Corporate Income Tax in Latvia

Latvia does not tax annual profit. A company pays corporate income tax (CIT) only for the month in which it distributes profit or makes a payment the law treats as a distribution. Retained profit carries no tax. The tax is 20% of the taxable amount after that amount is divided by 0.8, so a net dividend of 80 costs 20 of tax (CIT Law art. 3(1), art. 4(9)). From 1 January 2026 a company whose owners are only individuals can choose 15% with a 0.85 divisor on dividends; the individual then pays 6% personal income tax on the dividend.

Who this applies to

• Domestic companies (iekšzemes uzņēmumi) and permanent establishments of foreign companies pay CIT on the base in art. 4 (CIT Law art. 2(1)(1) and (2)). From the reporting year starting in 2026, port authorities are also taxpayers (art. 2(1)(1)(d), transitional provision 53).
• Non-residents earning Latvian income are taxpayers for withholding purposes (art. 2(1)(3), art. 5). That side is in lv-cross-border.
• Out: individuals; sole traders who have not chosen to prepare annual accounts; budget-funded bodies whose business income is in the budget; private pension funds; investment funds and alternative investment funds (their investors pay); non-profit associations and foundations; religious organisations, trade unions and political parties (art. 2(2)).
• An SIA cannot be a micro-enterprise taxpayer. Under the Micro-enterprise Tax Law, only an individual merchant (IK), an individual enterprise, a farm or fishing holding, or an individual registered with VID as carrying on business can be a micro-enterprise and choose micro-enterprise tax (Micro-enterprise Tax Law art. 1(3), art. 2(1)). VID's guidance lists the same groups ("Mikrouzņēmumu nodoklis", updated 06.05.2026). A new SIA cannot choose it. An SIA that was already a micro-enterprise taxpayer lost that status on 1 January 2022 and became a CIT payer (Micro-enterprise Tax Law, transitional provision 36). So every SIA pays CIT under this skill. CIT Law art. 2(4) and art. 4(11) still name "an SIA registered as a micro-enterprise taxpayer", but no SIA can now hold that status.
• Micro-enterprise taxpayers (an individual enterprise or a farm or fishing holding registered for micro-enterprise tax) include CIT in the micro-enterprise tax and are outside this skill (CIT Law art. 2(4), art. 4(11)). A CIT payer that registers as a micro-enterprise taxpayer includes deemed dividends in its CIT base for that period (art. 7(1)(3)).
• Tonnage tax companies have a separate base for qualifying shipping (art. 4(16) to 4(21)). Not covered here.
• Credit institutions and consumer lenders also pay an annual CIT top-up of 20% on the previous year's after-tax profit, less the CIT paid on dividends calculated in the top-up year (extraordinary dividends excluded) (art. 4.1(4)). Not covered in detail here.

Rates, bands and thresholds

Item	Rate or amount	Year	Source URL
General CIT rate	20% of the taxable base	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 3(1))
Divisor applied before the rate	taxable amount / 0.8 (25% of a net distribution)	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 4(9))
Alternative rate on calculated dividends, companies owned only by individuals (optional)	15%	from 1 Jan 2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 3(5), art. 4.2(1))
Divisor under the alternative rate	dividend / 0.85	from 1 Jan 2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 4.2(2))
Personal income tax on dividends paid under art. 4.2	6%	from 1 Jan 2026	https://likumi.lv/ta/id/56880-par-iedzivotaju-ienakuma-nodokli (art. 15(5.1), art. 9(3.9))
Personal income tax on ordinary dividends from CIT-taxed profit	exempt	2026	https://likumi.lv/ta/id/56880-par-iedzivotaju-ienakuma-nodokli (art. 9(1)(2.1))
Representation and staff wellbeing costs treated as non-business	excess over 5% of prior-year gross payroll	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 8(2)(7))
Bad debt with a provision, not recovered	taxed after 36 months (60 months if the debtor is insolvent)	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 9(1)(1))
Thin capitalisation	interest on average debt above 4 x opening equity	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 10(1))
Interest limitation	net interest above EUR 3,000,000: excess over 30% of profit before CIT plus interest and depreciation	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 10(3))
Share disposal relief	gain on direct shares held at least 36 months offsets dividends	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 13(1))
Minimum CIT for the reporting year	EUR 50	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 17(11))
Annual CIT top-up for banks and consumer lenders	20%	2026	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums (art. 4.1(4)(5))
Late payment interest	0.05% of unpaid tax per day	2026	https://likumi.lv/ta/id/33946-par-nodokliem-un-nodevam (art. 29(2))
Fine unit for administrative fines	EUR 5	2026	https://likumi.lv/ta/id/303007-administrativas-atbildibas-likums (art. 16(2))

