Because freelancers are not Solar Staff's employees and we don't pay taxes on their payouts, they must declare any income received via Solar Staff by themselves.
To carry on tax accounting in Latvia for your Solar Staff income, you need to:
Be a tax resident
Determine the applicable tax obligations
Tax residence
Latvia taxes its residents on their worldwide income, while non-residents are taxed on their Latvian-source income only.
Persons satisfying one of the following conditions may be considered tax residents in Latvia according to the national laws:
Individuals having their registered (declared) place of residence in Latvia
Individuals present in Latvia for 183 days or more during any 12-month period
Latvian citizens employed abroad by an employer registered in Latvia
Latvia has double taxation treaties with a number of countries (full list), the provisions of which may override the applicable tax residence rules and other provisions of national legislation.
Taxpayer ID number
In Latvia, the taxpayer identification number (TIN) is the same as the national identification number (national ID number, personal code, or ID code), a unique 11-digit number assigned by the government authorities and used for identification purposes. It is printed on all national identification documents, such as an ID card, passport, residence permit, etc. (usually either next to or below the name or birth date).
The VAT ID number (PVN maksātāja numurs) is mandatory to obtain regardless of one's status (self-employed person or sole trader) if the total value of transactions subject to VAT (Pievienotās vērtības nodoklis / PVN) during the previous 12 months exceeds EUR 40,000 or in case of making transactions with taxpayers from the EU member states (the latter applies to income received via Solar Staff). This number starts with the prefix LV and consists of 11 digits (for example, LV 12345678910).
Taxes and contributions payable by freelancers
Tax liabilities depend on the chosen tax status and/or fulfillment of certain criteria. Latvia has three tax status options for Solar Staff users to choose from:
Individual (Iedzīvotājiem)
Self-employed person (saimnieciskās darbības veicēji)
Sole trader (individuālais komersants)
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in Latvia, but you can fill in your taxpayer ID in your account.
Read on for more details.
Individuals
An individual (Iedzīvotājiem) is the basic status of each natural person that does not require special registration. It remains applicable until the requirements for self-employment or sole trader status are fulfilled. This status carries the obligation to pay personal income tax.
Personal income tax / PIT (iedzīvotāju ienākuma nodoklis / IIN) is calculated using a progressive tax rate scale (learn more):
20% on income below EUR 20,004
23% on income between EUR 20,004 and EUR 78,100
31% on income over EUR 78,100
Expenses related to business activities are deductible.
Tax returns. Individuals are required to file annual income tax returns (gada ienākumu deklarācija) each year between March 1 and June 1 (see completion instructions here).
Tax payment. The tax is to be paid into a single account within 15 days of filing the tax return, but no later than June 23 if the tax due is less than EUR 640 or no later than June 23, July 23, and August 23 if the tax due exceeds EUR 640, in which case it is payable in three installments.
Self-employed persons
A self-employed person (saimnieciskās darbības veicēji) is a natural person engaged in business/commercial activities without forming a company.
Before starting commercial activities, individuals willing to operate in this capacity must register with the State Revenue Service (Valsts ieņēmumu dienests, VID) as taxpayers engaged in commercial activities, indicating the type of intended activities.
Commercial activities in Latvia require mandatory registration if one of the following conditions is met:
Transactions are regular and systematic (three or more transactions per year or five or more transactions in three years)
Annual transaction income exceeds EUR 14,229 (excluding income from the sale of personal belongings)
The economic nature of the activities points to a systemic pursuit of income generation
Self-empoyment eligibility restrictions apply to certain types of activities (see the full list here). The self-employed person's registration status can be checked online in the State Revenue Service's database.
Self-employed persons can apply one of the following tax regimes:
Regardless of the chosen tax regime, taxpayers are required to obtain a VAT number. If the income totals EUR 40,000 or more, value-added tax (pievienotās vērtības nodoklis) is levied at a rate of 21% and VAT returns must be submitted in accordance with the requirements applicable to sole traders (learn more).
