Individuals may register as single or individual merchants in Latvia. If their annual revenue exceeds 200,000 EUR or if they want to do business as a commercial agent or broker, these people must register with the Latvian Commercial Register for the economic activity they intend to engage in. If a single proprietor has more than five workers, they must additionally register with the Trade Register. The property of the Latvian solo trader will be subject to responsibility, but the individual trader will also be entitled to all commercial earnings.

Important information for Latvian individuals who want to start businesses

The critical information for a Latvian individual entrepreneur is highlighted below:

Register with the State Revenue Service

Private people must register with the State Revenue Service as taxpayers – performers of commercial operations – before beginning any commercial activity, identifying the kind of business they plan to engage in. Real estate agents, commercial agents, transport services, automobile sales, and activities involving excise items may only be run by companies that have registered with the Register of Enterprises. Legal entities and self-employed individuals must be certified for the profession at the time of registration to engage in professional activity for which there are requirements.

SRS Electronic Declaration System registration

The SRS Electronic Declaration System’s section Documents -> From the form -> Taxpayer registration and data change forms -> Registration of a taxpayer (natural person) allows for the recording of economic activity. It also allows for the registration of taxpayers (natural persons) in person at any Client Service Center by presenting proper identification and completing the Taxpayer Registration Sheet. The lack of a registration fee should be noted. You may check the Taxpayer Register, which is open to the public, to see the performer’s status.

Form for taxpayer registration and data modification

To ensure that the intended activity does not resemble an employment contract and to notify the applicant of this, you must fill out the Taxpayer Registration and Data Change Form/Taxpayer (Natural Person) Registration Data/Economic Operator in EDS when establishing a firm. The questionnaire’s goal is to provide you with information on the characteristics of an employment contract and emphasize the key distinctions between employment and company contracts, allowing you to assess the kind of business you want to register.

Register structural unit

The location must be registered with SRS as a structural unit if economic activity occurs somewhere other than the legal or declared address. If the location is not owned by the registrant, additional information that must be submitted includes copies of valid documents certifying the right to use the premises or permission from the owner (or legal representative).

PIT on business income

Before beginning company operations, individual entrepreneurs must register for Personal Income Tax (PIT). PIT is determined as the difference between revenue and costs for income from company operations. Expenses incurred by private people are allowed as long as they don’t go beyond 80% of gross revenue. All legal expenses are entirely deductible (e.g., salary, immovable property tax, depreciation of non-current assets)

Lower licensing cost

A private individual may pay a lower licensing cost if the following conditions are met: 

• The person has an old-age pension and can spend the non-taxable minimum
• the person has been given Group I or II disability status
• the person’s annual income from commercial activities is less than EUR 3000
• the individual does not pay business or microenterprise taxes
• the individual neither pays salary taxes nor employs anybody else

The person who paid the lower license price is exempt from filing a yearly tax return. The discounted license cost may only be paid for six months (EUR 9) or a full calendar year (EUR 17).

Unauthorized commercial activity

Business revenue that comes from a backyard garden or auxiliary farm, harvesting berries, collecting wild medicinal herbs and flowers, or raising wildlife, as long as it doesn’t exceed EUR 3000 annually, may be excluded. To calculate yearly revenue, accounting records must be preserved. This commercial activity must be disclosed to SRS within five business days if yearly income surpasses EUR 3000.

Obligatory payments to state social insurance

For the State Social Security Law, a private person who engages in commercial operations is regarded as being self-employed and as such is subject to the Law’s obligatory contribution requirements. According to calculations made by the State Social Insurance Agency, self-employed individuals (who are not also workers) are required to pay the minimum mandatory contributions to the state pension insurance (SSIA). SSIA notifies SRS of this amount, and SRS tells the taxpayer through EDS. A self-employed individual must notify SRS if they have determined that their income will be below the minimum.

Value Added Tax

Despite not meeting the registration threshold of EUR 40 000 specified by the VAT legislation, a natural person who registers their commercial operations may nevertheless register at the SRS VAT payer register and pay VAT. However, if the total cost of VAT-taxable supply of goods and services over the previous 12 months exceeded EUR 40 000, the natural person is required to register at the SRS VAT payer register and must charge VAT on all transactions. To charge VAT on purchases made within that period, a natural person who makes purchases on EU territory and whose total tax-free value in the current calendar year equals or exceeds EUR 10,000 must register as a VAT payer with the SRS.