Accounting Services in Latvia: Complete Guide for Businesses and Self-Employed

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Have you started a business in Latvia and feel that accounting is like a dark forest where getting lost is easy? You are not alone in facing these challenges. Accounting services in Latvia have become an indispensable part of business operations, and today we will explore in detail why every entrepreneur and self-employed person needs a qualified accountant or accounting service provider.

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What are accounting services and why are they so important

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Accounting services represent professional financial documentation management, tax calculation and submission, as well as analysis of the company's financial condition. In Latvia, every registered enterprise or self-employed person is legally obligated to maintain accounting according to the Accounting Law, which came into force in 1992 and has been amended more than 50 times. This law establishes that all merchants must maintain financial records and prepare annual reports.

A professional accountant does not simply add numbers or arrange documents in folders. They help you understand your business's financial health, plan tax payments and avoid penalties that can reach up to 1400 euros for one violation according to the State Revenue Service regulations. In Latvia in 2024, penalties totaling more than 8 million euros were imposed for accounting and tax violations.

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What forms of accounting exist in Latvia

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Latvian legislation offers several options for organizing accounting. The first option is full accounting, which is mandatory for all limited liability companies, joint stock companies and other legal entities. This form requires registration of all financial operations, balance sheet preparation and submission of annual reports to the Register of Enterprises by April 30 each year.

Simplified accounting is available for small enterprises and self-employed individuals whose annual turnover does not exceed 40000 euros. In this case, you can use a simpler accounting system, but you still need to comply with all tax laws and submit declarations to the State Revenue Service. Self-employed people with smaller incomes can use a patent or microenterprise tax, which significantly simplifies the accounting process.

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What documents are necessary for quality accounting

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For your accountant to perform their duties professionally, you need to regularly provide the following documents:

• All purchase and sales invoices in original or electronic format
• Bank statements for all company accounts every month
• Cash orders and cash books when working with cash
• Contracts with employees, contractors and suppliers
• Copies of waybills if the company has vehicles
• Business trip orders and supporting documents for business trip expenses
• Warehouse documents on goods movement
• Documents on acquisition and write-off of fixed assets
• VAT invoices with complete information according to law
• Personnel documents on wages and social contributions

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The State Revenue Service conducts regular inspections, and lack of documents can lead to serious consequences. According to statistics in 2023, more than 3000 enterprises received warnings or penalties for incomplete documentation.

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How much do accounting services cost in Latvia in 2024

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Accounting service prices in Latvia depend on company size, number of operations and accounting complexity. For microenterprises with small document volume, the monthly fee can be from 80 to 150 euros. For small enterprises with regular operations and employees, the average price ranges from 200 to 400 euros per month.

For medium-sized enterprises with more complex structure and several employees, accounting services can cost from 500 to 1000 euros monthly. For large companies with international operations, the price can exceed 2000 euros per month. For self-employed people with patent or microenterprise tax, services are available from 50 to 100 euros per month.

It is important to understand that the lowest price does not always mean the best offer. A professional accountant can save you much more money by helping optimize taxes and avoid penalties. One unnoticed violation can cost more than a year of accounting services.

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What are the main areas of accountant responsibilities

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A professional accountant in Latvia performs a much wider range of functions than many think. The primary task is registering all financial operations in the accounting program according to Latvian accounting standards and international financial reporting standards. The accountant classifies each transaction, assigns it to the correct account and ensures everything is properly documented.

Tax calculation and declaration preparation is another essential duty. The accountant calculates corporate income tax, value added tax, social contributions for employees and submits all necessary declarations to the State Revenue Service. In Latvia in 2024, the corporate income tax rate is 20 percent on distributed dividends, while the microenterprise tax is 25 percent on turnover.

The accountant also prepares financial statements, balance sheet, profit or loss statement and cash flow statement. These documents are necessary not only for law compliance but also for you as the business owner to understand how your business is developing. A professional accountant can explain these reports in simple language and provide recommendations for business improvement.

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How to choose the best accounting service provider

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When choosing an accounting service provider in Latvia, the first criterion is certification and experience. Check whether the accountant is registered with the Latvian Association of Certified Auditors or the Latvian Association of Accountants. A professional accountant must have at least higher education and regularly attend continuing education courses, as tax laws change almost every year.

The second important factor is communication and availability. A good accountant must be available when you need them and must be able to explain complex things simply and clearly. Evaluate how quickly they respond to your questions and whether they proactively inform you about deadlines and changes in legislation.

The third aspect is technology and software. Nowadays all professional accounting service providers use modern accounting programs that allow you to see your company's financial condition in real time. The most popular programs in Latvia are Horizon, Jumis, Tildes Jumis and ERGO. Ask what software your potential accountant uses and whether you will be able to access data online.

