Effective Tax Rate on Rental Income
|Click here to see a worked example|
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.
Income TaxNonresidents earning income in Latvia are taxed at a progressive rate of 20-31%.
Rental IncomeRental income earned by nonresident property owners are taxed at the standard progressive income tax rate of 20-31%, in which case property taxes and depreciation expenses are deductible. The taxpayer also has an alternative to pay a flat 10% income tax on their rental property income, however in this case, no deductions are allowed, and the property owner can not benefit on the capital gains deductions when selling the property.
Capital GainsCapital gains from the sale of real estate property are taxed at a special rate of 20%. 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.