A Guide to Corporate Taxes in Latvia

What Is the Corporate Tax Rate in Latvia?

The corporate tax rate in Latvia is the percentage of a company’s taxable profit that must be paid to the government. For most businesses, this rate has remained stable, affecting both local companies and foreign firms with operations in Latvia.

• Standard Corporate Income Tax Rate: The main corporate income tax rate in Latvia is 20% on taxable profits.
• Undistributed Profits: Profits that are not distributed, such as those reinvested in the business, are not subject to tax until paid out. This allows companies to defer tax on retained earnings.
• Alternative Tax Regime: Started on January 1, 2026, allowing certain companies with natural-person shareholders to opt for a 15% corporate income tax on distributed profits, alongside a 6% personal income tax on dividends.
• Special Exemptions: Certain entities, such as investment funds or pension funds, may qualify for a 0% tax under specific conditions set out in Latvian law.

To understand how the corporate tax rate in Latvia operates in practice, it is important to examine the breakdown of the components of corporate income tax.

Breakdown of Corporate Income Tax Components

Latvia’s corporate income tax system consists of several key components that contribute to a company’s overall tax obligations. These include:

• Federal Corporate Tax: The primary tax is levied on taxable profits when they are distributed (e.g., as dividends), applying to both local and foreign companies in Latvia.
• Local and Municipal Taxes: Latvia does not impose local corporate income taxes, but businesses may face local fees (e.g., property tax), which are not significant.
• Surcharges: No standard surcharges on corporate income, though businesses in regulated industries may incur additional sector-specific taxes.
• Taxable Income: Corporate tax is based on profits after allowable deductions, including operational costs and wages, thereby reducing taxable income.

With the corporate income tax components clarified, the next step is to review the corporate tax filing requirements in Latvia.

Corporate Tax Filing Requirements in Latvia

Filing corporate tax returns in Latvia involves completing a set of steps through the official electronic system to ensure compliance with Latvia’s corporate tax filing requirements. Here’s what you need to know about company tax filing in Latvia:

• Filing Deadline: Corporate tax returns must be filed by the 20th of the month following the tax period.
• Required Documents: Submit the corporate income tax return form electronically via the State Revenue Service (SRS) portal, along with any relevant supporting documentation (e.g., financial statements or proof of deductions) when applicable.
• Digital Filing: All returns must be filed through the SRS portal, requiring a digital certificate or registered access for secure submission.
• Extensions: There are no routine extensions for corporate tax returns in Latvia, and businesses are expected to meet the monthly or quarterly deadlines. Special cases may be considered, but extensions are not standard practice.
• Penalties: Late filings or payments result in penalties and interest. Interest is charged at around 0.05% per day on unpaid tax. Filing penalties range from €70 if the return is less than 15 days late, to €280 if it is less than 30 days late, and to €700 if it is more than 30 days late.

After outlining the filing requirements, businesses should also consider the tax year and payment deadlines in Latvia.

Tax Year and Payment Deadlines in Latvia

In Latvia, understanding the corporate tax year and associated payment deadlines is crucial for businesses to stay compliant and avoid penalties. Here’s an overview of the standard tax year period and key payment deadlines in Latvia:

• Standard Corporate Tax Year: Latvia does not apply corporate income tax on a traditional calendar year basis. Corporate tax is charged when profits are distributed or treated as distributed, rather than when they are earned.
• Payment Deadlines: Corporate tax payment deadlines in Latvia are typically the 20th of the following month after the tax period.
• Advance Payments: Businesses are required to make monthly advance payments based on the prior year’s tax liability. These payments are due by the end of each month for the previous month.
• Final Payment: The final corporate tax payment is due by the 23rd day of the month following the tax period, meaning the payment deadline falls three days after the filing deadline.

Beyond these deadlines, companies must also account for withholding taxes and other business taxes in Latvia.

