Taxation is a complex thing to understand, so, it is important to get help from experts. If you are a foreigner in Latvia, you are advised to get in touch with our company formation agents to learn about taxation, because it is crucial to comply with taxation in the region if you want to avoid any complications.
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Latvian income tax
A progressive personal income tax (PIT) system exists in Latvia. Unless the legislation specifies a different rate, the progressive rate is determined using the following formula based on the level of yearly income. See the Latvian income tax rates below:
- – Up to € 20,000 in income is subject to a rate of 20%;
- – A rate of 23% is applied to any portion of income between €20,004 and €78,100;
- – Over EUR 78,100 in income results in a rate of 31%.
- – There is a 20% rate of personal income tax on dividends. There will not be any PIT to pay, though, if a corporation has already charged its profits to CIT.
This Latvian income tax applies to businesses in Latvia as well as those in the EU, EEA, and other nations, except for companies in the tax haven. Apart from EU/EEA enterprises, where no proof is required because it is presumed that tax (PIT or CIT) has been imposed at source by default, profits should be zero-rated for PIT if proof of PIT or CIT paid abroad has been provided.
Besides assistance in the Latvian income tax, you can also get in touch with our company incorporation consultants if you want to buy a shelf company in Latvia.
Capital gains tax in Latvia
Capital gains tax in Latvia is the difference between the sales price of an asset’s capital and its acquisition value, as well as the difference between the investment’s liquidation quota and its worth. The method used to buy the capital asset will determine the acquisition value. The Latvian capital gain income tax is levied at a 15% rate. A 10% tax is applied to the capital income that is not a capital gain. According to Latvian law, income from capital other than capital gains includes:
- – dividends from company stocks and shares,
- – income from other rights (not derived from debt obligations) to participate in profit distribution,
- – income from private partnerships, as well as income related to interest income,
- – income from investments in private pension funds,
- – income from life insurance agreements with savings.
If you are unable to understand the Latvian capital gains tax efficiently, our experts can explain it to you. Get in touch with our company incorporation experts for their services.
If you have a firm in Latvia and you need accounting services, you can rely on our experts. They can offer you efficient accounting services in Latvia. A qualified Latvian accountant may be a valuable source of guidance and advise on how to control your company’s expenses and report losses. You may then base your judgments on measured risks and anticipated outcomes. You should be aware that financial statements including trading and profit & loss account, balance sheet, and others may be simply created if accurate transaction documentation is kept.
The corporate income tax rate in Latvia
One of the lowest corporate income tax rates in Europe is 15% in Latvia. Taking into account all the adjustments that the tax regulations specify, it is applied to the annual profits. For the Latvian corporate income tax, business expenses are deductible. The tax exemption is also applicable to interest and sales of public bonds, but the bond must first be quoted on markets governed by the EU or the EAA. Capital gains are another type of income subject to the Latvian corporate income tax rate. This is especially true of capital gains from the sale of a property. The distinction between a property’s net tax value and the sales price in this instance represents the taxable income. Capital gains from the selling of shares are not subject to the corporate income tax rate in Latvia.
The reduced version of the Latvian corporate income tax is available to permanent enterprises that have been in operation for no more than a year. Such a business pays corporate income tax on 20% of its revenue if it applies to a simplified tax regime. If you have more questions about Latvian corporate income tax, our experts can guide you. Furthermore, our specialists can also help you incorporate a branch in Latvia. You can take advantage of the free zone by setting up a company in Latvia. The European Union considers Latvia to be a nation and a member state (EU). Along with that, Latvia is a participating member of the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD) (WTO). As a result, there are numerous possibilities for commerce and incentives for both imports and exports among the member nations in these international organizations.
Value-added tax in Latvia
The entire European Union, including Latvia, is subject to the VAT, which is a consumption tax. On products and services bought and sold for use or consumption, the value-added tax is imposed. Since the end user is responsible for paying this tax that is incorporated into the cost of a commodity or service, it is seen as an indirect tax. According to Latvia’s value-added tax Law:
- – The standard tax rate is 21%;
- – However, the reduced VAT rate can be 12%, 5%, or, 0% depending on the good or service.
Due to the circumstances of the competition, the EU has established tight guidelines for implementing the VAT. Contact our company incorporation experts if you want to learn about the Latvian dividend tax.
Furthermore, our company incorporation agents can help you get a virtual office in Latvia. They will explain to you all the available packages and you can select anyone as per your business needs.