Read on for more details about the tax regimes and relevant obligations.
General tax regime
Tax on business income (Vispārējā nodokļa maksāšanas kārtība) is the default tax regime that involves keeping accounting records and paying the following taxes and contributions:
Personal income tax / PIT (iedzīvotāju ienākuma nodoklis / IIN) is calculated using a progressive tax rate scale (more details):
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
Expenses related to business activities are deductible.
Tax returns. Self-employed persons are required to file annual income tax returns (gada ienākumu deklarācija) each year between March 1 and June 1. If the annual income exceeds EUR 78,100, the return is to be filed between April 1 and July 1. The D3 section of the tax return is mandatory for completion (see the video tutorial). Adjustments to the filed tax return (addition of income and expense items) can be made within a period of three years.
Tax payment. The tax is to be paid into a single account within 15 days of filing the tax return, but no later than June 23 if the tax due is less than EUR 640 or no later than June 23, July 23, and August 23 if the tax due exceeds EUR 640, in which case it is payable in three installments.
The minimum tax amount (minimālais nodoklis saimnieciskās darbības veicējiem) of EUR 50 is set for all taxpayers regardless of the amount of income received and applies even if the tax due is less than EUR 50. It does not apply in the year when the business activity is registered, in the following year, and in the year when the business activity is terminated.
Mandatory state social insurance contributions (valsts sociālās obligātās apdrošināšanas iemaksas / VSAOI) are mandatory payments due to be made into a designated budget account, which entitle payees to certain social insurance benefits as prescribed by law. The higher the income from which contributions are made, the greater the resulting amount of benefits, pensions, or compensations. More information about social insurance contributions can be obtained from the Ministry of Welfare (Labklājības ministrija) and the State Social Insurance Agency (Valsts sociālās apdrošināšanas aɪentūra). Furthermore, self-employed persons are required to make contributions towards pension insurance (Iemaksas pensiju apdrošināšanai). FAQ
Social insurance contributions are payable at a rate of 29.36%, while pension insurance contributions are payable at a rate of 10% on the portion of income that exceeds the basic VSAOI threshold, or at other prescribed rates if the profit (i.e., income less expenses) exceeds EUR 620 per month (but it is possible to pay contributions on a higher income amount).
Reporting and payment. The filing of a quarterly report of a self-employed person or hired employee (pašnodarbinātā vai darba ņēmēja ziņojums) containing information on all contributions is required to be filed by the 23rd day of the month following the reporting quarter (learn more). The deadline for paying contributions is the same as the deadline for filing the reports.
If the income is less than EUR 620 per month or EUR 1,860 per quarter, a minimum mandatory contribution is to be paid (more details here). The minimum mandatory contribution is calculated by the State Social Insurance Agency (VSAA) within three months after the end of the quarter and reported to the State Revenue Service (VID) by the 20th day of the third month. Further, the State Revenue Service (VID) provides this information to the self-employed person via the Electronic Declaration System (Elektroniskās deklarēšanas sistēma, EDS) within one business day.
Useful links: information and guidance on contributions
Micro-enterprise tax
Micro-enterprise tax (Mikrouzņēmumu nodoklis / MUN) is a tax regime that requires self-employed persons to keep accounting records and make a single tax payment, which covers the following taxes and contributions:
Mandatory state social insurance contributions (VSAOI) set for micro-enterprise owners (80% of the payment)
Income tax on business activities (20% of the payment)
This tax regime can be applied by both sole traders and self-employed persons. To start applying it, you need to submit an application (learn more); the expected turnover shall not exceed EUR 40,000, and the applicant shall have no plans to register as a VAT payer. Simultaneously being a taxpayer of personal income tax (PIN) is also not allowed. Other restrictions may apply.
