Over 80% of penalties issued by Latvia's State Revenue Service (VID) in 2025 traced back to bookkeeping failures — not aggressive tax planning, not deliberate fraud, but simple record-keeping errors. A misclassified expense here, a missing invoice there, and suddenly you're facing an audit notice and a fine that could have been avoided with a properly maintained ledger.

Bookkeeping in Latvia is not optional. It is a legal requirement for every business entity, from a sole trader with EUR 5,000 in annual revenue to a multinational subsidiary processing thousands of transactions per month. The rules are specific, the deadlines are firm, and the consequences of getting it wrong are real.

This guide walks through everything a business owner in Latvia needs to know about bookkeeping — what the law requires, which system you need, what it costs, and where most companies go wrong.

What Latvian Law Actually Requires

The legal framework for bookkeeping in Latvia rests on two pillars: the Law on Accounting (Grāmatvedības likums) and the regulations issued by the Cabinet of Ministers that flesh out the details. Together, they establish a set of requirements that apply to every commercial entity.

Every business must maintain accounting records that accurately reflect its financial position and all economic transactions. Records must be kept in Latvian (though supporting documents may be in other languages if a Latvian translation is available upon request). The accounting period is the calendar year — January 1 through December 31 — unless the Cabinet of Ministers grants an exception.

Primary documents — invoices, receipts, contracts, bank statements — must be retained for at least five years after the end of the relevant financial year. Some documents, like annual reports, must be kept for 10 years. Lose them, and you lose the ability to defend your figures during an audit.

Here is what catches many new business owners off guard: the obligation begins on the day your company is registered. Not the day you make your first sale. Not the day you hire your first employee. The day you exist as a legal entity. If your SIA was registered on March 3, you need bookkeeping from March 3.

Single-Entry vs. Double-Entry: Which System Applies to You

Latvia allows two bookkeeping systems, and you don't get to choose freely between them.

Double-entry bookkeeping is mandatory for all SIAs (limited liability companies), regardless of size. It is also required for any entity that exceeds certain thresholds in revenue, assets, or employee count. The system records every transaction in two accounts — a debit and a corresponding credit — creating a self-balancing ledger that makes errors easier to catch and financial statements more reliable.

Single-entry bookkeeping is available only for micro-enterprises, certain small sole traders, and entities whose annual revenue stays below the thresholds defined in the Law on Accounting. It's simpler: you record income and expenses in chronological order, essentially maintaining a cash book. No balance sheet, no double entries, no chart of accounts.

The practical difference is enormous. A SIA with 50 transactions per month needs a proper chart of accounts, a general ledger, subsidiary ledgers for receivables and payables, and monthly reconciliations. A self-employed photographer with 10 clients per year might need nothing more than a spreadsheet.

(For a deeper comparison, see our article on single-entry vs. double-entry bookkeeping.)

In our experience, the businesses that run into trouble are the ones that start with single-entry because it's easier, then grow beyond the thresholds without transitioning. The transition is not just an accounting exercise — it requires restating your financial position, which can take weeks if your records are incomplete.

The Core Documents Every Business Must Maintain

Latvian law specifies exactly which documents constitute proper bookkeeping. Missing any of them is not a grey area — it's a violation.

Invoices (rēķini): Every sale and purchase must be documented with an invoice containing mandatory details: supplier and buyer information, invoice number, date, description of goods or services, unit price, total amount, PVN (VAT) amount if applicable, and the total including PVN. Skip any one of these fields, and VID can reject the invoice as invalid — which means you cannot deduct the associated expense or reclaim the input PVN.

(Full breakdown: Invoice requirements in Latvia.)

Bank statements: Monthly reconciliation of your accounting records against bank statements is standard practice. Most businesses receive electronic statements daily through their accounting software.

