Tax Residency in Latvia: 183-Day Rule and Obligations

An American consultant spent January through June in Riga, then moved to Tallinn for the rest of 2025. Total days in Latvia: 181. He assumed he was safely below the 183-day threshold. He was wrong -- Latvia counts days in any rolling 12-month period, not by calendar year. When his January 2025 through December 2025 stay was combined with a two-week trip to Riga in late December 2024, he crossed 183 days. He became a Latvian tax resident, liable for tax on his worldwide income, and discovered this fact when VID flagged his EDS profile the following March.

The 183-day rule sounds simple. In practice, it catches more people than you would expect.

The Rule: When You Become a Latvian Tax Resident

You are a Latvian tax resident if any of the following apply:

1. Physical presence: 183 days in any 12-month period. Not calendar year -- any continuous 12-month window. If you spend 100 days in Latvia from September to December 2025 and 90 days from January to April 2026, you have spent 190 days in a 12-month period. You are a tax resident.

2. Declared residence in Latvia. If you register your residence at the Office of Citizenship and Migration Affairs (PMLP), Latvia considers you a tax resident from the date of registration, regardless of how many days you spend physically in the country.

3. Latvian citizen or permanent resident abroad, but with declared residence in Latvia. Even if you live primarily abroad, maintaining a declared address in Latvia can trigger residency status.

The first criterion -- 183 days -- is the most common trigger for international entrepreneurs and expats. Days of arrival and departure both count as days in Latvia. Business trips, vacations, medical stays -- all count. The only absences that do not count are transit through Riga airport without leaving the international zone.

What Tax Residency Means: Worldwide Income

Once you are a Latvian tax resident, you owe PIT on your worldwide income. All of it. Employment income earned in Germany. Dividends from a US brokerage account. Rental income from a London apartment. Interest from a Swiss bank. Capital gains from selling shares on the Tokyo Stock Exchange.

The rates for 2026:

• 25.5% on income up to EUR 105,300/year
• 33% on income above EUR 105,300/year
• Dividends from Latvian SIAs: 0% PIT (CIT already paid at the corporate level)
• Dividends from foreign companies: 20% PIT (reduced by treaty if applicable)
• Capital gains: 20% PIT
• Interest income: 20% PIT

Non-taxable minimum (up to EUR 6,600/year) and dependent relief (EUR 250/month per dependent) reduce the effective burden for lower-income residents.

Social contributions (VSAOI): Tax residents who are self-employed must also pay VSAOI at approximately 31.07% on their self-employment income, up to the income ceiling.

Double Tax Relief: Avoiding Paying Twice

Becoming a Latvian tax resident does not mean you pay tax twice on the same income. Latvia provides two mechanisms for relief:

Treaty relief. If Latvia has a double tax treaty with the country where the income originates, the treaty allocates taxing rights and typically allows a credit for tax paid in the source country. With 80+ treaties, most common situations are covered.

Unilateral credit. Even without a treaty, Latvia generally allows a credit for foreign tax paid on the same income, up to the amount of Latvian tax that would apply.

Practical example: You are a Latvian tax resident earning EUR 50,000/year from a UK employer. The UK taxes this income at source (under PAYE). Under the Latvia-UK treaty, Latvia has the right to tax this income (as your residence country), but must give you a credit for UK tax paid. If UK tax on EUR 50,000 is EUR 8,000 and Latvian PIT would be EUR 10,500, you owe Latvia the difference: EUR 2,500.

The paperwork falls on you. You must report the foreign income in your Latvian annual tax declaration and claim the credit with supporting documentation (foreign tax returns, employer certificates, withholding statements).

Tie-Breaker Rules: Resident in Two Countries?

If you qualify as a tax resident in both Latvia and another country (common for business owners who split time between two places), double tax treaties provide tie-breaker rules:

1. Permanent home. Where do you have a permanent home available? If only in one country, that country wins.
2. Centre of vital interests. If you have homes in both, where are your closer personal and economic ties -- family, main business, social connections?
3. Habitual abode. If vital interests are split, where do you spend more time?
4. Nationality. If all else fails.
5. Mutual agreement. The tax authorities negotiate.

In practice, most tie-breaker cases are decided at step 1 or 2. The centre-of-vital-interests test is subjective and occasionally disputed. Documentation helps: school enrollment for children, club memberships, primary bank accounts, and location of key business decisions all support your case.

Becoming a Non-Resident: How to Leave

If you are a Latvian tax resident and want to cease being one, you need to:

1. Physically leave Latvia and ensure you spend fewer than 183 days in any rolling 12-month period going forward
2. Deregister your declared residence at PMLP (if you registered one)
3. Notify VID by updating your status in the EDS system
4. File a final tax return covering income earned during the period of Latvian tax residency

The date of cessation matters. Latvia taxes your worldwide income up to the date you cease to be a resident. Income earned after that date is only taxable in Latvia if it is Latvian-source income (subject to non-resident withholding rules).

Exit traps: If you leave Latvia but maintain a declared address, own property, or keep family members living in Latvia, VID may argue that your centre of vital interests remains in Latvia. Make a clean break if you intend to stop being a Latvian tax resident.

Scenario: The Part-Year Resident

You arrive in Latvia on March 15, 2026, and cross the 183-day threshold on September 14, 2026. You become a Latvian tax resident retroactively from the date your rolling 12-month count crossed 183. In practice, VID typically treats you as a resident for the entire calendar year if you cross the threshold during that year, though technically the obligation runs from the date of arrival.

For the period before becoming a Latvian resident, only Latvian-source income is taxable. For the period after, worldwide income applies.

This creates complex calculations in the year of transition. Professional assistance is strongly recommended for the first tax return after becoming or ceasing to be a Latvian tax resident.

Reporting Obligations

Latvian tax residents must:

• File an annual income declaration by June 1 of the following year
• Report foreign bank accounts if total balances exceed EUR 15,000 at any point during the year
• Report foreign financial assets (shares, bonds, funds) through the annual declaration
• Make advance PIT payments if self-employed or receiving significant non-withheld income

Failure to file triggers penalties starting at EUR 150, with escalation for repeated non-compliance.

For personalized guidance on your tax residency status and reporting obligations, contact SIA "CORVUS ACCOUNTING & TAX". We specialize in helping expats and international business owners navigate Latvia's residency rules.