Micro-Enterprise vs Self-Employed: Quick Comparison

Two freelance translators in Riga, same language pair, same clients, similar revenue -- about EUR 25,000 per year. One pays EUR 6,250 in total tax. The other pays EUR 4,100. The difference is not a deduction trick or a clever loophole. It is the regime each one chose when registering.

Latvia offers two main tax regimes for individuals conducting economic activity without forming a company. They look similar from the outside but work very differently on the inside. This comparison covers only these two regimes; for the full picture including SIA and other options, see the complete tax regimes guide.

Side-by-Side Comparison

| Feature | Micro-Enterprise (MEN) | Self-Employed (standard) | |---|---|---| | Tax rate | 25% on gross revenue | VSAOI 31.07% + IIN 25.5%/33% on net income | | Expense deductions | Not available | Full deductions for documented expenses | | Revenue ceiling | EUR 40,000/year | No limit | | Employee limit | Maximum 5 | Not applicable (cannot hire) | | Social insurance | Reduced coverage | Full coverage | | Pension credits | Accumulate at lower rate | Full accumulation | | Bookkeeping | Simplified | Standard income/expense records | | VAT interaction | Can register voluntarily | Mandatory above EUR 50,000 threshold | | Reporting frequency | Quarterly | Monthly VSAOI + quarterly IIN |

When MEN Wins

The micro-enterprise regime is cheaper when your business expenses are low relative to revenue -- roughly below 15-20%. A copywriter working from a personal laptop with no travel, no office, and no significant software costs falls into this category.

At EUR 20,000 revenue with zero expenses: MEN tax is EUR 5,000. Standard self-employed total (VSAOI + IIN) is approximately EUR 6,800. MEN saves EUR 1,800.

MEN also wins on simplicity. One tax, quarterly filing, minimal bookkeeping. For someone who values their time above all else, the administrative savings are real.

When Self-Employed Wins

The standard regime pulls ahead as soon as expenses become meaningful. Every euro of documented business expense reduces both your VSAOI and IIN base -- something impossible under MEN.

At EUR 30,000 revenue with EUR 10,000 in expenses: MEN tax is EUR 7,500. Standard self-employed total is approximately EUR 6,800. Standard regime saves EUR 700 and provides full social coverage.

At EUR 30,000 revenue with EUR 15,000 in expenses: MEN tax is still EUR 7,500. Standard self-employed total drops to approximately EUR 5,100. Standard regime saves EUR 2,400.

The social insurance gap matters too. Under MEN, your pension credits accumulate at a fraction of the standard rate. Over a 20-year freelance career, this difference compounds into tens of thousands of euros in lower pension payments. Most people do not think about this until it is too late to fix.

The Decision in One Sentence

If your documented expenses are above 20% of revenue, or if self-employment is your primary income and you care about pension and social coverage, the standard regime is almost always better. MEN only makes sense for very-low-expense, lower-revenue activities where simplicity is the priority.

You can switch between regimes once per year (deadline: December 15, effective January 1). See our switching guide for the mechanics.

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Which Regime Costs You Less? We Will Show You.

We model micro-enterprise tax versus self-employed status against your actual revenue, expenses, and social coverage needs. The calculation takes one meeting; the wrong choice costs thousands over the years.

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