Accounting and reporting in Latvia

Accounting services for legal entities

You can order full accounting — from processing source documents to preparing the annual report — or only selected accounting services according to your company’s needs. The working procedure, rights, obligations and responsibilities of the parties are fixed in advance in the contract.

Accounting services for natural persons

If a natural person is registered with the State Revenue Service as performing on economic activity, the accounting and reporting requirements depend on the chosen tax regime. Under the general regime it is necessary to keep records of income and related expenses, and to submit the required tax reports and the annual income declaration. In certain cases a VAT declaration is also required.

What I offer to natural persons:

• Maintaining a journal of income and expenses from business activities
• Maintaining a journal of value-added tax
• Preparation of tax reports and declarations
• Tax calculations
• Calculation of capital gains and preparation of the relevant declaration
• Consultations on accounting and taxation, preparation of applications and other documents

Which documents are needed for accounting

Every transaction — sale, purchase, payment — must be supported by a document containing the mandatory details. This is a frequent source of problems: if a document is incorrectly drawn up, the accountant is not entitled to accept it as a supporting document.

A common problem is a receipt that lacks the required details. Such a receipt cannot be used as a supporting document: the expense will have to be substantiated in another way or will not be accepted for accounting. If you are unsure whether a document is correctly drawn up, it is better to check before the transaction rather than afterwards.

Organisational documents, registers and chart of accounts

In Latvia, every company must have internal documents that define how its accounting is organized based on its specific business activities. While the company manager can delegate the drafting of these rules to an accountant or specialist, the manager retains legal responsibility and must officially approve them. Once established, the accountant must follow both national legislation and these internal company documents in their daily work.

The law does not dictate a specific format for accounting registers or charts of accounts; instead, the company's management determines them. In AB ways a journal-ledger (trial balance) is used for accounting. The chart of accounts is drawn up taking into account the company’s activities and management’s needs for internal reporting. This flexibility allows management to create separate accounts for clients in different EU countries or build a highly detailed breakdown of rental expenses, such as separating costs for rent, electricity, and water.

When it is worth consulting in advance

Sometimes it is useful to check the legal requirements before a transaction — this may affect the profit from the deal. A few examples:

• Payment to a non-resident for management or consulting services — an obligation to withhold corporate income tax may arise.
• Payment to a natural person who has not registered economic activity — also entails an obligation to withhold personal income tax.
• Payment to a supplier whose bank account is in a low-tax or no-tax country — may also give rise to a withholding obligation.
• Cash settlements. Legislation sets legal restrictions on the use of cash. Non-compliance is subject to a fine.
• Place of supply for VAT purposes — this determines the applicable tax rate and therefore the final price of the goods or service.