The taxable base

The base for a taxation period is the sum of the items in art. 4(2), divided by 0.8 (art. 4(1), 4(9)). Amounts follow the revenue and expense recognition rules of the Annual Accounts Law or IFRS (art. 4(4)).

1. Distributed profit (art. 4(2)(1))

• (a) calculated dividends, including extraordinary dividends;
• (b) payments treated as dividends;
• (c) deemed dividends under art. 7: a reduction of share capital (first out of capital that came from profit), completion of liquidation, or registration as a micro-enterprise taxpayer (art. 7(1), 7(3)).

The dividend is taxed in the period in which it is calculated (declared), not when it is paid.

2. Deemed distributed profit (art. 4(2)(2))

• (a) Non-business expenses (art. 8): costs not directly linked to the business, judged by economic substance. Examples in art. 8(2): benefits to shareholders or staff not taxed as their income; gifts and forgiven loans; donations outside the art. 12 relief; assets used for non-business purposes; representation and staff wellbeing costs above 5% of the prior year's gross payroll; representative cars; bribes; disproportionate penalties, or penalties paid to related or low-tax persons; fuel above the art. 8(5) limits. Advances where the deal has not started within 12 months are also caught (art. 8(2¹)). Items (a) and (f) do not apply where personal income tax was withheld (art. 4(3)).
• (b) Bad debts (art. 9): a provision for a debt not recovered within 36 months (60 months if insolvency proceedings started), or a direct write-off, unless the art. 9(3) conditions are met. Those require all recovery steps, and for example the debtor being in the EU/EEA or a treaty country, a court judgment with a bailiff's statement, or a small debt (up to EUR 20, or up to 0.2% of turnover capped at EUR 500). A debt recovered in the year drops out (art. 4(6)).
• (c) Increased interest payments (art. 10): interest on the part of average debt above four times opening equity (less revaluation and other reserves not from profit). Where net interest exceeds EUR 3,000,000, interest above 30% of profit before CIT plus interest and depreciation. The higher of the two is added (art. 10(4)). Loans from regulated EU/EEA or treaty-country lenders are outside the first test (art. 10(2)).
• (d) Loans to related persons (art. 11): a loan to a related person is a deemed distribution. Not caught: loans from a shareholder to the company; loans to the company's own foreign PE; loans up to the amount the company itself borrowed from unrelated persons; loans made in a year that starts with no retained earnings; loans up to opening share capital less earlier unrepaid loans; loans for 12 months or less (art. 11(3), 11(4)). The base is reduced when the loan is repaid (art. 11(5)).
• (e) Transfer pricing adjustments: income the company would have received, or costs it would not have had, if related-party deals were at market value (art. 4(2)(2)(e)). Deals with persons in a listed low-tax or no-tax jurisdiction count as related-party deals (art. 4(10)). Documentation and methods: lv-transfer-pricing.
• (f) Benefits a non-resident gives its staff or board that relate to its Latvian PE.
• (g) Liquidation quota: equity above the shareholders' contributions (art. 4(8)).
• (h) to (k) Assets transferred in a reorganisation (art. 18); assets moved to a foreign PE, or out of a Latvian PE, where Latvia loses the right to tax (exit charge, see lv-cross-border); hybrid mismatch results (art. 7.1).

Items (b), (c), (d), (e), (f), (i), (j) and (k) go into the base of the last taxation period of the reporting year (art. 4(5)). Non-business expenses (a) are taxed in the period they arise, except advances on deals not started within 12 months, which go into the last month of the reporting year (art. 8(2¹)(1)).

