Changes in taxation and finances from 2025

* The rate shall be applied in summary order upon submission of the annual income return 

As of 1 January 2025, the following amendments are provided in the law "On Personal Income Tax":

• the differentiated non-taxable minimum is replaced by a single (fixed) non-taxable minimum, which will be applied to all employees regardless of the amount of gross income (non-taxable minimum in 2025 will be 510 euro per month, in 2026 - 550 euro per month, from 2027 - 570 euro per month);
• the pensioner's non-taxable minimum has been increased to 12 000 euro per year (1 000 euro per month) and, in order to ensure its effective application, the possibility is provided for working pensioners to apply the pensioner's non-taxable minimum in similar parts during the taxation year at the pension disburser and at another source of income (place of employment);
• two-step progressive tax rates have been introduced – 25,5% for income which does not exceed 105 300 euro per year (maximum amount of the object of mandatory contributions determined in accordance with the law "On State Social Insurance"), and 33% for income which exceeds this threshold;
• increased applicable tax rate for income from capital gains and income from capital which is not capital gains from 20% to 25,5%;
• an additional tax rate of 3% has been introduced, which will be applied to income over 200 000 euro per year. The base taxable with an additional rate, is intended to include taxable income, as well as certain types of income from capital, which are exempt from taxation (dividends, income equivalent to dividends, conditional dividends, liquidation quota);
• extended tax benefits for payments made by the employer in accordance with the concluded collective agreements. In the future, the relief will also be applied to the employee's relocation, accommodation and transport expenses covered by the employer. The amount of relief will be determined in the form of a total limit for all employees (multiplying the average number of employees by 700 euro);
• until 31 December 2027 the period has been extended in which royalty recipients have the option not to register as a performer of economic activity, but the disburser of income withholds tax at source;
• the non-taxable amount for childbirth allowance and funeral benefit paid by the employer has been increased to 500 euro, and for gifts from the employer - to 100 euro per taxation year;
• from 2025, the amount of personal income tax exemption for material and monetary prizes (premiums) received at contests and competitions will be uniform, and a single exemption limit of 1 500 euro per year will be set for them.
• until 2029 the period has been extended in which such amounts received are not included in taxable income which have been disbursed as state support for agriculture or European Union support for agriculture and rural development, as well as during this period an exemption has been established for other support payments equivalent according to their nature and purpose made by state institutions.

From 1 January 2025, it is planned to reduce the administrative burden for micro-enterprise taxpayers, to simplify the micro-enterprise tax regime and to make it more friendly for taxpayers who perform economic activity irregularly.

From 1 January 2025:

• a person will be entitled to re-register as a micro-enterprise taxpayer also in the taxation period (in which he or she has suspended economic activity and payment of micro-enterprise tax) and in the post-taxation period, if in the meantime economic activity has not been performed under another tax regime;
• the period after which a micro-enterprise taxpayer loses his or her status if he or she has not had turnover is extended by one taxation year. The micro-enterprise taxpayer will lose his or her status with the next taxation period in the following cases:
  • in general case – if the micro-enterprise taxpayer has not had turnover for 2 consecutive taxation periods;
  • if a micro-enterprise is registered as a micro-enterprise taxpayer, starting from the second quarter of the taxation period, and has not had turnover for 3 consecutive taxation periods (including the year of registration);
  • if a micro-enterprise – a natural person registered with the State Revenue Service as a performer of economic activity – loses the status of a micro-enterprise taxpayer because he or she has not had turnover, the State Revenue Service will also exclude him or her from the State Revenue Service Taxpayers’ Register.

From 1 January 2026:

• the State Revenue Service will take a decision regarding the loss of the status of micro-enterprise taxpayer and the exclusion of micro-enterprise from the State Revenue Service Taxpayers’ Register automatically within five working days after the deadline for submission of the fourth quarter return of the relevant taxation period;
• if a natural person predicts that he or she will perform economic activity irregularly, he or she will be entitled to register with the State Revenue Service as performer of economic activity and to apply for the status of a micro-enterprise taxpayer for a fixed period – one or several quarters within the taxation period.

• As of 1 January 2025, is increased:
  • lotteries tax rate for lotteries (also for instant win games) from 10% to 15%;
  • gambling fee for re-registration of a gambling licence for organisation for each current year from EUR 37 000 to EUR 45 000.
• As of 1 January 2027, gambling tax rate is increased:
  • for roulette, card and dice games (for each gambling table) for each current calendar year from EUR 33 696 to EUR 40 440;
  • for gaming machines (for each gambling place of each gaming machine) for each current calendar year from EUR 6204 to EUR 7440;
  • for a game of chance via the telephone and for a betting and wager from 15% to 18% of the revenue from organisation of this game;
  • for a bingo game from 10% to 12% of the revenue from the organisation of this game;
  • for gambling, which is organised via telecommunications, irrespective of the type of game from 12% to 15% of the revenue from the organisation of this game.

