How can an Umbrella Company Help with Contracting in Latvia?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Latvia. Even better, most are experts in Latvia and expat tax law, meaning they’ll also help you optimize your earnings in Latvia.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Latvia.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Latvia, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Latvia and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Latvia
One of the most consistently challenging aspects of contracting in Latvia is complying with the country’s tax system. As well as paying tax in Latvia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Latvia
If you’re working in Latvia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Latvia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Latvia, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Latvia through PAYE is left with the prospect doing everything themselves.
Do you know much about Latvian Tax Law? Does Latvia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Latvia can range from 20 to 31.4 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Latvia
|When Do You Need to Lodge Your Tax Return?||1 June (in the year following the income tax year)|
|Tax Filing Deadline||1 June (in the year following the income tax year)|
|Can you file it online?||Yes, https://eds.vid.gov.lv/login/|
How to File Taxes in Latvia as a Contractor
You can file your taxes online via the State Revenue Service’s Electronic Declaration System (EDS).
Step 1: Register
There are 2 ways to register for the State Revenue Service’s EDS.
You may register here(link is external) using your online banking details, electronic identification card (eID) or secure electronic signature (sParakstu).
Alternatively, you can complete the form here(link is external) and submit it to your nearest State Revenue Service (SRS) Client Service Centre, along with a passport or ID. This can be found here(link is external).
Within 5 working days, you will receive a username and password from the SRS.
Step 2: Sign In
Log in to the EDS here(link is external). Here you can declare and pay your taxes.
Tax Figures in Latvia
|Tax-free Threshold in Latvia||None|
|Income Tax Rates||
Tax Residency in Latvia
When do you become a tax resident in Latvia
You become a tax resident in Latvia when:
- Your registered (declared) place of residence is located in Latvia;
- You stay in Latvia for 183 days or longer in a 12-month period beginning or ending during the tax year; or
- You are a citizen of Latvia and you are employed abroad by the Latvian government.
Tax treaties may apply to influence residence for tax purposes.
Does the 183 day rule apply in Latvia
Am I taxed on my global income in Latvia
Residents are taxed on their global income. Non-residents are taxed on their Latvia-source income only.
Can you set up your own Limited Company in Latvia?
|How long does it take to set up||5.5 days|
|How much does it cost||EUR187.03 + EUR18.78 (for the first signature and EUR4.70 for each subsequent person’s signature)|
|Is it easy?||Starting a Business Rank: 21/190 (Source: World Bank)|
Tax Calculator in Latvia
If you are a contractor and want a calculation on your tax and net retention in Latvia, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Latvia
Contractors in Latvia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Latvian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Latvian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Latvian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Latvia
We work with numerous umbrella companies in Latvia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Latvia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Latvian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Latvia but without the overhead of directly dealing with the Latvian tax authorities. Get in touch with us today for some reliable advice on tax in Latvia!
A Contractor’s Guide to Work Permits in Latvia
Immigration is one of the primary concerns for any contractor hoping to start working in Latvia. Permanent employees will find it easy to get their Latvian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Latvian work permit, known more commonly as the Latvian work visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Latvia is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Latvia (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Latvia. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Latvia and match contractors with the right company for them. If you’ve already secured a contract in Latvia, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).