Cash documents: If your business handles cash, you need a cash register (kases aparāts) certified by VID, daily Z-reports, and a cash book. The requirements are strict, and the penalties for non-compliance start at EUR 140 for the first offense. (More on this: cash register requirements.)

Payroll documents: Employee contracts, salary calculations, tax withholdings, social contribution reports. Every month you have employees, you generate payroll documentation.

Contracts: Any agreement that creates a financial obligation should be in your files. Lease agreements, service contracts, loan agreements — all of them support the transactions recorded in your books.

Annual financial statements: Every SIA must prepare and submit an annual report to the Enterprise Register. The report includes a balance sheet, income statement, and notes. The submission deadline is four months after the end of the financial year — April 30 for most companies.

Accounting Software: The Latvian Landscape

You cannot run bookkeeping for a Latvian SIA on pen and paper. Well, legally you can, but practically, nobody does.

The dominant software in Latvia is Tildes Jumis — a desktop application that has been the market standard for over two decades. It's built for Latvian accounting standards, generates VID-compliant reports, and is what most local accountants know by heart. The downside: it's a desktop program with a dated interface, and collaboration between business owner and accountant requires file transfers.

Horizon has gained significant ground as a cloud-based alternative. It offers real-time access from anywhere, automatic bank feeds, and a more modern user interface. For businesses where the owner wants to see financial data without calling the accountant, Horizon is increasingly popular. Monthly subscription runs roughly EUR 15-50 depending on the plan.

1C (Одна-Эс) dominates the Russian-speaking segment. If your accountant trained in a post-Soviet context, they likely know 1C better than anything else. It's powerful, customizable, and handles complex multi-entity structures well. It's also notoriously difficult to set up without an experienced implementer.

MONEO is a newer entrant focused on invoicing and basic bookkeeping for smaller businesses. It won't replace a full accounting system for a growing SIA, but for micro-enterprises and sole traders, it covers the essentials at a lower price point.

(Detailed comparison: accounting software in Latvia.)

The software choice matters less than you might think, as long as it's compliant with Latvian standards and your accountant knows how to use it. What matters more is that the data gets entered accurately and on time.

What Bookkeeping Actually Costs

This is the question every business owner asks first. The answer depends on your structure.

Outsourced accounting — hiring an external firm — is the most common approach for small and medium businesses in Latvia. Typical monthly fees as of 2026:

New company with minimal activity: from EUR 150/month
Small company (up to ~50 transactions/month): EUR 200–600/month
Medium company (100-300 transactions, employees, PVN): EUR 700–900/month
Large company or complex structure: EUR 1,000+/month

These prices generally include daily bookkeeping, monthly declarations (PVN, payroll taxes), and the annual report. They do not usually include tax consulting, audit support, or non-standard work.

In-house accountant — hiring a full-time employee — becomes cost-effective once your monthly accounting spend exceeds roughly EUR 1,500. A competent accountant in Riga commands a gross salary of EUR 1,500–3,000 per month, depending on experience and the complexity of your business. Add the employer's social contribution burden of approximately 23.59%, and the real cost is EUR 1,854–3,708 monthly — before considering office space, software licenses, training, and the fact that one person can get sick.

(Full cost analysis: outsourced vs. in-house accounting.)

The break-even point varies, but in our experience, businesses processing fewer than 200 transactions per month rarely justify a full-time hire. Between 200 and 500 transactions, it's a genuine decision. Above 500, you probably need at least one dedicated person — possibly supplemented by an external firm for the annual report and tax advisory.

The Licensed Accountant Requirement

Starting in 2024, Latvia introduced a requirement for companies exceeding certain thresholds to use a licensed (certified) accountant. This is a significant shift from the previous regime, where anyone could maintain the books regardless of their qualifications.

As of 2026, the licensing requirement applies based on company size criteria — revenue, balance sheet total, and employee count. If your company crosses those thresholds, your accountant (whether in-house or outsourced) must hold a valid certificate issued by the relevant professional body.

