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TODAY 17/03: IO Focus: Hong Kong, Investors Offshore special feature
TODAY 17/03: New PBTG Editor Column, Caroline, PBTG editor
16/03 Hungary Summary PBTG Guide, added to Personal Business Tax Guide
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03/03 Personal Business Tax Guide, PBTG, has launched!
Providing essential tax news and information for globally mobile artists, contractors, entrepreneurs, professionals, small businesses, sportspersons and entertainers.
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LOWTAX ONSHORE

LATVIA: DOMESTIC CORPORATE TAXES


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BACK TO LATVIA INFORMATION: BUSINESS, TAXATION AND INVESTMENT


Latvia Scope of Income Tax

Resident businesses are liable to corporate income tax on their worldwide income, while non-resident businesses operating in Latvia pay tax on their Latvia-source income only. Consolidation is not permitted.

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Latvia Income Tax Rates

The rate of corporate income tax in Latvia for 2009 is 15%.

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Latvia Calculation of Taxable Base

Taxable income includes trading income, passive income and capital gains. Dividends received from local or EU entities and gains realised from EU securities are exempt.

Losses can be carried forward for five years (eight years from 2010) in the order in which they were incurred; losses cannot be carried back.

There is no alternative minimum tax.

Normal business expenses are deductible from income. Tax credits are available for various types of investment. Foreign tax credits are available up to the level of Latvian tax that would have been payable on the income concerned.


Latvia Filing Requirements and Payment of Tax

The tax year is the calendar year, although a company may choose an alternative 12-month period. Tax is payable monthly in advance based on previous results, by the 15th of the month. A tax return must be filed within 30 days of the annual shareholders meeting, or within four months of the end of the fiscal year; any balance of tax must be paid within 15 days of the due date for the annual tax return.

Consolidated tax returns are not permitted, but there is a limited group relief scheme. Penalties for infringement include a fine of LVL200 if the return is filed up to 30 days late, or LVL500 if over 30 days late, plus 30%-50% of the tax due, increasing to 100% for repeat offences within the following three years. Late payments are charged at 0.05% daily of the amount unpaid.

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Latvia Withholding Taxes

There are no withholding taxes on domestic dividend, interest and royalty payments. Under the Parent/Subsidiary Directive, dividends paid to connected corporate recipients in the EU (minimum 10% shareholding) are also exempt.

A 10% withholding tax applies to payments of interest and royalties made to connected corporate recipients in the EU, but under the Interest and Royalties Directive such payments will be exempt from 2013.


Latvia Sales Taxes and VAT

The standard VAT rate is 21%, but this will rise to 23% from January 1, 2010. There is a reduced rate of 10% that applies to, for example, pharmaceutical products, medical equipment, passenger transportation, and heating and electricity. A number of goods and services were previously included in the lower rate, such as books, hotel accommodation, funeral services, and entry to sporting events, but these are now charged at the standard rate.

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