How to register as a self-employed person in Latvia?

If you're considering registering as self-employed to start your business, you're probably thinking about many things: how to register, what taxes to pay, and how to handle your accounting independently. For any entrepreneur, even a small one, it's important to take care of these things from the start to have more time to focus on growing the business, developing products, and building customer relationships.

We've compiled answers to some of the most frequently asked questions by self-employed individuals – we believe this will help you take your first steps in starting economic activity with confidence!

Self-employed or sole trader?

If you've decided to become self-employed, you can register as either a self-employed person or a sole trader (IK). The main difference lies in the registration process. IK registration is done via the Register of Enterprises by submitting a form, registering a business name, and paying the registration fee. A self-employed person registers with the State Revenue Service (VID) through the Electronic Declaration System using their personal ID code.

What is my main activity code?

When registering as self-employed, you must indicate your main activity code according to the NACE 2 classifier. If you’re unsure how to determine the code, contact the Central Statistical Bureau – that’s the fastest and safest way to find the right code.

Which tax regime should I choose?

Currently, there are two tax regimes for self-employed persons: the general regime and the Micro-enterprise Tax (MUN) regime.

General regime: You calculate social security contributions quarterly and personal income tax (IIN) annually. You can deduct expenses. For example, if a phone is used for both personal and business needs, part of the cost can be deducted, lowering the taxable income.

MUN regime: A single tax rate covers both social contributions and IIN. You cannot deduct expenses. It's suitable for those with few or no expenses. Note: VAT payers cannot use this regime. You also lose access to IIN deductions.

If you're not sure which regime suits you, take the test on our website and review the tax rates and rules for each regime. Your income and expenses can significantly influence the result.

How much tax do I have to pay?

MUN regime: Tax is 25% of turnover. Payments are made quarterly.

General regime: If your monthly income is €700 or more, you pay 31.07%. If it's less, you pay 10% pension insurance only. You also pay 10% on the difference between actual income and the minimum base.

Deadlines for submitting reports:

• General: January 17, April 17, July 17, October 17
• MUN: January 15, April 15, July 15, October 15
• Tax payment: by the 23rd of the same month via the unified tax account

IIN in the general regime is calculated once a year based on total income. Submit your annual return from March 1 to June 1. Payment is due by June 23.

What are minimum social contributions?

Both regimes require minimum social contributions from a base of €2100 per quarter. If your income meets this threshold, no extra calculations are needed. If you’re also employed, the employer may need to make additional contributions. Exceptions apply – see the official list.

If your income is projected below €2100, you must submit the form “Self-employed income forecast” in the EDS by the report deadline. Then, only 10% pension contributions will be calculated on your actual income.

How to keep an accounting journal?

Keep all documents related to income and expenses – receipts, invoices, bills. Income should be recorded when received, expenses when paid. Follow legal rules about allowable deduction proportions.

You can do it manually using online templates. A safer and easier way is to automate the process. The Pats.lv system automatically fills in the journal and calculates taxes based on your data.

If this is your first time doing accounting yourself, it might feel complicated and time-consuming. Pats.lv makes it easier – tax calculations, journal entries, and report generation are automated.

No prior accounting knowledge is needed – try it free for the first 7 days!

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Last updated: 25.11.2024