How are micro-enterprises different?

Micro-enterprises are a form of business activity that is especially suitable for beginners and small companies with comparatively low turnover. Micro-enterprises have slightly lower taxes and relieved conditions of operation. Sole proprietorships, individual undertakings, farms or fishing enterprises, natural persons registered as performers of economic activity, as well as limited liability companies (SIA) may become micro-enterprises.

Who can become a micro-enterprise in Latvia?

To become a micro-enterprise in Latvia or a micro-enterprise tax payer, a company must conform to certain criteria:

  • annual turnover does not exceed EUR 40,000;
  • only natural persons are the participants of a SIA;
  • only employees of the micro-enterprise are board members of the SIA;
  • the number of employees does not exceed five at any moment in time;
  • none of the employees has an income that exceeds EUR 720 per month;
  • the payer of the tax is not a member of a partnership.

How to become a micro-enterprise in Latvia?

In accordance with the law, a micro-enterprise is entitled to receive the status of a micro-enterprise payer, if they have agreed in writing with all employees of the micro-enterprise regarding the application of micro-enterprise tax. This agreement may be included in the labour contract as an individual provision.

The status of a micro-enterprise tax payer may be obtained simultaneously with the registration of an enterprise in the Register of Enterprises by applying for the receipt of the status of a micro-enterprise tax payer, as well as a natural person may submit an application for the receipt of the status of a micro-enterprise tax payer simultaneously with registration of the status of a performer of economic activity. The state revenue service shall make the decision regarding the granting of micro-enterprise payer status within five business days.

What taxes must be paid?

Payment of a micro-enterprise tax is comparatively simpler, because the personal income tax, corporate income tax, risk state duty and social tax must not be paid separately; only micro-enterprise tax must be paid.

The micro-enterprise tax object is the turnover of the micro-enterprise. The micro-enterprise tax rate on the turnover of the micro-enterprise is 15%. If a micro-enterprise did not have any turnover during a year or the calculated sum of micro-enterprise tax does not exceed EUR 50, the micro-enterprise tax payer shall pay micro-enterprise tax in the amount of EUR 50 into the state budget.

When is it suitable?

Being a micro-enterprise is convenient, if the expenses of a company are low, for instance, if a company offers programming, accounting, legal or marketing services. It is suitable, if the turnover is low and payments of salaries that exceed EUR 720 per month are not expected. Before making the final decision, it is worth performing a calculation and assessments regarding whether this is the most suitable form of business activity in the particular situation.