Latvia country profile

Latvia country profile

Key tax factors for efficient cross-border business and investment involving Latvia.

Related content

business people standing in a modern courtyard

EU Member State

  Yes.

Double Tax Treaties

Albania Georgia Macedonia Slovakia
Armenia Germany Malta Slovenia
Austria Greece Mexico Spain
Azerbaijan Hungary Moldova Sweden
Belarus Iceland Montenegro Switzerland
Belgium India Morocco Tajikistan
Bulgaria Rep. of Ireland Netherlands Turkey
Canada Israel Norway Turkmenistan
China Italy Poland UAE
Croatia Kazakhstan Portugal UK
Czech Rep. Rep. of Korea Qatar Ukraine
Denmark Kuwait Romania US
Estonia Kyrgyzstan Russia Uzbekistan
Finland Lithuania Serbia  
France Luxembourg Singapore  
       

Forms of doing business

Limited Liability company, Joint-stock company.

Legal entity capital requirements

Limited Liability company - EUR 2,800, joint-stock company – EUR 35,000.

Residence and tax system

A company is deemed to be a resident if it is incorporated in Latvia. Latvian tax law treats branches as tax resident whether they are formally registered or should have been registered.

Resident companies are taxed on their worldwide income. Non-resident companies are taxed only on their Latvian source income.

Compliance requirements for CIT purposes

The taxable period normally corresponds to the calendar year, but a company may elect to have a taxable period different from the calendar year. Tax returns are filed on an annual basis.

Tax rate

The standard corporate income tax rate is 15 percent.

Withholding tax rates

On dividends paid to non-resident companies

0 percent tax rate except if dividends are paid to entities registered in listed low tax territories.

On interest paid to non-resident companies

0 percent tax rate except if interest paid to entities registered in listed low tax territories.

On patent royalties and certain copyright royalties paid to non-resident companies

0 percent tax rate except if royalties are paid to entities registered in listed low tax territories.

On fees for technical services

0 percent.

On other payments

  • 10 percent on management and consultancy fees
  • 5 percent on rental payments made to non-residents for the use of property in Latvia (except for the use of airplanes and commercial, manufacturing or scientific equipment)
  • 15 percent on remuneration received from participation in Latvian partnerships

 

Branch withholding taxes

No.

Holding rules

Dividend received from resident/non-resident subsidiaries

Exemption method (100 percent):

  • Taxation requirement: subsidiary must not be established in low tax regions

Capital gains obtained from resident/non-resident subsidiaries

All gains are taxable as ordinary income; however, gains and losses derived from the sale of shares (if the company is not a resident of a low tax jurisdiction) are exempt from tax.

Tax losses

If tax losses have been calculated and incurred up to 2007, they can be carried forward for 8 years. Losses correctly calculated and incurred from 2008 onward can now be carried forward for an unlimited period of time. Taxpayers registered in special aided territories can carry forward the losses incurred from 2005 onward for an unlimited period of time.

Tax consolidation rules/Group relief rules

No.

Registration duties

  • Registration of a limited liability company: EUR 144.
  • Registration of a joint-stock company: EUR 356.

Transfer duties

On the transfer of shares

Proceeds from the sale of real estate company shares in Latvia: 2 percent.

On the transfer of land and buildings

Stamp duties apply on the transfer of immovable property: 2 percent of the purchase price or cadastral value of the property or valuation for mortgage purposes, whichever is higher. The maximum tax payable is EUR 42,686. No other stamp duties apply.

Stamp duties

Please see above.

Real estate taxes

Yes, locally determined.

Controlled Foreign Company rules

No.

Transfer pricing rules

General transfer pricing rules

Yes.

Documentation requirement

Supporting documentation is required.

Thin capitalization rules

Two methods are applied: (i) debt-equity ratio of 4:1 and (ii) excess of interest rate over 1.57 times the short term interest rate of Bank of Latvia. The excess amount of interest is non-deductible. If both ratios are exceeded, then the higher amount is non-deductible.

No application of rules to loans from Latvian credit institutions and credit institutions registered in EU, EEA, and DTT countries.

General Anti-Avoidance rules (GAAR)

No.

Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions

No.

Advance Ruling system

Yes.

IP / R&D incentives

150 percent deduction for costs of establishing or acquiring intangible assets resulting in a trademark or patent registration.

Tax rebate for initial long-term investments made within the scope of supported investment projects might be applicable.

Other incentives

Relief available on significant investment.

VAT

The standard rate is 21 percent.

Other relevant points of attention

No.

Contact us

Steve Austwick

KPMG in Latvia

T: +371 67 038 057

E: saustwick@kpmg.com

EU Tax Centre

KPMG’s EU Tax Centre, working together with our network of EU tax law specialists throughout the European Union.

 
Read more

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.