Latvia's tax regulations include important provisions about "presumed income" (domājamais ienākums) for board members. Here's what business owners need to know for 2025.
When Does Presumed Income Apply?
Your company must handle presumed income taxation when two conditions are met:
- Your company has no employees or board members receiving at least the minimum monthly salary
- The company's monthly turnover exceeds threshold 5x the minimum monthly salary €3,700 (5x the minimum monthly salary in 2025)
Exemptions:
- First-Year companies: You're exempt during the calendar year when your company was registered
- Group companies salary exception (above €3,700 from 2025) from any group company
The Group Company Exception Update
Important provision update for group companies on new 2025 thresholds - a board member must receive at least €3,700 gross (5x the minimum monthly salary in 2025) from another company within the same group, only then the presumed income requirement doesn't apply. The company must have at its disposal and, upon request, must present documents confirming the amount of remuneration received by the board member from another group company.
For businesses operating across multiple entities, this update requires careful planning for 2025 compensation structures.
The Practical Difference: Salary vs. Tax Payment
There's a crucial distinction between paying an actual salary and paying tax on presumed income:
Actual Salary:
- Board members can withdraw the money
- Real income is created
- Regular employment benefits apply
Presumed Income Tax:
- No actual money paid to board member
- Company still pays all taxes
- Funds cannot be withdrawn
- Pure tax obligation
Planning Tips:
- Review your group structure if applicable
- Consider consolidating board member payments within your group
- Document all group relationships clearly
- Plan ahead for the new 2025 minimum salary thresholds
Remember to consult with your tax advisor about these regulations, especially regarding group structures and cross-border implications. The rules require careful planning and proper documentation to implement effectively.
The presumed income system aims to ensure appropriate tax contributions while providing flexibility through exemptions like the group company provision. With the new 2025 thresholds approaching, now is the time to review and adjust your compliance strategy.