Last modified: 21/01/2025 06:59

Corporate taxation

	Rate
Corporate income tax rate undistributed profits / distributed profits and deemed dividends	0%/25% (effective rate)
Branch tax rate undistributed profits / distributed profits	0%/25% (effective rate)
Capital gains tax rate	0%

1. Capital gains are assessed as part of corporate income tax on distributed profits. Direct holdings in other companies exceeding 36 months holding period may qualify for full tax relief unless there is a Latvian real state involved.

Residence: A company is resident in Latvia if it has its legal seat (registered office) or its effective management and/or specific place of activity there.

Basis: Resident companies are taxed on their worldwide income. Non-resident companies are taxed on permanent establishment (PE), branch income or on real estate located in Latvia.

Taxable income: Tax is assessed on dividends or transactions classified as deemed dividends. Taxable income is divided by 0.8 and then 20% tax rate applied, thus effective tax rate is 25% from the distributed amount.

Significant local taxes on income: There are no local taxes on corporate income.

Alternative minimum tax: 50 euros minimum corporate income tax per year, if no salary-related tax payments have been made during a calendar year

Taxation of dividends: Tax is assessed on dividends or transactions classified as deemed dividends. Taxable income is divided by 0.8 and then 20% tax rate applied, thus effective tax rate is 25% from the distributed amount. Tax is not paid for dividends which have been received from another company which has paid corporate income tax.

Capital gains: Capital gains are taxed if they form part of a company’s distributed profits. Capital gains from direct holdings in other companies which have been held at least 36 months are exempt from corporate income tax on distributed profits.

Losses: As tax is assessed on distributed profits, losses generally have no effect on corporate income tax.

Foreign tax relief: Corporate income tax paid on foreign income can qualify as tax credit in Latvia. Generally, it would be tax paid in an EU country or country with which Latvia has a double tax treaty.

Participation exemption: See above under ‘Taxation of dividends’ and ‘Capital gains’.

Holding-company regime: See tax benefits for holding companies under ‘Capital gains’.

Tax-based incentives: There are some incentives for establishing presence in specific economic zones.

Group relief/fiscal unity: None

Small company/alternative tax regimes: Latvia has a specific regime for small companies under which a single combined tax (covering both corporate income tax, personal income tax and social insurance payments) is paid from revenue. This tax is known as microenterprise tax. The rate is 25% for revenue up to 25,000 euros and 40% from revenue exceeding 25,000 euros.

Corporate taxation: compliance

Tax year: Corporate income tax is assessed and paid on a monthly basis if profits have been distributed.

Consolidated returns: No

Filing and payment: A self-assessment procedure applies. Most of the filings are made electronically in the system operated by the State Revenue Service. Filings are due by the 20-th date after the month when profits were distributed.

Penalties: Failure to file or consistent late filing may trigger penalties. Size of penalties is decided based on severity of violations.

Rulings: Written clarification on tax matters can be received from the State Revenue Service.

Taxation of individuals

	Rate
Income up to 105,300 euros	25.5%
Income between 105,300 and 200,000 euros	33%
Income over 200,000 euros (covers all income, including capital gains)	36%
Capital gains	25.5%

Residence: Individuals are considered resident if they have a declared place of abode in Latvia or they are physically located in Latvia for 183 days or more within a 12-month period. Non-residents receiving income in Latvia will also be subject to personal income tax.

Basis: Resident individuals are taxed on their worldwide income, except dividends from Latvian companies, which are tax exempt. Non-residents are taxed on Latvian employment income, other income sources and profits attributable to Latvian real estate.

Taxable income: All income derived from compensation for work performed and income from capital (real estate and other assets) are subject to personal income tax.

Capital gains: Capital gains – both income from assets and realization of gains from the sale of assets are subject to 25.5% personal income tax.

Deductions and allowances: Non-taxable minimum salary of EUR 510. Various expenses may be deducted in computing taxable income, including social insurance payments, life insurance premiums, contributions to private pension funds, study and health expenses. Personal allowances are granted to taxpayers for dependent children.

Foreign tax relief: Taxable income is reduced by foreign dividends or capital gains which were received after deduction of income tax in respective jurisdiction if resident controls at least 25% in entity which is source of income.

Taxation of individuals: compliance

Tax year: The tax year is the calendar year, but in most cases tax is payable monthly (deducted from salary etc).

Filing and payment: Tax on employment income is withheld by the employer. Tax on other sources of income in general is withheld by the legal entity which makes the payment. Self-assessment is required for income where tax has not been withheld. Tax filing dates are around the 20th of the following month. The self-assessment tax return is due between 1 March and 1 June of the following year, but individuals paying income tax at the 31% rate may file between 1 April and 1 July.

