Latvia corporate tax - guide for international expansion

Are you considering expanding your business to Latvia? Understanding the country's corporate tax landscape is crucial for making informed decisions about your European operations.

Latvia offers a competitive business environment within the European Union, with specific tax regulations that can impact your company's financial planning. From registration requirements to payment procedures, navigating Latvia's corporate tax system requires careful attention to local compliance standards. Wise Business can help streamline your international payments and currency management as you establish operations in this Baltic nation, making it easier to handle tax obligations and day-to-day business transactions in euros.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Latvia Corporate tax rate in 2025

The standard corporate income tax rate in Latvia is 20 % for 2025. This rate applies to distributed profits (such as dividends or deemed distributions) of resident companies and permanent establishments of non-resident companies operating in Latvia.¹

Latvia employs a distinctive corporate tax system in which profits are not taxed when earned, but only when they are distributed or treated as “deemed distributions.” This allows retained earnings to remain untaxed at the corporate level until distribution.¹

Certain payments or expenses that resemble distributions, such as non-business expenses, excessive interest to related parties, loans to shareholders, transfer pricing adjustments, and liquidation proceeds, may trigger taxation as deemed distributions, sometimes at an effectively higher rate (e.g. 25 %).¹

Once the company-level tax of 20% has been applied, dividends paid to resident individuals or resident companies are generally not subject to further income taxation (subject to conditions and exceptions, especially in the case of micro-enterprise payers or distributions from low-tax jurisdiction structures).¹

Capital gains on sales of assets are taxed only when distributed (or deemed distributed). Gains on shares may be exempt if the shares were held for at least 36 months.¹

Latvia does not currently offer a consolidated group taxation or fiscal unity regime under which companies can file a single group corporate tax return.¹

Regarding small / micro-enterprise regimes: Latvia uses a Micro-Enterprise Tax (MUN) regime, which taxes turnover (not profits). The rate is 25 % (as of 2024) and applies when certain eligibility criteria are met. Micro-enterprise status replaces normal income taxation rules for qualifying entities, but it is not a discounted “corporate income tax” rate per se.¹

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Latvia

Corporate tax payments in Latvia are administered by the State Revenue Service (VID – Valsts ieņēmumu dienests), the country’s primary tax authority. Companies can make payments through several methods approved by VID, with the most common being electronic payment via the Electronic Declaration System (EDS), which allows businesses to file returns and settle taxes online.²

The taxable period is generally monthly, though some taxpayers may use a quarterly period. Corporate income tax returns must be filed for any period in which a tax base arises, by the 20th day of the following period, with a return always required for the last month of the financial year.³

Tax must be paid on or before the 23rd day of the month following the tax period. Under Latvia’s system, profits are generally taxed only when distributed as dividends or deemed distributions, while retained earnings remain untaxed, allowing companies flexibility for reinvestment.³

Let's consider a practical example: if your company has an annual turnover of €1.5 million with a profit margin of 10%, your taxable profit would be €150,000. Under Latvia's system, if these profits are retained in the business, no immediate corporate income tax is due.

However, if the full €150,000 is distributed as dividends, the corporate income tax would be:

€150,000 × 20% = €30,000

When expanding your business to Latvia, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local EUR account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Latvia

The tips to keep your company fully compliant with Latvian tax regulations:⁴

• Register for taxes early: After incorporation, companies must register for taxes with the State Revenue Service. Key obligations include personal income tax, employer and employee social insurance contributions, and VAT.
• VAT compliance: VAT applies to most business transactions at the standard rate of 21% (with reduced rates of 12%, 5%, and 0%). Businesses must register for VAT once annual turnover exceeds €40,000, though voluntary registration is allowed earlier. VAT returns are filed monthly or quarterly, depending on the company’s profile.
• Corporate income tax (CIT): Latvia applies a 0% CIT rate on reinvested profits. CIT at 20% is only charged on distributed profits such as dividends or non-business expenses. Resident companies are taxed on worldwide income, while non-residents are taxed on Latvian-source income. Careful corporate tax provision planning is essential to manage liabilities, especially for companies budgeting future dividend payouts.
• Quarterly corporate tax payments: While undistributed profits are exempt, companies must pay CIT when profits are distributed, typically within the reporting quarter. Setting aside funds through budget corporate tax planning helps avoid last-minute cash flow issues.
• Personal income tax (PIT): Residents are taxed on worldwide income at progressive rates of 20%, 23%, and 31%. Dividends and interest are taxed separately at 10%, while capital gains are taxed at 20%. Non-residents pay PIT only on Latvian-sourced income.
• Annual reporting: Under Latvian law, companies must prepare annual accounts. Small companies may be exempt from some statements, while medium and large firms require audits. Annual reports must be filed with the State Revenue Service within four months of the financial year-end (seven months for larger firms).

