Taxes for individual entrepreneurs in Latvia in 2025: a detailed overview
In Latvia, the choice of the form of doing business directly affects what taxes you have to pay. This is especially true for individual entrepreneurs, self-employed persons and owners of microenterprises.

In this article, we will look at the main taxes, rates and tax elements in force from July 3, 2025, so that you can choose the right tax regime and avoid unnecessary overpayments.

🔹 Main forms of activity
There are several forms of business available to individual entrepreneurs in Latvia:
* Natural person carrying out economic activity (FIK) — natural person carrying out economic activity
* Individual Merchant (IK) — Individual Merchant
* Micro Enterprise — Micro Enterprise
* SIA (limited liability company) — limited liability company

📌 1. Personal income tax (IIN — personal income tax)
Individual entrepreneurs operating under the standard tax regime are required to pay income tax on profits.
💰 IIN rates in 2025:
* 25,5% — basic rate of taxable income
* 33% — if the annual income exceeds 105,300 euros
* +3% — additional tax if the income exceeds 200,000 euros per year
🧾 Tax book and benefits:
* Non-taxable minimum: 510 euros per month
* Additional deductions:
* For dependents
* For pensioners
* Persons with disabilities
📎 The tax book must be registered in the VID system.

📌 2. Micro-enterprise tax (MUN — microenterprise tax)
This is a simplified taxation system designed for small businesses with low turnover and a limited number of employees.

📊 Tax rate:
* 25% of annual turnover
⚠️ Important conditions:
* Turnover must not exceed €50,000 per year
* If the limit is exceeded, you lose the right to be a microenterprise
* Upon reaching the limit, you must register as a VAT payer
✅ Who can use MUN:
* Individual traders
* Individual traders
* Peasant and fishing farms
* Natural persons registered in the VID as self-employed

📌 3. Value added tax (VAT — value added tax)
If your company sells goods or provides services, you may need to register as a VAT payer.

📈 VAT rates:
Standard 21%
Reduced 12%
Special (e.g. for books, printed materials) 5%
Zero 0% (export, etc.)
🛑 Mandatory registration:
If the annual turnover exceeds 50,000 euros, registration as a VAT payer becomes mandatory.

You can register voluntarily and before reaching the limit — this can be beneficial by working with other VAT payers.

📌 4. Social contributions (SAI — State Social Insurance Contributions)
For enterprises (if there are employees):
* General rate: 34.09% of salary
* Employer: 23.59%
* Employee: 10.50%
For the self-employed:
* 31.07% of the minimum wage (determined by the country)
* 10% of overtime income (for calculating pensions and benefits)
📌 In 2025, the minimum wage in Latvia is 700 euros per month.

📌 5. Income Tax/Dividends (UIN)
For natural persons receiving dividends from business activities:

* 20% — income tax on dividends
* 0% — if profits are not distributed, but are reinvested back into the business (applies to LLC)

📌 6. Real estate tax
If an entrepreneur owns real estate (office, warehouse, rented housing), he must pay tax:

* 0.2% — 1.5% — of the cadastral value of the property
* Up to 3% — for neglected or abandoned real estate
📍 Rates are set by municipalities and may vary by region.

🏢 Popular forms of business and taxes
Business form Taxes Note
SIA 20% from dividends/0% from reinvestments Suitable for medium and large companies
Individual Merchant (FIK) 25.5% or 33% + SAI Flexible form, accurate expense accounting is required
Microenterprise 25% of turnover Simplified reporting, turnover limits

The Latvian tax system in 2025 offers entrepreneurs a choice - from a simplified micro-tax to a progressive income tax rate. The main thing is to choose the form of activity that best suits your business model and comply with the requirements of the VID in a timely manner.
What to remember:
* Upon reaching a turnover of 50,000 euros, you must switch to the general system and register as a VAT payer
* The profits reinvested by the SIA are not taxable
* Self-employed persons are required to make social contributions even with minimal profits
* There are tax benefits and deductions that can be used when properly registered

Need help choosing a tax form or registering with the VID? Write to us - we will tell you how to optimize taxes and avoid problems with regulatory authorities.