What this means in practice: if you're using a friend, a family member, or a self-taught bookkeeper who lacks certification, and your company has grown beyond the thresholds, you're out of compliance. VID has started checking.

(Details: licensed accountant requirement.)

The Five Mistakes That Cost the Most

After years of working with businesses across Latvia, certain patterns emerge. These are the bookkeeping errors we see most frequently — and they're almost all preventable.

Mixing personal and business expenses. The SIA is a separate legal entity. Its bank account is not your personal wallet. Every time you buy groceries with the company card, you create either a taxable benefit or an undocumented withdrawal, both of which attract VID's attention.

Falling behind on data entry. Bookkeeping works when transactions are recorded within days, not months. We have inherited clients who hand over a shoebox of receipts in March expecting us to reconstruct an entire year of accounting. It's possible, but expensive, error-prone, and stressful for everyone involved.

Ignoring PVN deadlines. PVN declarations are due by the 20th of the month following the tax period. Miss the deadline, and penalties accrue automatically. Miss it repeatedly, and VID may revoke your PVN registration — which creates enormous problems if your clients are other businesses that rely on reclaiming input PVN.

Failing to document cash transactions. Cash is not invisible to VID. Every cash receipt needs a corresponding entry, and if your business accepts cash from consumers, you need a registered cash register. Operating without one can result in fines starting at EUR 140 and escalating rapidly.

Not reconciling bank statements. If your accounting records don't match your bank statements at year-end, something is wrong. That "something" might be a missing invoice, a double entry, or an unexplained payment. Reconcile monthly — not annually.

(Deep dive: bookkeeping mistakes that trigger audits.)

Deductible Expenses: What Counts and What Doesn't

A properly maintained set of books does more than keep you compliant — it protects your deductions. Every expense you claim against your company's revenue must meet two tests: it must be directly related to business activity, and it must be properly documented.

"Properly documented" means a valid invoice or receipt with all mandatory details, tied to a real business purpose. "I needed it for work" is not documentation. A client entertainment expense, for example, requires a record of who attended, the business purpose of the meeting, and an invoice from the venue.

The categories that most commonly cause disputes with VID include vehicle expenses (business use must be separated from personal use), mobile phone costs (same issue), travel expenses (must be connected to a specific business purpose), and representation expenses (subject to annual limits).

(Full guide: expense deductions for SIA.)

Choosing the Right Support

Whether you handle bookkeeping in-house, outsource it entirely, or use a hybrid model, the key decision factors are volume, complexity, and your own involvement level.

A sole-owner SIA with 20 invoices per month and no employees can function perfectly well with a basic outsourcing arrangement at EUR 150–200 per month. A manufacturing company with 15 employees, inventory tracking, and cross-border transactions needs either a skilled in-house team or a mid-tier accounting firm charging EUR 700–1,000 per month.

The wrong choice is not catastrophic — you can always switch providers or bring accounting in-house later. But switching mid-year creates transition costs (EUR 500–2,000 depending on the complexity of the handover), so it pays to make a considered decision upfront.

(Decision framework: how to choose an accounting service provider.)

What Happens When You Get It Right

Bookkeeping is rarely exciting. Nobody starts a business because they're passionate about double-entry ledgers. But the businesses that treat bookkeeping as a core function — not an afterthought — consistently make better decisions. They know their margins. They spot cash flow problems before they become crises. They file taxes without scrambling, and they survive audits without penalties.

The cost of getting it right is predictable: EUR 150–1,000 per month, depending on your size. The cost of getting it wrong is not.

Start With Clean Books From Day One

Whether you are launching a new SIA or inheriting years of neglected records, the setup phase determines everything that follows. We select the software, configure the chart of accounts, establish document workflows, and take ownership of ongoing bookkeeping -- so your books are audit-ready at all times.

Set up professional bookkeeping for your company →

Bookkeeping in Latvia: What Every Business Owner Must Know