3. Reliefs that reduce the base

• Dividends received (art. 6): a company can reduce its calculated dividends by dividends it received in the same period from a payer that is a CIT payer in its home state, or on which tax was withheld at source. Not for dividends from a low-tax or no-tax jurisdiction, from a company that was a micro-enterprise taxpayer when it earned the profit, where the payer deducted the dividend, or where the main purpose is to use the exemption (art. 6(1), 6(3) to 6(5)). Unused received dividends carry forward in date order (art. 6(2)).
• Share disposals (art. 13): a gain on directly held shares held at least 36 months reduces calculated dividends, with carry-forward of any excess. Not for shares in low-tax jurisdiction companies, unlisted companies whose assets are more than 50% Latvian real estate, or fund units (art. 13(3), 13(4)).
• Donations to qualifying recipients (art. 12): not covered in detail here.

3a. Controlled foreign companies (art. 6.1)

• A company adds to its base the profit of a foreign company (or of its own foreign PE) that comes from non-genuine arrangements, where it holds, alone or with related persons, more than 50% of the shares or votes, or is entitled to more than 50% of the profit (art. 6.1(1) to 6.1(3)). An arrangement is non-genuine to the extent the foreign company would not take the risks or hold the assets if it were not controlled by a company that carries out the key management functions for them (art. 6.1(7)).
• The share of profit goes into the return for the last taxation period of the reporting year in which the foreign company's year ends (art. 6.1(5)).
• Not applied where the foreign company's annual profit is up to EUR 750,000, or its income other than from sales of goods and services is up to EUR 75,000, unless it is in a listed low-tax or no-tax jurisdiction or the tax authority found the arrangements in an audit (art. 6.1(8), 6.1(9)).
• Later dividends out of that already-taxed profit reduce the company's own dividend base (art. 6.1(10)).

4. The 15% alternative for companies owned only by individuals (art. 4.2)

• Condition: in the tax period (a calendar month, or a quarter for a company entitled to book quarterly, art. 3(2), 3(3)) in which the dividend is calculated, every shareholder (dalībnieks) is an individual (art. 4.2(1)). "Dalībnieks" means any owner of shares or anyone else with a non-debt right to share in profit (art. 1(7)), so the option is open to an AS as well as an SIA, as long as no shareholder is a company, fund or other entity.
• Scope: only calculated dividends under art. 4(2)(1)(a). Deemed dividends, payments treated as dividends and all deemed distributions stay at 20% / 0.8.
• It is a choice: the company "is entitled to choose" it for the dividends calculated in that tax period, so the test and the choice are made period by period (art. 4.2(1)).
• Computation: dividend / 0.85 x 15% (art. 3(5), art. 4.2(2)). The shareholder then pays 6% personal income tax on the dividend instead of the usual exemption (PIT Law art. 9(3.9), art. 15(5.1)).
• Who withholds the 6%: the company, when it calculates the dividend (CIT Law art. 16(5)). For personal income tax the dividend counts as paid on the day it is calculated (PIT Law art. 16.1(8)). The company pays the 6% into the single tax account by the 23rd of the following month (PIT Law art. 17(10)(12)) and reports the payment to VID by the 15th of the following month (PIT Law art. 17(11)(1)). For listed shares, the investment service provider that keeps the account withholds, on the payment date (PIT Law art. 16.1(8)).
• Start: inserted by the law of 3 December 2025, in force 1 January 2026.
• It is not a saving on the same profit. Take EUR 12,000 of profit paid out. Standard rule: the dividend divided by 0.8 is 12,000, so the dividend is 9,600, CIT is 2,400 and there is no personal income tax; the owner keeps 9,600 (art. 3(1), art. 4(9)). Option: the dividend divided by 0.85 is 12,000, so the dividend is 10,200, CIT is 1,800 and the company withholds 6%, which is 612 (art. 3(5), art. 4.2(2), art. 16(5)); the owner keeps 9,588. On the same profit the standard rule leaves the owner 12 more per 12,000.

5. Losses and pre-2018 profit

• There is no loss carry-forward under this system: losses do not reduce a distribution.
• Pre-2018 losses: a company with losses in its CIT return at 31 December 2017 could cut CIT on dividends by 15% of those losses, capped at 50% of the CIT on dividends each year, in the reporting year starting in 2018 and the next four reporting years (transitional provisions 13 and 14). That window has closed; nothing is left to use in 2026.
• Pre-2018 profit: dividends out of retained profit shown in the balance sheet at 31 December 2017 are outside the base. That profit is first reduced by later losses and by dividends already paid out of it, first in, first out (transitional provisions 8 to 10).