Solidarity Contribution Law will be applicable starting from January 1, 2025 and provides the following:

• An obligation on credit institutions registered in Latvia, as well as branches of credit institutions of other countries in Latvia to pay Solidarity Contribution;
• The Solidarity Contribution base is calculated as the net interest income that for more than 50 per cent exceeds the average net interest income reflected in the credit institution’s financial reports in the five-year reference period - financial years beginning on January 1, 2018, and ending on December 31, 2022;
• Solidarity Contribution is paid by applying a 60 per cent rate to the Solidarity Contribution base;
• The payment period is the calendar year during which the Solidarity Contribution advance payments must be paid on a quarterly basis;
• Solidarity Contribution is set for three years period – for 2025, 2026 and 2027;
• Law provides the possibility of applying a solidarity contribution rebate (25, 50, 75 and 100 per cent) if credit institution during the period of the Solidarity Contribution payments significantly increases its credit volumes. The amount of the rebate depends on the amount of increase of crediting growth during the reporting year compared to the previous year.

As of January 1, 2025:

• From 2025 Directive 2020/285 (SME directive) is transposed into the Value Added Tax Law. Changes in SME VAT scheme open the VAT exemption simplification to the cross-border activity. Small enterprises established in another Member State can apply VAT exemption to their supplies in Latvia if their annual turnover stays below EUR 50 000 and a total annual turnover of no more than EUR 100 000 in all Member States in the current and previous calendar year. In the same way the small enterprises established in Latvia are eligible for VAT exemption in another Member States.
• Directive 2022/542 is transposed into the Value Added Tax Law for determining in which country VAT is due on entrance fees for virtual events. Where the supply of cultural, artistic, sporting, scientific, educational, entertainment and similar services or the access to such events is made virtually, the place of taxation will be where the recipient is established and not where the event takes place.
• From 2025, diplomatic and consular missions of other Member States registered in Latvia, as well as diplomatic and consular missions of third countries registered in Latvia, will be able to acquire goods and receive services for official needs in the territory of Latvia within a simplified procedure. Henceforth, in order to apply a VAT 0% rate to transactions of diplomatic and consular missions, a VAT and/or excise tax exemption certificate approved by the Ministry of Foreign Affairs or an exemption certificate issued by the diplomatic and consular mission based on the decision of the Ministry of Foreign Affairs, will be required.
• The reduced VAT rate of 12% for fruits, berries and vegetables referred in the Annex to the Value Added Tax Law has been established as a permanent regulation.
• New medical services which shall not be taxable have been defined:
• dietary recommendations prescribed during the treatment process;
• pharmaceutical care provided to a person in pharmacies;
• palliative care mobile team service.

On July 1, 2025, a regulation will come into force that establishes a special registration procedure for VAT payers who have not reached the VAT registration threshold of 50,000 EUR but receive services from a person from another Member State or from any third country or made acquisition of goods in the territory of the European Union. These small companies are only be liable for VAT on services received from a person from another Member State or from any third country or  on acquisition supplies of goods within the territory of the European Union, but not be obliged to pay VAT on their domestic VAT taxable transactions until they register in the State Revenue Service Value Added Tax Payer Register in accordance with the general procedure.

1. Gradually increase the rates of excise duty on motor fuel, as well as on fuel, natural gas and petroleum gases used as heating fuel, as part of the CO2 component;
2. Abolish the exemption from excise duty for petroleum products used in electricity generation and cogeneration by setting the rate of excise duty as petroleum products used as heating fuel;
3. Increase the rate of excise duty on non-alcoholic beverages with a sugar content from 8 g (inclusive) per 100 ml;
4. Increase excise duty rates more rapidly for the intermediate products;
5. From 2027, in order to reduce the difference in excise duty rates between the Baltic States, continue to increase the excise duty rate also for alcoholic beverages, including beer, as well as tobacco products and products similar to the purpose of use;
6. Set a limit of 200 litres of fuel in the standard tanks of a commercial vehicle entering from a third country in Latvia.

Excise duty rates for tobacco products, EUR

Excise duty rates for liquids and components for e-cigarettes and novel products, EUR

Excise duty rates for natural gas, EUR

Excise duty rates for oil products, EUR

¹Gasoil (diesel fuel) and gas oil (diesel fuel) to which biodiesel acquired from biomass or paraffined diesel fuel acquired from biomass has been added.

Excise duty rates for non-alcoholic beverages and coffee, EUR

Excise duty rates for alcoholic beverages, EUR

¹Rate for beer or beer of independent small breweries, but not less than the minimum amount of duty set for beer.

