Latvia: Worked Example of Tax on Rent
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Tax Example: Rent
| Non-resident couple's joint monthly rental income1 | €1,500 | €6,000 | €12,000 | |
| Annual Rental Income | 18,000 | 72,000 | 144,000 | |
| Less: Depreciation Expense2 | (25,000) | (100,000) | (200,000) | |
| Less: Real Estate Tax3 | (2,500) | (10,000) | (20,000) | |
| Less: Real Estate Transfer Tax4 | (5,000) | (20,000) | (40,000) | |
| = Taxable Income | € (14,500) | € (58,000) | € (116,000) | |
| Income Tax Rates | ||||
| Flat rate5 | 15% | nil | nil | nil |
| Annual Income Tax Due | € 0 | € 0 | € 0 | |
| Tax Due as % of Gross Income | 0% | 0% | 0% | |
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DISCLAIMER: The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on September 17, 2008.
Notes
1 The property is jointly owned by husband and wife. Calculations are done assuming that the real estate property is acquired recently.
2 The annual tax depreciation rate of buildings is allowed up to 10% of the property value. The properties are deemed to cost €225,000, €1 million, and €2 million respectively. Declining balance method will reduce the amount of depreciation expense from year to year, thus taxable income will increase and tax liability will occur.
3 Land and buildings are subject to real estate tax at a rate of 1% of the cadastral value (a unique value estimated by the state authorities for each property, which should be close to fair market value, but usually is significantly lower).
4 Real estate transfer tax (RETT) is 2% of the purchase price. RETT is applicable as a cost in the taxation year it is incurred.
5 To avail of the reduced income tax rate of 15% and to consider depreciation as an income-generating expense, property owners must register their economic activities with the tax authorities. The standard income tax rate is 25%.
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