Deadlines and filing

What	When	Source
Taxation period	calendar month; a quarter for companies entitled under Accounting Law art. 13 to book documents quarterly	CIT Law art. 3(2), 3(3)
CIT return (UIN deklarācija) to the State Revenue Service (VID)	by the 20th of the month after the taxation period	art. 17(1)
Nil periods	no return needed for a period with no taxable item, except the last month of the reporting year	art. 17(3)
Return not filed by the 20th	the period is treated as nil; a later return counts as a correction (not for the last month of the year)	art. 17(4)
Payment	into the single tax account by the 23rd of the month after the taxation period	art. 17(7)
Year-end correction	no late interest on extra tax from correcting the last month's return for changes found while preparing annual accounts filed on time	art. 17(8)
Minimum tax	if CIT for the reporting year is under EUR 50, top up to EUR 50 in the last month's return; not for a company registered or liquidated in the year, one that paid at least EUR 100 of personal income tax or social contributions for an employee, or one in insolvency	art. 17(11), 17(12)
6% personal income tax on art. 4.2 dividends	company withholds on the day the dividend is calculated; pays by the 23rd and reports to VID by the 15th of the following month	CIT Law art. 16(5); PIT Law arts. 16.1(8), 17(10)(12), 17(11)(1)
Due date on a holiday	moves to the next working day	Law on Taxes and Fees art. 29(3¹)

Penalties and interest

• Late payment interest: 0.05% of the unpaid tax for each day late (Law on Taxes and Fees art. 29(2)). For the single tax account it is charged on the 1st and 15th of each month, and not charged if the tax arrives by the last day of the month in which it was due (art. 29(2¹), 29(2²)(1)).
• Under-declared tax found in an audit: the tax, late interest to the start of the audit, and a fine of 20% of the under-declared tax if the shortfall is up to 15% of the tax due, or 30% if it is more (art. 32(1), 32(4), 32(5)). The fine is halved for a first offence where returns and payments were on time and the taxpayer cooperated (art. 32(7)). Amounts set in an audit are due within 30 days (art. 32(8)).
• Voluntary correction: a corrected return before any audit costs the tax and late interest only (art. 33.2(1)). After notice of an audit but before it starts, a 5% fine is added (art. 33.2(2)).
• Late filing fines (art. 141), in fine units of EUR 5 (Administrative Liability Law art. 16(2)):

Days late	Fine
3 to 10	warning or 5 to 14 units (EUR 25 to 70); not applied to a single monthly or quarterly return up to 5 days late in 12 months
11 to 20	15 to 30 units (EUR 75 to 150)
21 to 30	31 to 56 units (EUR 155 to 280)
over 30, or not filed	57 to 140 units (EUR 285 to 700)

• Accounting breaches that reduce the base carry the same liability (CIT Law art. 19(1)).

Cross-border points

• Withholding on payments to non-residents (management and consulting fees, real estate, payments to low-tax jurisdictions), permanent establishments, treaty relief and the exit charge on assets leaving Latvia: see lv-cross-border.
• Arm's length adjustments are taxed here as a deemed distribution at 20% / 0.8 in the last month of the reporting year. Who is related, documentation thresholds and penalties: see lv-transfer-pricing.
• Dividends from EU/EEA and treaty-country subsidiaries can reduce a Latvian company's own dividend base under art. 6, unless the payer is in a listed low-tax or no-tax jurisdiction.
• Any deal with a person in a listed low-tax or no-tax jurisdiction is treated as a related-party deal for deemed distributions (art. 4(10)).

