Taxes and Consulting

Currency: Euro (EUR)

Currency Control: No

Financial Reporting Standards: National standards (in accordance with IAS) and IFRS.

Corporate Income Tax - Rate: 20% – calculated and paid only when profits are distributed as dividends. Undistributed profits: Not subject to corporate income tax. Dividend Distribution: No mandatory annual distribution of profits.

Value Added Tax (VAT) - Standard Rate: 21%. Reduced Rates: 12% or 5% for certain goods/services.

Personal Income Tax (PIT):

• 25.5% for income up to EUR 105,300 per year.

• 33% for income exceeding EUR 105,300 per year.

Additional Tax on High Incomes - 3% on total taxable income exceeding EUR 200,000 per year. Effective from 2025 and applies to all taxable income, including capital income and capital gains, as well as tax-exempt dividends and liquidation quotas from Latvian and foreign companies. Some income types, such as gifts, earnings from euro bonds, and tax-exempt property sales, are excluded from the taxable base for this tax.

Capital Gains Tax -25.5% (applies to real estate, shares, cryptocurrency, etc.).

Minimum Tax-Free Income - EUR 510 per month.

Minimum Wage - EUR 740 per month. For self-employed individuals, social tax must be paid at least on this amount. For small businesses with low turnover, this means the monthly turnover threshold for not paying social or income tax for the board member increases from EUR 3,500 to EUR 3,700 (740×5).

Social Contributions - 35.09%.

Tax Authorities - LR State Revenue Service: www.vid.gov.lv

Tax Reporting - Tax Period: Calendar month and financial year. Financial Statements: Must be prepared annually. Tax Declaration: Must be submitted monthly (or quarterly in some cases) by the 20th of the following month. Payment Deadline: By the 20th of the following month (or quarter, where applicable).

Penalties - Late Payment Penalty: 0.05% per day. Tax Audit Penalties: Can range from 10% to 300% of the tax amount.

For tax consultation in Latvia, submit a request or schedule an online meeting. You can also contact us via phone for professional advice.

Corporate Tax Residency. A company is considered a tax resident of Latvia if it is registered in Latvia (i.e., in the Latvian Commercial Register). General Rule: Residents are taxed on worldwide income. Non-residents are taxed only on income earned in Latvia. Permanent Establishments (PEs) of Foreign Companies: Taxed similarly to resident companies, though certain restrictions apply to payments made to the head office.

Taxable Income in Latvia. Corporate income tax is only applied when profits are distributed. Reinvested or retained profits are not taxed. Profit Distribution Includes: Declared dividends and interim dividends, Payments equivalent to dividends, Hidden profit distributions, so-called "deemed dividends", such as: Non-business-related expenses, excessive interest payments, loans granted to related parties, transfer pricing adjustments, non-qualifying bad debts, liquidation quotas.

Corporate Income Tax in Latvia - 20% of total distribution. Certain expenses are considered as profit distribution (see "Taxable Income" above). 

Minimum Corporate Tax. If no tax is payable or if the amount is less than EUR 50, a minimum tax of EUR 50 is applied. This minimum tax is not considered a tax overpayment.

Losses. Since corporate income tax applies only to distributed profits, financial losses reduce the distributable profit amount.

For tax consultation in Latvia, submit a request or schedule an online meeting.

Latvia does not have a special holding regime, but certain dividends and capital gains may be tax-exempt.

Taxation of Dividends Paid. Dividends and profit distributions are subject to corporate tax at the company level (see "Taxable Income" above). No additional tax is applied at the time of profit distribution. 

Capital Gains. Taxed only when profits are distributed. Tax exemption: Capital gains from share sales are tax-exempt if the shares were held for at least 36 months. This exemption does not apply to: Shares of companies in low-tax or tax-free jurisdictions (see "Blacklist"), Sales of shares in companies where more than 50% of assets consist of Latvian real estate.

Contact us to assess your company’s profile and eligibility for the Latvian holding company regime.

• Blacklist: A 20% withholding tax applies to any payments to entities in blacklisted jurisdictions, except for payments for acquired goods and purchases of publicly traded EU/EEA bonds.

• Dividends: No withholding tax unless paid to a blacklisted jurisdiction.

• Interest: No withholding tax unless paid to a blacklisted jurisdiction.

• Royalties: No withholding tax unless paid to a blacklisted jurisdiction.

• Consulting Services: Subject to 20% withholding tax unless an applicable double taxation treaty provides otherwise.

• Real Estate Sales by Non-Residents: 3% tax on gains from the sale of Latvian property or shares in a company where 50%+ assets are Latvian real estate.

• Technical Services Fees: No withholding tax.

• Branch Profit Remittance: No withholding tax.

For further details, contact us.

Latvia follows the EU list of non-cooperative tax jurisdictions, which includes:

• Anguilla (UK territory)

• Guam (USA)

• American Samoa (USA)

• U.S. Virgin Islands

• Fiji

• Russia

• Palau

• Panama

• Samoa

• Trinidad and Tobago

• Vanuatu

For tax consultation, contact us. 

Controlled Foreign Companies (CFC) in Latvia – The Controlled Foreign Company (CFC) regime for legal entities was introduced on 1 January 2019. A controlled foreign company is a person in which a Latvian company, either alone or together with related enterprises, has a direct or indirect participation of more than 50% of the capital or voting rights, or is entitled to receive more than 50% of the profits of the foreign enterprise.

A permanent establishment of a Latvian company abroad is always considered a CFC.

The company must include in its tax base the undistributed income of the CFC from artificial transactions that were concluded in order to obtain a tax advantage. A transaction or series of transactions is considered artificial to the extent that the foreign enterprise or permanent establishment itself would not own the assets or would not assume the risks necessary to generate the income if the foreign enterprise or permanent establishment were not controlled by a company that performs the management function necessary for these assets and risks. The CFC rules do not apply if the CFC's profit does not exceed EUR 750,000, and the income received excluding the sale of goods and services does not exceed EUR 75,000. The specified restrictions do not apply to income from companies from countries on the "black" list of low-tax jurisdictions.

For consultation on taxation in Latvia, leave us a request or schedule a meeting online. You can also call the phone numbers listed for consultations with a specialist.

According to the thin capitalization rules, interest payments are included in the taxable base if:

(1) the debt: equity ratio exceeds 4:1; or (2) the interest payment exceeds EUR 3 million or 30% of EBITDA (earnings before interest, taxes, depreciation and amortization).

The higher of these two calculations is included in the taxable base. The thin capitalization rules do not apply to interest payments on loans to credit institutions of the European Union (EU) or the European Economic Area (EEA) countries, or to credit institutions from a country that has concluded a double taxation treaty with Latvia, or to government debt securities of EU/EEA countries.

For advice on taxation in Latvia, leave us a request or schedule an appointment online. You can also call the phone numbers listed for consultations with a specialist.