Contracting in Latvia
Introduction
The Republic of Latvia is located in Northern Europe and shares borders with Estonia, Lithuania, Russia, Belarus and a maritime border with Sweden.
The Republic of Latvia declared independence from Russian rule after World War I, but suffered subsequent invasions and revolutions resulting in it only truly becoming an independent democratic state in the 1990’s. Despite its somewhat erratic history Latvia has always managed to maintain its identity and is recognised in Europe for its culture.
It is a member of the European Union, Eurozone, NATO, Council of Europe, the United Nations as well as a number of various other well recognised organisations. The national currency has been the Euro since 2014.
Latvia performs well for democratic governance and freedoms and has a high income economy with good living standards. Interesting Latvia has the highest percentage of leading positions held by women in Europe. After 2000 Latvia had one of the biggest GDP growth rates in Europe, but the financial crisis at the end of the decade effected the economy adversely and Latvia is still attempting to promote foreign direct investment to make up for this.
Latvia has a mild climate especially around the coastal areas which mean cooler summers and milder winters, ideal for people who can’t stand the weather too hot or too cold. It also has lots of natural forests and parks and a wild diversity of wildlife for those who are fond of an outdoor life. Culturally it also has a lot to offer. Overall Latvia is a country that is potentially very desirable for a freelancer looking to contract abroad and is certainly worth consideration.
Registry/Registration
Being a member of the European Union EU citizens can move to and work in the country freely. It is also a member of the Council of Europe and the Schengen area and therefore has diplomatic relations with a wide variety of countries and hosts many foreign embassies in its capital. Expats can enjoy equal rights there excluding the right to vote.
EU nationals will not require a work permit to enter into employment, although they should apply for a residence permit if planning on staying for more than 90 days to avoid complications. Non-EU individuals will need to prove that they will be engaged in employment with a Latvian registered business in order to gain a work permit and may also be required to already have obtained a residency permit. In order to obtain this permit it depends on your nationality as requirements differ slightly for countries which Latvia has a visa free regime with. It is important to note that if you engage in employment without a work permit this can result in rejection of residency permits, this can also be rejected for a variety of reasons including, but not limited to giving false information and not having the financial resources for subsistence as well as pretty much any criminal activity.
Income Tax
Although the tax year is in Latvia is one calendar year i.e. 1st January to 31st December the tax returns are filed the following year between 1st March and 1st June unless your annual income exceeds EUR62,800 then it should be filed between 1st April and 1st July.
If you are resident and work for a Latvian company then your employer should be withholding your income tax. As a resident you should declare all income whether earned in Latvia or not. Non-residents need only file if they have earned taxable income in Latvia, thereafter the same rules and rates apply as to residents.
The current rates are:-
20% EUR20,004
23% EUR20,004 – EUR62,800
31% EUR62,800 +
Social Security
If you are self-employed and working in Latvia your contributions depend on whether you are still covered for social insurance in your home country. If so you do not have to enter the Latvian Social Security System.
National Social Insurance Contributions are made by the employer and employee jointly at 24.09% paid by the employer and 11% paid by employee. This is capped at EUR62,800, however if you exceed this amount it should be noted that you then become liable for Solidarity Tax which is due monthly on the same basis as Social Security payments.
Employment Rules
Latvian Labour code is based on EU directives. The law recognises trade unions and collective labour agreements. You need an employment contract to work in Latvia and these can either be permanent or temporary, temporary contracts can be for a period of two years at most, after this time it will automatically become a permanent contract. To terminate an employment contract in Latvia you need to give one months notice unless it can be mutually agreed to give a different notice period.
Banks
Latvia has one of the lowest costs of living in the European Union which makes it very inviting. Banking wise it operates like most other European countries, debit and credit cards are widely excepted with the exception of small businesses or individuals who sometimes only take cash. Those who wish to avoid fees associated with cards and foreign bank transfers are advised to open a local account. If you do not speak Latvian it is advised to make an appointment with the bank to ensure that an English speaker is on hand to assist you. Providing that you have all the relevant documents and adequately complete the application an account should be open in a matter of hours if not minutes, although if there are complications it has been known for this to take longer usually if proof of deposit and source of funds is required and not straight forward. Although documentation may vary from bank to bank it is pretty standard as per the rest of the European Union and you will require your passport, proof of residence, proof of address and your employment contract if applicable. Whilst online processing is available this is generally quicker and easier if you visit the bank in person. Non-residents can expect additional charges to open a Latvian bank account. Latvia has many large foreign banks in which to choose to open an account with, so it is best to check which will suit you with regards to your language, requirements and domestic banking relationship.
Corporate Structures
Self-employment is a complicated issue for foreign professionals in Latvia, but here at Chesterfield we can provide a variety of management packages including ongoing self-employed payroll services to make life easier. We can also provide full management assistance with regards to all local accounting and tax liabilities. If required we can also offer establishment of your own company and can structure the invoicing to your particular needs.
Chesterfield and Contracting in Latvia
With one of the lowest living costs in Europe, Latvia has seen a marked increase in foreign professionals locating there for work. Chesterfield has years of experience with helping global freelancers and therefore we are ideally situated to assist with all aspects of self-employed contracts across a wide range of countries including Latvia. Furthermore Chesterfield prides itself on its personal service offering a dedicated member of staff for a more individual orientated experience.
