Generous depreciation allowances brings down rental income tax payables
Last Updated: July 13, 2017
Effective Tax Rate on Rental Income
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Nonresidents are taxed on their Latvian-sourced income. Married couples are taxed separately.
Nonresidents are often taxed by withholding and are only eligible for allowances and credits available to residents if they are residents of EEA countries and are earning at least 75% of their income from Latvian sources.
Nonresidents earning income in Latvia are taxed at a flat rate of 23%.
Rental income earned by nonresident property owners are taxed at the standard income tax rate of 23%. Property taxes and depreciation expenses are deductible. The annual tax depreciation rate of buildings is allowed up to 10% of the property value.
Capital gains from the sale of real estate property are taxed at a special rate of 15%. Taxable capital gains are computed as selling price less acquisition costs and other related expenses.
Real Estate Tax
Real estate tax is levied in Latvia at 1.5% for properties used for business activities. The tax is levied on the cadastral value of the property, as calculated by the local authorities.
As of 01 January 2013, local authorities can set the rate of real estate tax on their jurisdiction within a range of 0.20% to 3%. If the local authorities do not announce a different rate, the standard real estate tax rate of 1.5% will apply.
Real estate tax paid is also deductible for income tax purposes if the real estate property is used for business or commercial purposes.
As of 01 January 2010, residential houses and apartments not used for business purposes are also subject to real estate tax. Progressive rates have been set for residential properties.
REAL ESTATE TAX FOR RESIDENTIAL PROPERTIES
|TAX BASE, LVL (€)||TAX RATES|
|Up to 40,000 (€53,333)||0.2%|
|40,000 - 75,000 (€100,000)||0.4%|
|Over 75,000 (€100,000)||0.6%|
|Source: Global Property Guide|