Tax is one of the most important factors individual considers when registering company in EU. Latvia is one of the countries in the European Union with low tax rates. Currently new tax changes are discussed in Latvia that would improve the conditions for businesses in Latvia and social protection for residents in Latvia, EU LAW FIRM tax lawyers in Latvia will provide you a brief guide on current most important tax in Latvia, to explain the existing taxes and answer most asked questions about taxation in Latvia.
Tax reform in Latvia
In 2020 Latvian government already proposed potential changes in taxation in Latvia aimed at improving overall Latvia's economical competitiveness and social welfare. Since the new tax policy and changes are not yet implemented, this article by EU LAW FIRM tax lawyers in Latvia will address the current situation and answer most common questions that may arise when choosing Latvia as your jurisdiction for establishing your company in EU.
How much is corporate income tax in Latvia (CIT)?
As of February 18th 2021, CIT in Latvia is 20%. CIT rate of 20% in Latvia on the gross distributed amount or 20/80 on the net income, base subject to CIT has to be divided by 0.8. The recipient of dividends - natural person does not pay personal income tax from these dividends.
Taxpayers of CIT in Latvia are:
Those who perform economic activity.
- domestic undertakings,
- institutions financed from the state budget (income from economic activity is not provided in the state budget),
- institutions financed from the local government budget (income from economic activity is not provided in the state budget).
Foreign commercial company and other persons deriving income in Latvia (non-residents).
Permanent establishments of non-residents.
If the profit is not distributed there shall be no payment of CIT.
However, Corporate Income Tax Law in Latvia may provide for different conditions, such as in case of commercial companies using ships in international carriage and related activities and to which has been granted a tonnage taxpayer status may opt for payment of a tonnage tax in Latvia.
Also different conditions may be provided for taxpayers donating to a public benefit organization, budgetary institution or to the State capital company. However for such conditions to apply there are conditions laid out by the Government. To know more about donating to particular organization in Latvia and detailed tax calculation do not hesitate to contact EU LAW FIRM tax lawyers in Latvia.
How much is corporate income tax in Latvia applied for payments to non-residents?
For non-residents in Latvia CIT of 20% would be withheld from the following payments made to non-residents:
- Management and consultancy cervices - 20%.
- Remuneration for alienation of the real property located in Latvia - 3%.
- Payments * to legal, natural and other persons located, established or founded in low-tax or no-tax jurisdictions** - 20%.
*Applies to any kind of payment, such as dividends, interest payment, etc. Payment for the supplies of goods (if they correspond to the market value) and public securities are excluded from this type of payment.
** Pursuant to
How much is personal income tax in Latvia?
For now, personal income tax (PIT) in Latvia is of a progressive rate. In general PIT in Latvia would be the following:
Annual income up to 20 004 euro
Part of annual income which exceeds 20 004,00 euro, but does not exceed 62 800 euro
Part of annual income, which exceeds 62 800,00 euro
Income from capital gains
For example, in 2020 the annual non-differentiated non-taxable minimum was the following:
Regarding eligible expenditure, from 2018 personal income tax payers are entitled to deduct the total eligible expenses for acquisition of education, use of health and medical treatment, donations or gifts to benefit organizations, institutions etc. (as well to political parties) in amount of 50% of annual taxable income, but no more than 600 EUR per year.
How much is social tax in Latvia?
To know about social tax in Latvia and possible tax reliefs in case of doing business in Latvia we invite you to read other Article provided by EU LAW FIRM business lawyers in Latvia here.
Double tax treaties
If you derive your income from Latvia and also another jurisdiction you can benefit from avoidance of double taxation on income and capital. In this case double taxation is avoided through credit (income taxed but credit received from country of residence) or exemprion (income taxed only in country of residence, e.g. only in Latvia).
Currently Latvia has 58 double tax treaties in force, the most recent double tax treaty is being negotiated with Ghana. The tax payable and exemptions shall be determined by treaty concluded.
More about taxes in Latvia
To know more about your taxes in Latvia and other detailed information on tax in Latvia that may apply to you, we advise you to contact EU LAW FIRM tax lawyers in Latvia - firstname.lastname@example.org
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