For those considering individual business activity in Latvia, this article presents a concise overview of the sole proprietorship (self-employment) landscape, covering legal structures, registration, and 2025 tax regimes. It details current status types, eligibility, and mandatory contributions based strictly on official data.
Availability of Sole Proprietorship Status in Latvia
Latvia recognizes two main statuses for individuals looking to operate independent businesses: Individuālais komersants (IK) (Individual Merchant) and Saimnieciskā darbība (self-employed). Both options allow individuals to provide services and invoice clients without forming a separate legal entity. These setups are accessible to Latvian citizens and are widely adopted, particularly the “Saimnieciskā darbība” status, which is favored by freelancers and small-scale entrepreneurs.
Key Features and Registration
- Individuālais komersants (IK): Designed for individual business operators under their own name.
- Saimnieciskā darbība: Primarily used by freelancers, consultants, and micro-entrepreneurs.
Registration for either status is conducted through the State Revenue Service (VID), streamlining administrative setup without the complexity of establishing a corporation.
Taxation of Sole Proprietors in Latvia (2025)
Sole proprietors in Latvia must select between the general personal income tax regime and the micro-enterprise tax scheme. All are subject to mandatory social security contributions alongside income tax obligations. The table below summarizes the relevant tax rates in effect for 2025:
| Status Option | Applicable Tax Regime | Tax Rate (EUR, %) | Annual Thresholds (EUR) |
|---|---|---|---|
| Saimnieciskā darbība / IK | Personal Income Tax (progressive) | 20% / 23% / 31% | 20%: up to €20,004 23%: €20,004.01–€78,100 31%: above €78,100 |
| Saimnieciskā darbība / IK | Micro-enterprise tax | 25% / 40% | 25%: up to €25,000 40%: above €25,000 |
Note that, in addition to these income tax regimes, all sole proprietors are also obligated to make social security contributions.
Summary of Legal & Practical Requirements
- Separate legal entity formation not required: Individual status is sufficient for business operations and invoicing.
- Tax regime choice: Sole proprietors can select between general personal income tax rates or opt for the micro-enterprise tax, based on turnover.
- Mandatory social security: All forms of individual business activity entail social contributions.
- Registration process: Managed efficiently through Latvia’s State Revenue Service (VID)
- Accessibility: Available to all Latvian residents
Official Resources
- State Revenue Service (VID): Self-Employed Persons
- VID: Micro-enterprise tax
- Latvija.lv: IK Registration
- Latvija.lv: Saimnieciskā darbība Registration
Pro Tips for Managing Sole Proprietorship Status in Latvia
- Compare projected turnover to decide if the general or micro-enterprise tax regime is more cost-efficient for your business model.
- Use the VID’s official online tools for registration to accelerate processing and minimize paperwork errors.
- Track turnover carefully throughout the year. Exceeding key tax thresholds even by a small amount can result in a substantial tax rate jump.
- Factor mandatory social security contributions into all financial planning, as these are required in addition to income tax.
- Keep thorough documentation, especially if changing between tax regimes or seeking advisory support from VID.
Latvia’s framework for sole proprietorship is both accessible and widely used, making it straightforward for residents to begin business activity as “Individuālais komersants” or through self-employment. The primary considerations remain the registration process and careful selection between personal income tax and micro-enterprise regimes, both of which have distinct requirements and thresholds. Ensuring compliance with social security contributions and staying attentive to turnover levels are crucial steps for maintaining the advantages these individual business statuses offer in the Latvian context.