Firm Announcements and Law Updates

Latvia implements tax on distributed profits

As from the 1st of January 2018 Latvia has gone through some major changes in the state’s taxation environment in which the most important amendments are related to income tax law.

Here are the most important amendments to be considered within Latvia’s new tax environment:

  • Corporate income tax is increased from 15% to 20% and is payable only on distributed profits, providing corporate reinvestments at 0% tax rate;

  • Real estate sales are subject to 3% tax rate;

  • In case of receiving dividends corporate income tax will not be payable if the dividends are subject to income tax in the country of payer’s residence and the payer is not residing in black listed jurisdictions;

  • Loans issued to related parties are considered as deemed profit distribution, although such loans to companies where the obligee has participation are exempt. Also the loan is not subject to income tax if it has been repaid before the end of taxation year or the maturity does not exceed 12 months;

  • Dividends are subject to personal income tax at 20%, such requirement does not apply if the corporate income tax has been already paid for such dividends.

Reinis Sietins