Guides · MUN GUIDE

MUN — detailed guide for micro-enterprises

MUN (micro-enterprise tax) is Latvia's simplified tax regime for small businesses. This guide fully explains eligibility criteria, calculation, how to claim MUN status, and when to switch to the standard regime.

01

Who can be a micro-enterprise?

MUN status has several criteria, all to be met simultaneously: annual turnover below EUR 25,000 (from 2018 — previously was EUR 100,000), maximum 5 employees with salary up to EUR 720 per month each, member/shareholder may not be a board member of another company (anti-fragmentation rule), business activity may not be financial services or high-value consulting. MUN status can be requested for a newly founded company, or when transitioning from standard regime by 15 December each year for the following year.

02

How is MUN calculated?

The rate is 25 % on total turnover (all income from goods/services sales), not on profit. This is the simple aspect and the complex one simultaneously: no expenses, depreciation, allowances — only gross turnover × 25 %. Example: IT freelancer with annual turnover EUR 20,000 pays EUR 5,000 MUN per year. MUN replaces: UIN, IIN on dividends, VAT (yes, MUN company is NOT a VAT payer), VSAOI for employer and employees. Single payment at quarter end.

03

When to switch to standard regime?

Three main reasons to switch: 1) reached EUR 25,000 threshold (breach = automatic loss, standard regime from next year), 2) planning to expand (more than 5 employees, larger turnover, more complex structure), 3) want to deduct VAT (MUN does not allow deducting input VAT, which is only advantageous with low expenses). Compare: EUR 25,000 turnover MUN = EUR 6,250 tax. Same in standard regime with EUR 15,000 expenses = (10,000 × 20 %) UIN + VAT balance. Depends on the structure.

04

Penalties and audits

MUN oversight occurs through VID annual declaration and quarterly MUN declaration. Penalties for threshold breach without notification: full standard regime tax amount retroactively + 100 % penalty. For MUN threshold exceeded EUR 25,000 in a specific year, the company retains MUN status until year end, but the exceeded amount is subject to 40 % MUN rate (not 25 %). The following year automatically transitions to standard regime. Audit usually occurs in years 3 to 5 after MUN status.

Modules involved

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