International Expansion to Latvia

Latvia has built a reputation as one of Europe’s most tax-competitive economies, ranking second in the OECD’s 2022 International Tax Competitiveness Index. The country’s strategic location at the crossroads of Western Europe and Central Asia positions it as a transportation and logistics hub, supported by three ice-free ports, a reliable rail network, and Riga International Airport.⁵ These are the largest in the Baltics and connect to over 100 destinations during the summer season.⁶

In this country, companies benefit from five Free Ports and Special Economic Zones offering favourable tax conditions.⁷ Therefore, if you want to optimise your business structure or file corporate tax efficiently, Latvia’s corporate tax rate policies and corporate tax advisory services create a supportive ecosystem.

Notably, the economy is on a steady growth path, with GDP expected to rise from 1.2% in 2025 to around 3% in the coming years, supported by strong wage growth at 6%.⁸ The workforce is highly educated, with one of the highest rates of university attendance globally. Latvia also stands out for its language skills. 62% of people in the 25–34-year-old age group speak at least two foreign languages.⁹ This allows international companies to integrate into regional and global markets more easily.

Latvia has also fostered an innovation-driven culture, with more than 400 active startups and growing investor networks.¹⁰ Regional business incubators provide discounted services to SMEs, while a modern digital infrastructure, including globally competitive mobile internet speeds, ensures businesses can operate seamlessly.

The steps to follow when setting up your business in Latvia are:¹¹

1. Conduct market research and prepare a business plan.
2. Select a business type, location, and name.
3. Register with the Latvian Enterprise Register portal.
4. Obtain a Tax Identification Number (TIN) from the State Revenue Services (SRS).
5. Acquire licenses if required.
6. Open a corporate bank account.

There is an incredible growth potential for companies considering expansion to Latvia. Its strong economy, educated workforce, and solid tax and currency policies are all the ingredients you need to reach your business objectives.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Latvia

To incorporate a business in Latvia, you must register through the Latvian Register of Enterprises. The process is relatively simple, but companies must comply with the Latvia corporate tax rate requirements and international corporate tax law when setting up their structure.

The following information and documents are required when incorporating a company in Latvia:¹²

• Company name: a unique business name not already registered in Latvia.
• Type of company: the chosen legal entity (explained below).
• Articles of Association: a legal document that defines a company’s rules, management, and shareholder rights.
• Registered office: the company must have a legal address in Latvia.
• Directors and management board: individuals responsible for running the company. At least one member of the management board must be a resident of Latvia, an EU/EEA country, or the OECD.
• Share capital: the minimum required depends on the entity type, with contributions payable before registration.
• Shareholders: the owners of the company, either private individuals or corporate entities.

Note: Latvian companies are subject to the corporate alternative minimum tax if certain conditions are unmet. This ensures that entities contribute fairly to the tax system even when reporting low taxable profits.

Business Entities in Latvia

According to Latvian Commercial Law, here are the main types of business entities:¹³

• Limited Liability Company (SIA): The most common form of company in Latvia. It requires a minimum share capital of €2,800 (or €1 for small companies meeting specific criteria). Shareholders’ liability is limited to their investment, making it attractive for both local and foreign investors.
• Joint Stock Company (AS): Suitable for larger businesses or those planning to list shares publicly. The minimum share capital is €35,000. At least one board member must be an EU/EEA or OECD resident.
• Branch Office: A foreign company may establish a branch in Latvia without forming a separate legal entity. The parent company remains liable for all obligations.
• Representative Office: Unlike a branch, this entity cannot conduct commercial activities. It may only represent the parent company, carrying out marketing and research opportunities in Latvia.
• Partnerships: General and limited partnerships are available, but they are less common for international investors due to unlimited liability in some instances.

