In an effort to boost the development of the crypto asset market in Latvia, on Thursday, 10 April, the Saeima adopted in the final reading amendments to the Law on Personal Income Tax. The amendments stipulate that personal income tax is not applicable to income gained by foreign taxpayers (non-residents) from the disposal of publicly traded crypto assets.

Prior to the amendments, a 3% personal income tax was withheld from economic operators for the disposal of crypto assets, and non-residents could reclaim the withheld tax in accordance with the summary procedures. The authors of the amendments noted in the explanatory note that this process is cumbersome and unappealing for new entrants to the market.

According to the explanatory note, crypto asset sector representatives seeking to operate in an EU Member State to obtain a licence tend to assess the regulatory environment in each member state. The proposed changes aim to improve the business climate in Latvia and attract foreign providers of crypto asset services.

The tax relief will apply to businesses that have obtained a licence under relevant EU regulation to provide crypto asset services in the European Union.

The amendments also require the Ministry of Economics to prepare and submit an evaluation to the Cabinet of Ministers on the efficiency of further application of the tax relief.

Latvia is well positioned to attract a significant number of major players in the crypto asset market and to become an industry hub in the European Union. According to the Ministry of Economics, several companies that are considered global market leaders have expressed interest in obtaining an operational licence specifically in Latvia. This would provide an opportunity to create well-paid jobs, increase tax revenues, and promote the inflow of investments.

The personal income tax exemption will be applied over a three-year period—from 1 January this year until the end of 2027.

Saeima Press Service