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
2010 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
5% 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% (this will rise to 22%
on January 1, 2011). 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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