Social contributions and non-resident in Latvia
23.09.2015
Lilita Bērziņa
TODAYS AGENDA
•
•
•
•
Coordination of Social security systems in EU
Non-resident’s registration as a social tax payer in Latvia
Conditions for employees assignment to work in foreign
countries
Duty to register as a tax payer in Latvia
Coordination of Social security systems in EU
• By May 1st, 2010 the Regulation 883/2004 and application
regulation 987/2009 are in force:
•
- European Parliament’s and Council’s Regulation
EC No.883/2004 from April 29th, 2004 about coordination
of Social security systems;
- European Parliament’s and Council’s Regulation EC
No.987/2009 from September 16th, 2009, which defines the
order of realization of Regulation (EC) No.883/2004 about
coordination of Social security systems.
Coordination of Social security systems in EU
• Social contributions always stay in that member state,
where they are made!
Participants
•
Person works in only one state–
BASIC PRINCIPLE – employees, who operate in one
member state are subject of the law of concerned member state
(regardless of the country of residence)
It is not important, where this person lives or where the employer is registered
•
Employee’s assignment to temporary work performance in
other member state- employee works in some member state on
behalf of employer’s task, who usually makes operations there,
and who is assigned by mentioned employer to other member
state to make an operation on behalf of mentioned employer’s
task, also further can stay socialy insuerd at the first member
state, if the predictable time of work is not more than 24 months
and the mentioned person is not assignet to replace another
person. (A1 certificate)
Non-resident’s registration as a social tax payer in
Latvia
 Other member state’s employer, who employs an
employee, to whom, in accordance with the Regulation
No.883/2004, the laws and regulations of Republic of
Latvia are applied, registers at the State Revenue Service
as a payer of compulsory contributions, by subbmiting an
information indicating:
• Name of employer,
• Registration number (in other member state),
• Legal address.
 The State Revenue Service applies a registration code of
11 signs to this employer.
Employee begins a work in foreign countries
•
•
For persons, who begin or end an hired work in foreign
countries (in other European Union’s member state or state,
with whom Latvia has adopt and enforced convention about
double taxation and prevention of fiscal evasion), an employer –
resident of Latvia - not later than one day before a person
begins or ends a work, submits information regarding
employees at the State Revenue Service.
By submitting an information regarding employee’s works
beginning in foreign countries, employer must show the code of
the country, where this employee will be employed.
Conditions for employees assignment to work in other EU
member state(to apply Regulation’s No.883/2004 12(1)
clause conditions)
• Employee is a socially insured person in Latvia;
•
Employee has to be socially insured at least for one month and in Latvia for
he/her is being or was paid the State Social Insurance’s contributions.
• Work in other member state has to be done for the
company, which assigns the employee.
• During all period of assignment there has to be direct
working relations between the company, which assigns
the employee and the assigned employee.
Operations in two or more EU member states
simultaneously or alternately
• If you work in more than one member state, you have to
define a member state, in which you are most closely
connected.
Operations in two or more EU member states
simultaneously or alternately
 Employees:
• Have to evaluate, in which country the significant
operations are being made.
• If it is a domicile state, an employee can stay socially
insured at the domicile state, however, if there is no
significant operation in the domicile state, the person has
to be socially insured at employer’s legal address or
business place, where he/she is employed.
Significant operations
 To define, whether person makes significant operations in
the member state, it takes working time and/or salary into
account. In accordance with general evaluation, if less
than 25% from person’s working time is spent in domicial
state and/ or less than 25% from person’s salary is
received in the member state, than it will show that this
person doesn’t make significant operations in the
mentioned member state.
Operations in two or more EU member states
simultaneously or alternately
 If a person in his/her domicile state doesn’t make any
significant operations, than this person has to pay social
insurance contributions:
• In that member state, where company’s or employer’s
legal adress or business place is, if this person is
employed by one company or employer;
To receive A1 certificate
• In case of employee’s assignment, employer has to fill in
the Application to social insurance status maintenance in
Latvia, working in other EU state by assignment;
• Has to submit an approved copy of the Agreement with
assigned employee.
• Copies of companies agreements (distribution of services
and goods), to approve significant operations in Latvia.
These can be submitted by company’s choice.
•
It is advisable to fill in this application at least 6 weeks before beginning
operations in other country.
