The rate of income tax from companies in Latvia is 20% of the distributed profit (gross) or 25% of the amount paid (net).
Example 1:
Profit of EUR 1,000 is allocated to dividends:
800 euros payment to a participant or shareholder;
200 euros tax.
Example 2:
EUR 1,000 paid to a participant or shareholder as dividends;
250 euros tax.
The distribution of profits is equated and taxed at 25%:
- non-business expenses;
- doubtful accounts receivable;
- increased interest payments;
- loans to related parties;
- transactions with related parties at non-market prices;
- liquidation quota.
Tax-exempt:
Received dividends (except for dividends from offshore companies);
Capital gains on the sale of shares that have been owned for at least three years (except for shares of offshore companies).
When calculating the tax, these incomes are deducted from the taxable amount.
Companies are recognized as offshores according to the approved “blacklist”.
Since 2021, 12 offshore companies have remained on the list (previously there were 25):
- Anguilla
- Guam
- American Samoa
- US Virgin Islands
- Barbados
- Fiji
- Palau
- Panama
- Samoa (independent state)
- Seychelles
- Trinidad and Tobago
- Vanuatu
The list is used as an anti-evasion measure in the application of income tax. There are also restrictions on participation in public procurement.
The list was compiled at the EU level, based on the current situation in the field of information exchange between countries. Latvia is expected to keep pace with the EU by updating its list when the European list changes.
- Tax planning using offshore companies. Tax-efficient payment of income from offshore;
- Non-residents in Latvia: tax advice when investing in a Latvian business, receiving income;
- International trade. VAT in the EU;
- Tax-efficient sale of IT services/products;
- Personal investments: minimization of taxes when receiving investment income;
- Disputes with the State Revenue Service.
Countries that have entered into international agreements on the exchange of tax information are automatically excluded from the list.
The deadline for filing a tax return and payment is the 20th day of the next month. If in the previous month there were no dividends and equal payments, then the declaration for this month does not need to be submitted.
VAT in Latvia
Base rate 21%. Export, deliveries to EU countries – 0%.
Registration threshold for VAT: 40,000 euros.
In the VAT declaration, purchases over 150 euros must be separately deciphered.
Deadline for filing a tax return and payment: 20th day of the next month.
Personal income tax
Tax rates for salaries and individual economic activities:
| annual income 0 – 20 004 EUR | 20% |
| 20 004 – 62 800 EUR | 23% |
| over 62 800 | 31% |
Non-taxable minimum:
| income per month 0 – 500 EUR | 300 EUR |
| 500 – 1800 EUR | gradually decreasing amount from 300 to 0 |
| over 1800 | 0 |
The non-taxable minimum does not apply:
- for non-residents, except residents of the EU countries, who received more than 75% of their total income in Latvia;
- for capital income.
With an individual household. activities in expenses can be written off a maximum of 80% of income. In full, you can write off:
- social security salaries and payments;
- property tax;
- depreciation of fixed assets (in the amount and manner prescribed by law);
- compensation to tenants upon the termination of a lease agreement in connection with major repairs or conversion of premises for economic activities.
Capital income for individuals
Flat rate 20%, regardless of the amount of income.
Dividends are exempt from tax if:
- from dividends paid 20% when distributing the profit of a Latvian company under the new law on corporate income tax; or
- Income tax has been paid abroad or income tax has been withheld on foreign dividends (regardless of the rate).
Income is not taxed at the time it is received into an investment account that has been assigned a special tax status. The tax must be paid only when income is paid from such an account and only from the part that exceeds the amount deposited into the account.
Deadline for filing capital income declarations:
| income over 1,000 EUR: | once a quarter until the 15th day of the next month |
| income up to 1,000 EUR: | once a year until January 15 of the following year |