Withholding Taxes and Other Business Taxes in Latvia

In Latvia, businesses must consider withholding taxes on certain payments and other notable business taxes that impact operations:

Withholding Tax Rates:

• Dividends: Dividends paid to non-residents are generally not subject to withholding tax. However, a 20% withholding tax applies if the recipient is located in a tax-haven jurisdiction.
• Interest: Interest paid to non-residents is generally not subject to withholding tax under Latvian domestic law. A 20% rate may apply to payments made to entities in tax-haven jurisdictions.
• Royalties: Royalties paid to non-residents are generally not subject to withholding tax, unless the recipient is in a tax-haven jurisdiction, in which case a 20% rate may apply.

Value Added Tax (VAT):

• Latvia applies a 21% VAT to most goods and services, with some reduced rates for specific categories, such as books and pharmaceuticals.

Capital Gains Tax:

• Capital gains from the sale of shares and business assets are typically taxed at 20%. However, certain exemptions apply, especially for long-term holdings.

Alongside these obligations, companies should consider the available corporate tax in Latvia, along with incentives, deductions, and exemptions.

Corporate Tax Incentives, Deductions, and Exemptions

Latvia’s corporate tax system offers businesses several opportunities to reduce their taxable income through targeted incentives, deductions, and exemptions.

These provisions are designed to stimulate investment, innovation, and growth across the country.

1. Regional Incentives

Companies operating in Special Economic Zones (SEZs) and free ports can benefit from significant regional tax rebates. Qualifying businesses may receive up to an 80% rebate on corporate income and real estate taxes.

In certain cases, exemptions from indirect taxes, including VAT and excise duty, may also apply. These corporate tax incentives in Latvia are designed to attract investment and promote economic development in designated areas.

2. Investment Allowances

Latvia provides enterprise income tax rebates for significant investment projects. Eligible companies may receive tax credits of 25% on initial long-term investments up to specified thresholds and 15% on amounts exceeding those thresholds, subject to qualifying conditions.

In addition, Latvia’s corporate tax system encourages reinvestment, as retained profits are not taxed until distributed, effectively supporting ongoing business expansion and development.

To complete the framework, businesses should also understand Latvia’s international tax treaties and double taxation avoidance agreements.

International Tax Treaties and Double Taxation Avoidance

Latvia has signed a range of Double Taxation Treaties (DTTs) with 63 countries to prevent businesses from being taxed twice on the same income.

These treaties are crucial for companies operating internationally, as they clarify tax obligations and reduce the risk of dual taxation.

Overview of DTTs:

• Latvia has signed DTTs with more than 50 countries, including major trading partners like the United States, Germany, France, and the United Kingdom.
• DTTs clarify which country has the right to tax specific types of income, such as dividends, royalties, and interest.

Avoiding Double Taxation:

• Businesses operating in multiple countries can use DTTs to avoid paying taxes twice on the same income.
• If a Latvian company earns income from a foreign subsidiary, the tax treaty determines whether Latvia or the foreign country has the right to tax that income.
• Generally, the country where the income is generated has the first right to tax, and Latvia offers relief through:

Relief Mechanisms:

• Tax Credits: Offset foreign tax paid against Latvian tax liability.
• Exemptions: Certain types of income may be exempt from Latvian tax if taxed in the foreign jurisdiction under the terms of the treaty.

How Commenda Supports Corporate Tax Compliance in Latvia?

Corporate tax compliance services in Latvia require timely filing, accurate reporting, and ongoing monitoring of regulatory obligations.

Commenda helps businesses manage these requirements by centralizing workflows and providing visibility of compliance tasks across jurisdictions.

Commenda supports you with:

• Corporate tax return preparation and filing coordination: Consolidate financial data and track deadlines to help ensure the timely submission of corporate tax returns.
• Ongoing compliance monitoring: Track filing deadlines and jurisdiction-specific rules to help your business stay compliant with Latvian corporate tax obligations.
• Local expert support: Connect with licensed accountants and tax advisors for guidance on corporate tax compliance and registration requirements.
• Documentation management: Store and organize tax filings and compliance records to support internal reviews and, if needed, responses to tax authority inquiries.

Get expert help with tax compliance in Latvia today and simplify your corporate tax management.