The amendments of the Law on Vehicle Operation Tax and Company Car Tax will come into force from 1 January 2025, and provides the following:

• Vehicle Operating Tax rates are increased on average by 10% for all vehicles, as well as trailers and semi-trailers;
• Term for payment of the vehicle operating tax is determined – 31 January of the year following the calendar year. The Road Traffic Safety Directorate will send an information notice regarding payment of the Vehicle Operation Tax to those persons who have not paid the tax till 10 January of the year following the calendar year.
• Company car tax rates will increased on average by 10% starting from January 1, 2027.

1. A number of laws has been developed to ensure publicly available and comparable information on sustainability matters and to understand the impact of company activity on such sustainability matters as the environment, social rights, human rights and governance. The Saeima has adopted Sustainability Disclosure Law and related laws amending the Law on Annual Statements and Consolidated Annual Statements, Accounting Law, Financial Instrument Market Law, Credit Institution Law, Insurance and Reinsurance Law, Law on Investment Firms, Law on Investment Management Companies, Private Pension Fund Law, Law on Audit Services on 26 September 2024.

According to the Sustainability Disclosure Law the subject of the law is obliged to prepare a sustainability report and a consolidated sustainability report (if any) as part of the company's annual statement to be included in the management report of that company. The sustainability report is prepared in accordance with the EU Sustainability Reporting Standards.

The requirements of the law are being phased in and from 1 January 2025 the obligation to prepare a sustainability report will apply to all large companies that were previously not subject to the requirements to prepare a non-financial statement. However, for those companies that were previously obliged to prepare a non-financial statement the requirement to prepare sustainability report is already effective regarding annual statement for 2024 which will be elaborated in 2025. 

2. In order to adjust the threshold values of the size criteria for micro-entities, small, medium-sized and large undertakings (balance sheet total and net turnover) taking into account inflation during the period from the determination of the current threshold values, the Saeima adopted the law "Amendments to the Law on Annual Statements and Consolidated Annual Statements" on 26 September 2024. The aforementioned threshold values have been increased by 25% by the law.  Additionally, the threshold values of the criteria for small undertakings have been increased by 25%, upon reaching which the annual reports of small undertakings are subject to a mandatory audit or limited inspection by a sworn auditor. 

The adjusted threshold values for the size of undertakings shall apply starting already from the 2024 reporting year (the reporting year starting on 1 January 2024 or during the 2024 calendar year). 

3. The amendments to the Accounting Law adopted by the Saeima on October 31, 2024 (promulgated on November 12, 2024) which stipulate the gradual introduction of structured electronic invoices (e-invoices) enters into force on January 1, 2025. 

According to the Accounting Law enterprises are obliged to prepare a source document for payment to another enterprise which is a budget institution within the meaning of the Law on Budget and Financial Management (i.e., a budget institution; a derived public undertaking partially financed from the state budget and a budget-unfinanced institution) as a structured electronic invoice starting from January 1, 2025. Thus, on January 1, 2025, the circulation of e-invoices will begin between companies (including sole proprietors, i.e., natural persons engaged in economic activities) and budget institutions, and between budget institutions as well.  

If a enterprise has a contract for a transaction with a budget institution concluded by December 31, 2024, an issuance of e-invoices can be postponed until the end of 2025 (to be started on January 1, 2026).

The requirement for all enterprises to issue e-invoices for submission to another enterprise will come into effect on January 1, 2026.

4. Concerning the amendments to the Law on Audit Services, which entered into force on 17 October 2024, starting from 2025 to carry out sustainability assurance services for the sworn auditors and commercial companies of sworn auditors:  

• must have the rights granted by the Latvian Association of Sworn Auditors to provide the services and be registered in the Register of Sworn Auditors and the Register of Commercial Companies of Sworn Auditors.  
• must follow the International Standard on Assurance Engagements 3000 (ISAE 3000 Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The assurance standards will be used by assurance providers until the EU Commission has adopted the assurance standards by October 2026. Verification of compliance of European single electronic format (ESEF) of sustainability report and the content of the sustainability report with iXBRL marked information in accordance with ESRS XBRL Taxonomy Regulation will be possible once the specific digital taxonomy will be adopted by way of an amendment to the Regulation (EU) No 2019/815
• The sustainability assurance services providers are strictly regulated (criterion of education, an order of exams, regular and extraordinary qualification checks, professional liability insurance and internal and external quality controls are all defined by the Law on Audit Services). 
• Amendments to the Law on Audit Services provide that all applicants who will take qualification exams for sworn auditors starting the examination session in 2025 shall be subject to the requirement of the Law regarding mandatory pre-examination training.