Conditions to company, which assigns an employee,
to apply conditions of the Regulation

Company, which assigns an employee, has to make a signifficant bussiness part in
Latvia:
•
•
Company’s registered office and administration’s place;
Member of employees in Latvian company and in other member state’s
company;
Place, where the assigned employees are recruited;
Place, where the most contracts with customers are signed;
Legislations, which are adjusted to contracts, which Latvian company has
signed with customers and employees;
Number of contracts realized in Latvia and other country;
Company’s turnover for previous 12 months in Latvia and other member
state. 25 % from total turnover in Latvia can be reasonable criterium.
Company’s operation period in Latvia since its foundation uzņēmuma
darbības periods Latvijā kopš tā dibināšanas e.a.
•
•
•
•
•
•
Examples – which state’s social insurance system
would be applied?
•
Estonian company signs a contract of employment with an
Estonian citizen about a job, which will be realized in Latvia.
(Basic principle- in Latvia. Exception is, if its not assigned to short term with A1 certificate)
• Lithuanian company signs a contract of employment with a resident
of Latvia about a job, which will be realized in Latvia (in Latvia)
• Latvian employer assigns an employee to Estonia for 10 month to
carry out market research (Employee’s assignment A1 – in Latvia)
• Resident of Latvia signs a contract of employment with Irish
employer for a job in Ireland (Ireland, because the working place is in Ireland)
• Jānis is a resident of Latvia, who signs a contract of employment
with Estonian employer. Two days per week he works in Latvia,
three days – in Estonia (In Latvia, because 25% from incomes are made in
Latvia)
Duty to register as a tax payer in Latvia
• Any person, who gains incomes in the Republic of Latvia,
is the Personal Income Tax and Corporate Income Tax
payer, if the specific tax law doesn’t provide otherwise.
• Any incomes, which are gained by person, who is
domestic taxpayer, is applied with Personal Income Tax
and Corporate Income Tax, if the specific tax law doesn’t
provide otherwise.
Residents
• Person’s declared place of residenceis in the Republic of
Latvia or
• This person resides in the Republic of Latvia for 183 days
or more in every 12 months period, which begins or ends
at taxation year, or
• This person is a Latvian citizen, who is employed in foreign
countries by gouvernment of the Republic of Latvia.
• In tax laws a taxpayer, who is not a physical person, will be
regarded as resident, if it is made and registered or it had
to be made and registered in accordance with legislation of
the Republic of Latvia.
Non-residents
•
Non-residents pay taxes in accordance with the legislation of
the Republic of Latvia about in Latvian Republic, its territorical
waters and airspace gained incomes, as well as other taxes
accordingly the concrete tax legislation.
The tax conventions have to be taken into account!
Permanent Establishment
•
•
•
•
It is considered that non-resident (foreign merchant) has a
permanent establishment in Latvia, if simultaneously all
following conditions are complied:
1) non-resident (foreign merchant) uses in Latvia a concrete
place of operations;
2) the place of operations is being used constantly or is made
with purpose to use it constantly;
3) the place of operations is used for making economic
activities.
Permanent Establishment
 It will be considered that non-resident (foreign merchant) has a permanent
establishment in Latvia, if it makes at least one of the following operations
in Latvia:
• 1) uses a building site or makes construction, montage or instalation
works, or makes with a building site or mentioned works related
supervision or consultative operations; (convencions)
• 2) uses for nature resources’ research or obtaining provided equipment or
items, drilling platforms and specialized ships or makes with them related
supervision or consultative operations;
• 3) in time period or time periods, which in total exceed 30 days in any six
months period, provides services, including consultative, management
and technical services, by using the own employees or added staff;
• 4) uses a physical, legal or any other person’s operations for the needs of
own economic activities, if the mentioned person is authorized and
regulary (more than once in taxation period) uses powers of attorney to
conclude contracts on behalf of non-resident (foreign merchant).
Sample of payroll calculation in Latvia
•
Monthly payroll and tax calculation, when the gross monthly
salary is EUR 1 000 and the employee is a local Latvian
resident, who has joined the compulsory accumulative pension
scheme and who is not an expatriate with the certificate A1:
•
•
•
•
•
•
•
Gross monthly salary (in EUR)
1000 €
Social contribution10.5 %(employee's)105 €
Tax exempt basic allowance
65 €
Taxable salary
830 €
Income tax 23%
190.90 €
Net salary
704.10 €
Social contribution 23.59 %(employee's) 235.90 €
Thank you!