International corporate tax best practices

Managing corporate tax obligations across multiple jurisdictions requires a strategic approach that balances compliance with efficiency. International businesses should prioritize understanding local tax laws and maintaining accurate records to avoid costly penalties and ensure smooth operations.

Establishing robust financial systems is crucial for multinational companies. This includes implementing proper accounting procedures that align with local requirements while maintaining consistency across all operating jurisdictions. Regular reviews of tax positions and proactive communication with local tax authorities can help prevent issues before they arise.

Latvia's membership in the European Union provides access to various EU directives that can benefit international businesses, including the Parent-Subsidiary Directive and the Interest and Royalties Directive. These frameworks can help reduce withholding taxes on cross-border payments between EU member states, making Latvia an attractive location for regional headquarters or holding company structures.

Companies should also consider the impact of transfer pricing regulations, particularly when dealing with related party transactions. Latvia follows OECD transfer pricing guidelines, requiring arm's length pricing for transactions between associated enterprises. Proper documentation and economic analysis of intercompany transactions are essential for compliance and can help avoid disputes with tax authorities.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Latvia efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Latvia

Who is liable for corporate tax in Latvia?

Corporate income tax liability in Latvia applies to resident companies on their worldwide income and to non-resident companies on their Latvia-sourced income. A company is considered a Latvian tax resident if it is incorporated under Latvian law or if its place of effective management is in Latvia. Foreign companies operating through a permanent establishment in Latvia are also subject to corporate income tax on profits attributable to that establishment.

Are there any tax incentives for businesses in Latvia?

Latvia offers several tax incentives to encourage business investment and development. The most significant is the unique corporate tax system where retained profits are not taxed until distributed. Additionally, companies investing in research and development can benefit from enhanced deductions, and there are special regimes for certain industries such as shipping and aviation. Free economic zones also provide various tax benefits for qualifying businesses.

What is the tax treatment of dividends in Latvia?

Dividends received by Latvian companies from other EU resident companies are generally exempt from corporate income tax under the EU Parent-Subsidiary Directive, provided certain conditions are met. Dividends paid by Latvian companies to non-residents are subject to withholding tax at rates ranging from 5% to 20%, depending on applicable double taxation treaties. Domestic dividends between Latvian companies may also qualify for exemptions under specific circumstances.

What is the process for registering for corporate tax in Latvia?

Companies must register with the State Revenue Service (VID) within one month of commencing business activities in Latvia. The registration process involves submitting the required forms along with supporting documentation, including the company's articles of association and details of business activities. Registration can be completed online through the VID portal or in person at VID offices. Once registered, companies receive a tax registration number that must be used for all tax-related communications.

What are the common pitfalls to avoid regarding corporate tax in Latvia?

The most common mistakes include misunderstanding Latvia's unique profit distribution tax system, failing to maintain proper documentation for transfer pricing, and missing filing deadlines. Companies often struggle with the transition from traditional corporate tax systems to Latvia's model where timing of taxation depends on profit distribution rather than profit generation. Inadequate record-keeping for international transactions and failure to properly apply double taxation treaty benefits are also frequent issues that can lead to penalties and additional tax assessments.

Sources used in this article:

1. PwC Tax Summaries: Latvia Corporate Income Taxes
2. State Revenue Service (VID): Electronic Declaration System (EDS)
3. PwC Tax Summaries: Latvia Tax Administration
4. Investment and Development Agency of Latvia (LIAA): Business Guide (PDF)
5. U.S. Trade.gov: Latvia Investment Climate Statement
6. Riga Airport: Direct Destinations Update
7. PwC Tax Summaries: Latvia Tax Credits and Incentives (Free Ports/SEZs)
8. Bank of Latvia: Macroeconomic Forecasts June 2025
9. LIAA: Latvian Business Guide (PDF, older version)
10. ResearchGate: Startup Infrastructures in Ukraine, Latvia, and Georgia
11. Multiplier: Latvia Company Registration
12. Enterprise Register (UR): LLC Registration Summary
13. Company Registration Latvia: Types of Organizations in Latvia

Sources last checked 07/10/2025