Penalties: Penalties apply for late filing or failure to file.

Rulings: Written clarification on tax matters can be received from the State Revenue Service.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends (1)	0%	25.5%	0%	25.5%
Interest payments	0%	25.5%	0%	25.5%
Sale of real estate (2)	0%	0%	3%	3%
Lease income from real estate	0%	0%	5%	0%
Management and consulting fees	0%	0%	20%	0%
Income from artistic or sporting performance,copyrights	0%	25.5%	0%	25.5%
Payment for other intellectual property	0%	25.5%	0%	5%
Payments to no / low tax countries (3)	n/a	n/a	20%/25.5%	20%/25.5%

1. Dividends from a Latvian entity are tax free. Tax is not withheld if there is information that dividends from a foreign entity where paid net of income tax which is equal or higher than the above rate.
2. This includes sale of shares in legal entity where more than 50% of assets are Latvian real estate
3. 20% tax rate is withheld by companies, 23% – by individuals who make the payment

Branch remittance tax: No such tax.

Anti-avoidance legislation

Transfer pricing: Non-arm’s-length transactions with related parties would be treated as deemed profit distribution. Transfer pricing documentation is required starting from 250 thousand euros of annual controlled transactions.

Interest restriction: Corporate income tax will be applied on the higher of the following amounts: – interest on loans which exceed four times the amount of share capital and retained earnings – if interest exceeds 3 million euros, amount in excess of 30% of EBITDA Loans from EU regulated lending institutions and certain public entities are exempt.

Controlled foreign companies: No such regime.

Hybrid mismatches: Regulations aim to apply tax on transactions between different jurisdictions enabling reduction of taxable income or double tax credit which otherwise would not be available.

Disclosure requirements: Country-by-Country reporting for qualifying enterprises.

Exit taxes: No specific taxes outside general income tax regime.

General anti-avoidance rule: State Revenue Service may dispute tax assessment based on the following considerations: – The taxpayer’s legal structure is unusual, inappropriate or inadequate having regard to its economic purpose – Tax considerations are deemed to be the only motive for the transaction

Digital services tax and Other significant anti-avoidance legislation: No such tax and other regulations

Value-added tax/Goods and services tax

Type of tax: Value-added tax (VAT) in line with EU regulations. Applies to supplies of most goods and services and to imports. There is a range of exempt supplies and zero-rated supplies (exempt but allowing for deduction of input tax).

Standard rate: 21%

Reduced rates: 5% and 12%

Registration: 1) Supply of goods and services subject to VAT has reached EUR 40,000; 2) Value of purchase of goods within the EU without VAT exceeds EUR 10,000 per calendar year. 3) Other EU Member States tax payer and non-EU tax payer – prior to making transactions

Filing and payment: Filing – until the 20th date of the month following the taxation period Payment – until the 23th date of the month following the taxation period

Social security contributions

	Employer	Employee
	Rate (%)	Rate (%)
Employee employed by local or foreign employer	23.59	10.50
Employee – member of the Board (pre-conditions exist)	27.20
Foreign employee employed by foreign employer	31.83

Self-employed

Self-employed 31.07% Self-employed – real estate operator 26.59%

Other taxes

Capital duty: None

Immovable property taxes: Real estate tax rates are between 0.2 to 3% from the cadastral value of the property (defined by the government). Each municipality decides on the tax rates it will apply; however, tax can exceed 1.5% only if the property is not maintained in line with the regulatory requirements. If a municipality has not decided on its own tax rates, default rates defined by the law are as follows: – 1.5% from the cadastral value of land and non-residential buildings – 0.2% from the cadastral value of residential buildings whose value does not exceed 56,915 euros – 0.4% from the cadastral value of residential buildings whose value is between 56,915 and 106,715 euros and – 0.6% from the cadastral value of residential buildings whose value exceeds 106,715 euros. – The rates defined for residential buildings applies also for the residential part of mixed-use buildings.

Transfer tax: None

Stamp duty: Stamp duty to register acquisition of legal titles on a property in Latvia is 2% of the property value if the buyer is a legal entity and 1.5% if the buyer is an individual. Stamp duty is capped at EUR 50 000. It is customary that stamp duty is settled by the buyer.

Net wealth/worth tax: None

Inheritance/gift taxes: Regulated as part of personal income tax. Inheritance is not taxed. Gifts between close relatives are also not taxed.

Other: None

Tax treaties

Latvia has signed double tax and prevention of tax evasion treaties with 63 countries and has two tax information-exchange agreements. It is a signatory to the OECD Multilateral Instrument.