Being self-employed and an employee in Latvia at the same time – what should you know?

Planning to start your own business activity alongside your regular job? We've compiled the most important information you need to know before becoming self-employed!

Can an employee also be self-employed?

Yes, absolutely! This opportunity is often used by employees who want to pursue entrepreneurship by developing a hobby or earning additional income alongside their main job. As long as your employment contract does not restrict independent business activity, you are free to register and operate as a self-employed person.

Do I need to pay taxes from business activity?

Yes, of course! Your employer pays taxes from your salary, but you are responsible for calculating and paying taxes from your business activity according to the established rates and procedures. If you register as self-employed and choose the general taxation regime (to find out which option is best for you, take this test), note that two rates apply. The amount of your monthly income determines whether you must apply the full rate of 31.07%, which includes various types of insurance, or only the pension insurance rate of 10%. If your income is at least €700 per month, you must contribute 31.07% of that amount (or a larger amount of your choice), plus 10% of the difference between your total income and €700. For example, if your monthly income is €900, you pay 31.07% from €700 and 10% from the remaining €200, which totals €237.49. If your income is below €700, only 10% is paid from the actual income.

Self-employed individuals using the general regime must submit quarterly reports by January 17, April 17, July 17, and October 17, and pay taxes into the unified tax account by the 23rd of the same month. Personal income tax is calculated based on total annual income using the appropriate rate. The annual income declaration must be submitted between March 1 and June 1, and tax paid by June 23.

Who pays the minimum social contributions – the employer or the self-employed person?

Both employees and self-employed individuals are subject to minimum social contributions calculated from at least €2100 per quarter. If you are not employed, you must assess whether you are making sufficient contributions. If you are both employed and self-employed, all your income is combined to calculate the obligation. If the combined income falls short, your employer must cover the shortfall.

If you’re planning to start a business alongside your job, we recommend reading our article “How to become and be self-employed” for key information on registration, tax regimes, payment rules, and other conditions.

Once you begin business activity, you'll need to keep accounting records of income and expenses to calculate taxes accurately. This may seem difficult, especially if you’re doing it for the first time. Accuracy is crucial – it helps reduce your taxable income and save valuable funds for growing your business. You can reduce uncertainty by using a suitable accounting program.

Looking for one? Try Pats.lv! The platform simplifies accounting – tax calculations, journal entries, and report generation are all done automatically. All you need to do is track your income and expenses (with Pats Pro you can even connect your bank account to automate this) and upload the data into the system.

No prior accounting knowledge is needed to use pats.lv – try it yourself and see! Register now and use it free for the first 7 days!

Updated 25.11.2024