Corporate income tax
Latvian companies, which do not distribute profit, are exempt from the corporate income tax for the period from January 1 to December 31. If a company decides to distribute profits in favor of founders, the tax rises to 25%. The tax payable is formed as follows: a Latvian company is obliged to submit an annual financial report to the tax service of Latvia. The financial report summarizes the revenues, costs and expenses incurred during a specified period. The deadline for the annual report is usually within four months from the end of the company’s financial year (usually until April 30). After the report is submitted and profit is calculated, company’s participants decide whether to distribute profits and pay taxes or dispose a reinvestment.
The Value Added Tax (VAT)
Companies registered in Latvia have the right to receive VAT payer status in the Latvian tax service in two cases:<
- In case the turnover of the Latvian company has exceeded or will soon exceed 40000 EUR for the past 12 months.
- If a Latvian company plans to cooperate with companies registered in other EU countries.
Depending on the type of transaction, provided that the Latvian company has a VAT number, different tax rates are applied:
- Transaction between Latvian company and natural person from the EU (including citizens of Latvia) – 21%
- Transaction between a Latvian company