The micro-enterprise tax is calculated using a progressive rate scale as follows:
25% on turnover up to EUR 25,000
40% on turnover over EUR 25,000
In the first year of obtaining the MUN taxpayer status, the following tax rates apply:
From the second quarter, a rate of 25% applies to turnover of up to EUR 18,750, and a rate of 40% applies to the part of turnover above that threshold
From the third quarter, a rate of 25% applies to turnover of up to EUR 12,500, and a rate of 40% applies to the part of turnover above that threshold
From the fourth quarter, a rate of 25% applies to turnover of up to EUR 6,250, and a rate of 40% applies to the part of turnover above that threshold
Tax returns and payment. Micro-enterprise tax payers are required to file quarterly micro-enterprise tax returns (Mikrouzņēmumu deklarācija) via the Electronic Declaration System (Elektroniskās deklarēšanas sistēma / EDS). Tax returns are due to be filed before the 15th day of the month following the reporting quarter. Quarterly tax payments are due four times a year before the 23rd day of the month following the respective reporting quarter. Taxpayers who have a Commercial Activity Income (Saimnieciskās darbības ieņēmumu / SDI) can automate their quarterly tax return filings and payments avoiding the need to follow regular filing and payment procedures.
Useful links: information and guidelines; legislation on micro-enterprises
Reduced patent fee
Reduced patent fee for specific activities (Samazinātā patentmaksa) is a tax regime applicable to retirees and individuals with assigned group I or II disability status, provided that their anticipated and actual income from business activities in the previous year did not exceed EUR 3,000 and they have no employees. While this tax regime requires no keeping of accounting records, general records of income from business activities still need to be maintained.
There are restrictions on eligible activities and combining the reduced patent fee regime with concurrent employment and other tax regimes.
Registration requires submitting an application at least seven business days prior to the intended start of the patent regime application (learn more).
The reduced payment fee is payable as a single fixed amount of EUR 9 for six months or EUR 17 for one calendar year, without any state social insurance contributions (VSAOI) required.
The reduced patent fee is due to be paid no later than seven business days prior to the start of applying the patent regime. No tax return filing is required.
Useful links: reduced patent fee details
Sole traders
A sole trader (individuālais komersants) is an individual engaged in entrepreneurial activities and personally liable for their obligations with their property. To become a sole trader in Latvia, one is required to register with the Register of Enterprises (Uzņēmumu reɪistrs) either voluntarily or as a matter of obligation if one of the following criteria is met:
Annual turnover exceeds EUR 284,600
Business activity qualifies as the activity of a commercial agent or a broker
Annual turnover exceeds EUR 28,500, and business has five or more employees at a time
Type of activity falls within the list of specified activities
Sole traders are required to maintain accounting records and comply with the requirements of the Law on Accounting (learn more).
Also, sole traders, regardless of the chosen form and type of activity, must provide information and file online reporting using the Electronic Declaration System (Elektroniskās deklarēšanas sistēmu / EDS).
Sole traders can apply one of the following tax regimes:
Also, in cases where relevant obligations apply, other taxes may be payable. Read on for more details about the tax regimes and obligations.
General tax regime
The following mandatory taxes and contributions are payable under this tax regime:
Corporate income tax (Uzņēmumu ienākuma nodokļa likmes) is payable at a rate of 20% on taxable income (when assessing the taxable income base, the value of taxable earnings shall be divided by the coefficient 0.8). FAQ
Expenses associated with business activities are eligible for deduction if supported by documentary evidence.
The tax period is a calendar month or alternatively a calendar quarter (if the taxpayer, in accordance with Article 8 of the Law on Accounting, has the right to book supporting documents quarterly).
Tax returns must be filed in the form of a corporate income tax return (uzņēmumu ienākuma nodokļa deklarāciju) online (see completion instructions here). Tax returns are to be filed only if there is a tax due (with the exception of the tax return filed for the last month of the reporting year). The deadline for filing tax returns is before the 20th day of the month following the reporting month (quarter).