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What are the most common mistakes in accounting and how to avoid them

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One of the most common mistakes in Latvian companies is delaying documents or their complete absence. Many entrepreneurs think that documents can be arranged later, but this creates huge problems for both the accountant and during tax inspections. According to the Accounting Law, all financial documents must be kept for at least five years, and the State Revenue Service can request them at any time.

The second common mistake is mixing personal and business finances. Many small business owners use the same bank card for both private and business needs. This creates chaos in accounting and can lead to tax violations. Always keep business and personal finances separate, and if you had to use personal funds for business, formalize it as a loan to the company.

The third dangerous mistake is incorrect application of the VAT regime. In Latvia, enterprises must register as VAT payers if their turnover exceeds 40000 euros per year. Many entrepreneurs delay registration or incorrectly calculate VAT, which can lead to significant penalties. The VAT rate in Latvia in 2024 is 21 percent at the standard rate, 12 percent at the reduced rate and 5 percent for special product groups.

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What taxes must enterprises pay in Latvia

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Every enterprise in Latvia must account for several types of taxes. Corporate income tax is the main tax paid by legal entities. Since 2018, Latvia has operated a unique system where corporate income tax of 20 percent is applied only when profit is distributed as dividends or other payments specified by law are made. If profit remains in the company and is reinvested, no tax needs to be paid.

Value added tax must be paid by all registered VAT payers. The standard rate is 21 percent, but for certain goods and services a reduced rate of 12 percent applies, for example for medicines, books and hotel services. The particularly low rate of 5 percent applies to vegetables, fruits, eggs and certain cultural events. The VAT declaration must be submitted every month by the 23rd of the following month.

Social contributions must be paid for each employee. The total social insurance mandatory contribution rate in 2024 is 34.09 percent of gross salary, of which 23.59 percent is the employer's obligation and 10.50 percent is withheld from the employee's salary. Additionally, personal income tax of 20 percent must be paid, which is withheld from the employee's salary and transferred to the state budget.

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How does the microenterprise tax work and who is it suitable for

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The microenterprise tax is a special tax system introduced in Latvia in 2010 to simplify tax payments for small enterprises. This system allows enterprises to pay only one tax of 25 percent on turnover, which replaces corporate income tax, social contributions for the owner and some other taxes. This regime is available for enterprises whose annual turnover does not exceed 25000 euros and which employ up to five employees.

The microenterprise tax is especially beneficial for enterprises with high profit margins and low costs. For example, for an IT specialist or consultant who provides services and has no large material costs, this system can be very beneficial. However, for enterprises with high costs and low profit, this system may be disadvantageous, as the tax is calculated on all turnover, not on profit.

It is important to understand that microenterprise tax payers cannot be VAT payers, which means they cannot recover input tax on purchases. This may be undesirable for enterprises making large investments or buying expensive goods. Before choosing microenterprise tax, definitely consult with an accounting specialist who will calculate which system will be more beneficial for your business.

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What deadlines must be observed in accounting and taxes

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Latvia has strictly established deadlines for submitting various declarations and preparing reports. The VAT declaration must be submitted every month by the 23rd of the following month in the Electronic Declaration System. For example, for January the declaration must be submitted by February 23. If this date falls on a weekend or holiday, the deadline is moved to the next business day.

The annual report must be prepared and submitted to the Register of Enterprises by April 30 for the previous calendar year. This report includes the balance sheet, profit or loss statement, appendices and management report. For non-submission or delay of the annual report, the Register of Enterprises can impose a fine of up to 700 euros, and for repeated violations the fine can be doubled.

The personal income tax and social insurance contribution declaration for employees must be submitted every month by the 15th of the following month. This declaration must indicate the salaries of all employees, withheld taxes and social contributions. The taxes and contributions themselves must be transferred to the state budget also by the 15th. Delays in these payments result in late payment penalties of 0.05 percent per day on the overdue amount.

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How digitalization is changing accounting services

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Digital tools have completely transformed accounting services in Latvia over the last ten years. The Electronic Declaration System, which the State Revenue Service introduced in 2010, now serves more than 95 percent of all taxpayers. All enterprises are required to submit declarations electronically, which speeds up the process and reduces the number of errors.

Cloud technologies allow accounting service providers to work with client documents from anywhere, and clients have access to their financial data in real time. Programs like Horizon Cloud or Jumis Online allow entrepreneurs to see their financial condition at any time from a computer or smartphone. This means faster decision-making and better control over business finances.

