If you are interested in tax minimization in Latvia, our advisors are at your disposal. Plus, this article offers you information about the main tax optimization methods available to companies established in Latvia. Please explore the following lines and then discuss further details with our specialists in company formation in Latvia.
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Strategies for reducing the tax burden in Latvia
The strategies presented below are four examples of tax minimization actions that can be implemented by Latvian companies:
- Double taxation treaties: Latvia has signed a number of double tax treaties that can include important tax reduction advantages for investors who come from a certain country, the other signatory state to the treaty; these agreements reduce the tax burden and can be used when composing the overall tax strategy in Latvia for foreign subsidiaries.
- Accountancy proficiency: working with a reliable accountant and a tax consultant is a key step for creating a reliable and efficient tax minimization strategy; the tax calculation process should be considered from two points of view: a legal and a mathematical one, and a tax planner will be able to provide the solutions that will suit the company’s particulars and needs.
- Tax deduction: Some types of businesses can deduct certain categories of expenses that are relevant to their core business activities; purchasing assets before the end of the tax year can be an option for tax minimization.
- Donations: this is a form of relief available in the case of donations made to Latvian benefit organizations or their equivalent in an EU/EEA country.
Another key strategy for minimizing the tax liability for a company is to choose a suitable business form, if possible, the one that benefits from the lowest taxation threshold. In Latvia, a micro-enterprise is taxed at a lower rate of 15% for a turnover of a maximum of 40,000 euros. Investors who open a company in Latvia can qualify as a micro-enterprise in one of the following situations:
- individual merchant;
- individual undertaking;
- farm or fishing enterprise;
- limited liability company;
- a natural person registered with the State Revenue Services for the purpose of performing economic activities.
Before deciding to open a legal entity, it is worth checking if the new company will qualify for one of these criteria. This way, you can minimize the overall corporate tax rate if the company is considered a micro-enterprise and remains within the annual turnover requirements. One of our agents in company incorporation in Latvia can give you more information about the available business forms, especially the widely-used limited liability company.
Other useful tax optimization methods
In Latvia, various tax optimization methods can be put into practice. Here are some often used by company owners who want to reduce the amount of taxes to be paid in the firm:
- retirement plans are suitable options to cut the amount of taxes in the firm;
- opening a charity is also useful when implementing a tax optimization strategy in a company in Latvia;
- up to 80% corporate income tax relief is provided to those establishing their business presence in free ports and special economic zones in Riga, Latgale, Rezekne, etc.;
- the dividend tax base can be reduced through a holding company in Latvia;
- taxes can be reduced for equipment and machinery purchases.
Considering these tax minimization strategies, all that remains is to collaborate with our Latvian specialists and find out which method is optimal for the business you own in Latvia.
Taxation in Latvia
We present some of the most important taxes in Latvia:
- 25% is the standard corporate income tax rate in Latvia, specifying that 80% of profits are taxed at 20%;
- since January 2026, individual shareholders can choose the 15% corporate income tax rate imposed on gross distributed income in Latvia;
- the personal income tax in Latvia ranges between 20% and 33%;
- 21% is the standard VAT rate in Latvia, with a lower rate of 12% for heating, medicine & other services;
- 3% is the solidarity tax for incomes over EUR 200,000 for individuals in Latvia;
- an employee in Latvia pays around 10.5% the social security contributions, while the employer pays about 23%;
- the real estate tax in Latvia ranges between 0.2% and 1.5%, imposed on various transactions.
Why should you call our tax specialist in Latvia?
The Latvian tax system can be confusing for foreign entrepreneurs coming to do business in this country for the first time. Therefore, we advise those interested in company incorporation in Latvia to discuss with our tax experts and find out more about this important field. In addition, our accountants in Latvia can offer comprehensive, personalized services from the company’s formation stages, including advice on existing tax minimization strategies. Therefore, with a specialist at hand, you can ensure that you understand the tax system from the start, as well as the options available to you to reduce the amount of taxes that a company in Latvia owes.
Ready to set up a company in Latvia and need more information about the available tax minimization options? Please contact our local firm and discuss more on this topic and the available services.