighted average cost method may be used to determine capital gains. When employee chooses one of the methods, employee shall continue to use it for at least 10 years.
If payroll taxes have been deducted at the time of the exercise of the share purchase right, the value from which the taxes were deducted shall be considered as the acquisition value.
There are no other taxes on employment income.
Mārtiņš Lubgans
Email: martins.lubgans@lv.gt.com