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Latvia

Buyers Guide

Once a suitable property in Latvia has been found and an offer made and accepted, its usual to sign a preliminary contract that is conditional to satisfactory searches being conducted. When the contract is signed a 10% deposit is usually paid. This can be held in an escrow account by the lawyer or notary handling the legal side of the property buying process.

Taxation

Stamp Duty
The current rate of Stamp duty in Latvia is 2%
Stamp duty comes into effect on completion, i.e. once the contracts/deeds have gone through the notary and been transferred to the new owner.

Capital Gains Tax

Capital Gains Tax is 25%, but this is only applicable for the first year of ownership. This means that after the point of owning the property for a year you are exempt from paying capital gains tax. This is obviously a very attractive for an investor as it means it does not restrict you financially from selling your asset in the short term.

Cadastral Tax

Each property in Latvia is given a cadastral value. This is normally a different value to the purchase price of the property. In a lot of cases it tends to be a lot lower. The cadastral value of the property is then taxed annually at a rate of 1.5%.

VAT

The standard rate of VAT in Latvia is 18%.

Income Tax

Income tax for individuals is 25% and this is based on a flat rate system.
We are often asked about Income tax and its relationship with the management of a Buy to Let property. The good news is that if you are looking to let your property then the actual income tax payment made to the authorities is normally a minimal amount. The reason for this is that the government have allowed the deduction of certain expenses that are associated with the property. These are:

Expenses associated with the mortgage
Mortgage interest
Maintenance of the property
Monthly management fees
Expenses that are associated with inspecting the property

Finance

The banks in Latvia are geared up to assisting with and providing local mortgages for foreign nationals. The banks clearly understand that property in Latvia is a good investment and have been issuing mortgages to foreigners since the late 1990s. However since Latvias entry into the European Union in 2004, they have received and approved a lot of applications for mortgages from EU nationals.

The advantage of the banks in Latvia is that:

The majority are foreign owned, which means peace of mind for the investor
They have English speaking staff, who understand why you are investing in Latvia
Mortgages are available in Euros or Lats.
All mortgages are based on the Euro libor, which reduces risk.
There are fixed and variable rates of interest available
The period of a standard repayment mortgage can be up to 40 years
Your bank account can be accessed via the internet banking services

Mortgages for EU nationals vary from 7085%, depending on the property and the individuals circumstances.

The mortgage arrangement fee is between 0.4 1% of the value of the investment.

The banks will normally require the following from you to make an application:

1. A completed application form -
2. A photocopy of your passport for proof of identity.
3. Copies of your bank statements for the last six months.
4. An independent valuation of the property, this is something we can organise for you and tends to be between 100 150 Euros.

Remortaging property to release equity for a purchase

It might be a requriement for you to release some equity in your home property to finance or part finance a property purchase in Latvia, if this is the case then we have a solution.
Some Mortgage Companies are able to arrange remortgaging quickly and easily by telephone.
They research over 90 lenders for the best rate and do not charge a fee for the work they do as they receive a payment from the lender. The fact that they do not charge a fee for this is very attractive, because you do not want to be accumalating any more costs on your purchase.

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