|Corporate Tax rate:||As from January 1st, 2018, Latvian companies are subject to corporate income tax only on their profits that are distributed.|
|Personal income Tax:|
|Capital Gains (including real estate):||20%|
|Double taxation relief:||Yes|
|Social security contributions:||35.09% of employee salary|
|Real estate tax:||Varies|
Taxation of dividends
Because the changes to the corporate income tax and individual income tax systems will form a unified system, there are changes made to the taxation of dividends. The individual income taxation of dividend income and income from other profit distributions will not change when:
- Corporate income tax is paid on the distributed profits in Latvia or
- Corporate income tax is paid in a foreign country where the tax was withheld at source
- A rebate of up to 80% of tax is available for licensed entities located in special economic zones and free ports. The rebate has been approved as compatible with the EU state aid rules.
- A corporate tax credit in the amount of 25% of the amounts invested may be granted for long-term investments above EUR 10 million in state-supported industries (manufacturing, information technology, telecommunications, logistics), subject to approval by the Cabinet of Ministers. For the portion of an investment between EUR 50 million and EUR 100 million, a tax credit in the amount of 15% may be granted.
- A 300% super deduction is applied to qualifying R&D costs (direct labor costs of R&D staff and R&D services from scientific institutions and accredited laboratories in the EU/EEA) for corporate income tax purposes. Specific requirements must be fulfilled to qualify for the deduction.
- Start-up companies are entitled to make fixed monthly payments equal to two minimum compulsory state social insurance contributions (i.e. a total of EUR 259 in 2017) per employee, instead of paying full payroll taxes, and also are entitled to corporate income tax rebates. Startup company status is granted by a state-formed commission according to criteria set by the law.
- VAT is charged on supplies of goods and services, intra-community acquisitions of goods and services and the importation of goods and services.
- The standard rate is 21%, with a reduced rate of 12% applying to certain goods/services. Some items are zero-rated, and others are exempt (e.g. financial and insurance services).
- The taxable period generally is the calendar month, although it may be a quarter or a six-month period in certain cases. Returns must be submitted and tax paid by the 20th day of the month following the taxable period.