Corporate income tax in Latvia
Corporate income tax is paid by:
- domestic companies – residents;
- permanent representative offices of non-residents that perform economic activity.
Corporate income tax is applied to the profit or loss, which is calculated according to the taxpayer’s financial accounting data and adjusted according to the Corporate Income Tax Law.
In general, all types of income are included in the taxable income consisting of:
- income earned in Latvia or abroad (for residents);
- certain types of income earned in Latvia and listed in the Corporate Income Tax Law (for non-residents);
- income earned in Latvia from performing commercial activities (for permanent representative offices of non-residents).
Tax rate in Latvia
The flat corporate income tax rate is 15% of the taxable income.
For reduced tax rates please contact our lawyers and tax advisors.
Taxation of dividends
Payments of dividends between domestics companies are not subject to corporate income tax. Dividends paid to a legal entity – a resident of a European Union member state or a resident of the European Economic Area – are exempt from taxation.
Dividends paid to a legal entity outside the European Union or the European Economic Area, are subject to a 10% tax payable at the time of their payment.
Taxation of income of non-residents
Corporate income tax in Latvia is applied to the following payments to legal entities – non-residents, if they do not have a permanent representative office in Latvia, in accordance with tax rates stipulated in the Corporate Income Tax Law:
- management and consulting services – 10%;
- income from investments in a partnership – 15%;
- interest, if the persons paying and receiving the interest are interconnected – 5 or 10%;
- income from intellectual property – 10% or 15%;
- compensation for the use of property located in Latvia– 5%;
- from year 2014 non-resident who covered compensation for expropriation of property located in Latvia in amount of 2% has rights to submit a tax report and documents confirming expenses connected with received income and applying 15 % tax to calculated income;
- payments to persons located in low-tax or tax-free countries or territories –5-30%.
Filing tax declarations
Declarations for a particular taxation year shall be filled by taxpayers through the Electronical Declaration System and submitted to the State Revenue Service. Tax declarations shall be submitted simultaneously with the company’s annual report.
Tax payment deadline
Taxpayers shall pay the tax calculated in their tax declarations to the state budget within 15 days of submitting the tax declaration.
Each month during the taxation year, taxpayers shall pay monthly corporate income tax advances.
Tax incentives and relief
When calculating the amount of corporate income tax, taxpayers shall receive the following incentives and tax relief:
1) Incentives to facilitate investments;
2) Incentives for research and development;
3) Industry incentives;
4) Discounts for charitable purposes;
5) The possibility of carrying forward losses;
6) Relief for having savings for doubtful debts.