Artificial intelligence and automation are also entering accounting. Modern programs can automatically recognize invoices, classify expenses and even detect possible errors. This does not mean that accountants become unnecessary, but means that they can focus on more complex tasks and strategic recommendations rather than routine data entry. A professional accountant in 2024 is not only a numbers specialist but also a business consultant.

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Accounting services in Latvia are much more than just an obligation that must be fulfilled by law. A quality accountant is your business partner who helps you understand the financial situation, optimize taxes and avoid expensive mistakes. We have reviewed that accounting service prices range from 50 to more than 2000 euros per month depending on enterprise size, and that several tax regimes operate in Latvia that are suitable for different business models.

Remember that all documents must be kept for at least five years, that the VAT declaration must be submitted by the 23rd each month, and that the annual report must be published by April 30. Digitalization makes accounting increasingly accessible and efficient, but the role of a professional accountant remains equally important. When choosing an accounting service provider, look not only at price but also at experience, certification and communication quality.

Successful business management requires good accounting, and investment in professional services pays off with peace of mind that everything is in order, time savings and possible tax savings. Do not leave accounting until the last moment, but consider it a strategic business function that will help you grow and develop.

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How Lex&Finance can help you

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The Lex&Finance team combines experienced accounting specialists and legal consultants who have been helping enterprises in Latvia maintain quality accounting and optimize taxes for more than ten years. Our specialists are certified, regularly attend training and know all the latest changes in tax legislation. We offer a full range of accounting services from microenterprises to large international companies.

Our clients receive a personalized approach, as we understand that each business is unique with its own specific needs. We use the most modern accounting programs that allow our clients to see their financial condition in real time and make informed decisions. Lex&Finance offers not only document processing but also active consulting on tax optimization, business planning and financial strategy.

Our services include monthly accounting, salary calculations, preparation and submission of tax declarations, preparation of annual reports, consultations on tax issues and company establishment. We also help clients choose the most suitable tax regime and provide support during State Revenue Service inspections. Contact Lex&Finance to receive professional accounting support that will allow you to focus on business development while we take care of your finances.

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Answers to 5 frequently asked questions

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Is an accountant mandatory for the self-employed?

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Self-employed people do not have a strict legal obligation to hire an external accounting specialist, but in practice it is highly recommended. If you use a simplified accounting system or microenterprise tax, theoretically you can maintain accounting yourself using the Electronic Declaration System offered by the State Revenue Service. However, even in the simplest case, there are many nuances and deadlines that can be easily missed. A professional accountant costs from 50 to 100 euros per month for self-employed people but can save you much more by helping avoid penalties and optimize tax burden.

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How long must accounting documents be kept?

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According to the Accounting Law, all primary accounting documents, such as invoices, contracts, bank statements, salary calculation documents and reports, must be kept for at least five years after the end of the financial year in which they were created. Some documents, for example company founding documents or property documents, must be kept for the entire period of enterprise operation and another five years after that. The State Revenue Service can request documents for the last five years, so it is critically necessary to store them in a safe place. Nowadays more and more enterprises are switching to electronic document storage, which is just as legal as paper documents if they are properly formatted.

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Can you change accounting service provider at any time?

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Yes, you can change your accounting service provider at any time, but there are several things to consider. The best time to change is at the end or beginning of the financial year, as this simplifies the transition and reduces possible errors. If you change accounting service provider in the middle of the year, you need to ensure that all documents and data are completely transferred to the new accountant. It is also good to check the contract with the existing accounting service provider, as some contracts may have a notification period written in, for example 30 days before contract termination. Professional accounting service providers usually cooperate to ensure a smooth transition to the new service provider.

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What is the difference between an accountant and a certified auditor?

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An accountant is a specialist who performs daily accounting, prepares tax declarations and financial statements. They do not need a special license to work as an accountant, although professionally certified accountants are often members of the Latvian Association of Accountants. A certified auditor is a higher level specialist with a special certificate from the Latvian Association of Certified Auditors, which is necessary to perform legal audit. Legal audit is mandatory for medium and large enterprises, as well as for companies issuing public securities. The certified auditor checks and confirms the truthfulness and objectivity of the enterprise's financial statements. Simple enterprises usually only need an accountant, but larger companies need both specialists.

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Can you save on accounting services?

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Yes, there are several ways to reduce accounting costs, but you need to be careful not to sacrifice quality. First, you can organize your documents neatly and submit them to the accountant regularly and in an organized manner, which reduces their working time. Second, you can choose automated accounting programs that reduce manual work. Third, if your business meets the criteria, you can consider the microenterprise tax regime, which is simpler and cheaper in accounting. However, you should never choose the lowest price without additional verification, as poor accounting can cost much more than the cost of professional service due to fines, penalties and tax overpayments. Investment in quality accounting always pays off in the long term.