Latvia proposes new 10% tax regime for small service providers

Latvia is considering a new 10% tax regime designed to encourage small service providers, such as hairdressers, tutors, and trainers, to move from the shadow economy into the legal system. While the initiative aims to simplify taxation for those with small side incomes, the annual turnover threshold has been lowered from an initial 25,000 EUR to 12,000 EUR following concerns from the State Revenue Service (VID). Officials noted that a higher threshold could lead to tax optimization by existing micro-enterprise taxpayers who currently pay 25%.

Implementing this system is expected to be costly, with estimates suggesting that adapting the State Revenue Service's information systems and integrating them with banks could cost up to 400,000 EUR. Currently, only one bank, Industria, has expressed interest in participating in the system, which would involve banks automatically withholding the 10% tax from special accounts.