The tax due is to be paid each month no later than the 23rd day of the month following the reporting month (quarter).
Mandatory state social insurance contributions (Valsts sociālās apdrošināšanas obligātās iemaksas) are payable by sole traders in line with the same terms and obligations as those applicable to self-employed persons.
Micro-enterprise tax
Micro-enterprise tax (Mikrouzņēmumu nodoklis / MUN) is payable by sole traders in line with the same terms and obligations as those applicable to self-employed persons.
Other taxes
Depending on the selected type of activity, registration form, and other factors, sole traders may be required to pay additional taxes:
Value-added tax / VAT (Pievienotās vērtības nodoklis) is calculated at a standard rate of 21%. The full list of applicable tax rates is available here.
Obligations to register as a VAT payer and pay VAT. VAT is payable if the total value of VAT taxable transactions exceeds EUR 40,000 over a 12-month period. It also applies when engaging in transactions with taxpayers from EU member states, which is relevant when earning income via Solar Staff. In such cases, it is necessary to register as a VAT payer by submitting an application to the State Revenue Service (VID). It is also possible to register as a VAT payer when registering as a sole trader (learn more). One can also register as a VAT payer on a voluntary basis, without meeting the above requirements. Learn more about registering as a VAT payer.
The tax period for VAT return filing and payment:
Calendar month (within 6 months) if the sole trader is registered as a VAT payer with the State Revenue Service (VID) in the year in which there is an obligation to pay VAT
Calendar month if the value of taxable transactions in the previous tax year exceeds EUR 40,000, or if goods are delivered to the territory of the European Union, or if the registered taxpayer provides services with the place of provision determined pursuant to Article 19(1) of the Value-Added Tax Law (Pievienotās vērtības nodokļa likums) and the place of provision is another EU member state
Calendar quarter if the sole trader is registered as a VAT payer with the State Revenue Service (VID) for any other reason
VAT tax returns must be filed online in the form of a value added tax return with annexes (Pievienotās vērtības nodokļa deklarācija) within the first 20 days of the month following the reporting period. Annual VAT returns must be filed before May 1 of the year following the reporting year.
Also, in cases where relevant obligations apply, other tax returns may be required. Other forms of VAT returns are available here.
VAT payments are due no later than the 23rd day of the month following the reporting period, unless otherwise provided by Article 119 of the Value-Added Tax Law (Pievienotās vērtības nodokļa likums).
Vehicle Operation Tax (Transportlīdzekļa ekspluatācijas nodokļa likmes)
Company Car Tax (Uzņēmumu vieglo transportlīdzekļu nodoklis)
Electricity Tax (Elektroenerɪijas nodoklis)
Subsidized Electricity Tax (Subsidētās elektroenerɪijas nodoklis)
Real Estate Tax (Nekustamā īpašuma nodoklis)
Natural Resources Tax (Dabas resursu nodoklis)
Excise Tax (Akcīzes nodoklis)
Lottery and Gambling Tax (Izložu un azartspēļu nodoklis)
Additional information
State Revenue Service of the Republic of Latvia (Valsts ieņēmumu dienests, VID)
Electronic Declaration System (Elektroniskās deklarēšanas sistēma / EDS) for accounting management, return filing, and registration with the State Revenue Service (VID)
E-government portal of public services (Valsts pārvaldes pakalpojumu portāls)
Register of Enterprises (Uzņēmumu reɪistrs)
State Social Insurance Agency (Valsts sociālās apdrošināšanas aɪentūra)
Investment and Development Agency of Latvia (Latvijas Investīciju un attīstības aɪentūra)
Ministry of Welfare (Labklājības ministrija)
State Labor Inspectorate (Valsts darba inspekcija)
Comparison of a sole trader and a legal entity (freelancers may work for Solar Staff either as a sole trader under their own name or as a natural person)
Income received via Solar Staff is declared using certificates and invoices, and in accordance with the offer agreement
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].