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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