Worked examples

Example 1. Holding SIA, standard 20%, December 2026. A Latvian SIA owned by a German GmbH calculates a dividend of EUR 60,000 in December 2026. In the same month it received a EUR 25,000 dividend from its Latvian subsidiary, which paid CIT on that profit. Its representation costs for 2026 are EUR 9,000. Its gross payroll for 2025 was EUR 120,000, so the 5% cap is EUR 6,000 and EUR 3,000 is a non-business expense. The shareholder is a company, so the 15% option is not open. The received dividend reduces the calculated dividend to EUR 35,000 (art. 6(1)). The base is (35,000 + 3,000) / 0.8 = EUR 47,500 and the CIT is EUR 9,500. The December return is due by 20 January 2027 and the tax by 23 January 2027.

name: Holding SIA, dividend less dividend received, representation excess, December 2026
inputs:
  dividend_calculated: 60000
  dividend_received: 25000
  representation_costs: 9000
  prior_year_gross_payroll: 120000
steps:
  - taxable_dividend: max(dividend_calculated - dividend_received, 0)
  - representation_cap: prior_year_gross_payroll * 0.05
  - non_business: max(representation_costs - representation_cap, 0)
  - base: (taxable_dividend + non_business) / 0.8
  - cit: base * 0.20
expected:
  taxable_dividend: 35000
  representation_cap: 6000
  non_business: 3000
  base: 47500
  cit: 9500

Example 2. SIA owned by two individuals, 15% option plus a loan to a sister company, 2026. In March 2026 the SIA calculates a dividend of EUR 50,000 for its two individual shareholders and chooses the art. 4.2 rate. CIT is 50,000 / 0.85 x 15% = EUR 8,823.53, due by 23 April 2026. The SIA withholds 6% personal income tax from the dividend, EUR 3,000, reports it to VID by 15 April 2026 and pays it by 23 April 2026. Total tax is EUR 11,823.53 and the owners keep EUR 47,000. The profit used is 50,000 + 8,823.53 = EUR 58,823.53. Paid out under the standard rule, the same profit gives a dividend of 58,823.53 x 0.8 = EUR 47,058.82 with no personal income tax (art. 3(1), art. 4(9)), so on the same profit the option leaves the owners EUR 58.82 less. Comparing the same EUR 50,000 dividend (EUR 12,500 of CIT under the standard rule) is not like with like, because the owners would then keep EUR 50,000 rather than EUR 47,000. In June 2026 the SIA also lends EUR 10,000 for 24 months to a sister company owned by the same individuals. The SIA had retained earnings at 1 January 2026, opening share capital of EUR 3,000, no earlier unrepaid loans and no borrowings from unrelated lenders. The first EUR 3,000 is covered by share capital (art. 11(4)(3)); EUR 7,000 is a deemed distribution. It goes into the December 2026 return at the standard rate, because the 15% option covers only calculated dividends: 7,000 / 0.8 x 20% = EUR 1,750.

name: Individual-owned SIA, art. 4.2 dividend plus related-party loan, 2026
inputs:
  dividend: 50000
  loan_to_related: 10000
  share_capital: 3000
  earlier_unrepaid_loans: 0
steps:
  - cit_alternative: round(dividend / 0.85 * 0.15, 2)
  - pit_on_dividend: dividend * 0.06
  - total_alternative: cit_alternative + pit_on_dividend
  - net_alternative: dividend - pit_on_dividend
  - profit_used: dividend + cit_alternative
  - net_standard: round(profit_used * 0.8, 2)
  - standard_route_extra: net_standard - net_alternative
  - loan_exempt: min(loan_to_related, max(share_capital - earlier_unrepaid_loans, 0))
  - loan_taxable: loan_to_related - loan_exempt
  - cit_on_loan: loan_taxable / 0.8 * 0.20
  - total_company_cit: cit_alternative + cit_on_loan
expected:
  cit_alternative: 8823.53
  pit_on_dividend: 3000
  total_alternative: 11823.53
  net_alternative: 47000
  profit_used: 58823.53
  net_standard: 47058.82
  standard_route_extra: 58.82
  loan_taxable: 7000
  cit_on_loan: 1750
  total_company_cit: 10573.53

Ask the client first

1. Who owns the company in the tax period (month, or quarter) in which the dividend is calculated: only individuals, or any company, trust or fund? This decides whether the 15% option is open.
2. Is the company under tonnage tax, or is it a bank or consumer lender? Each changes the regime. (An SIA cannot be under micro-enterprise tax; see Who this applies to.)
3. Does it receive dividends or sell shareholdings, and from which countries? The art. 6 and art. 13 reliefs depend on it.
4. Are there loans to shareholders, sister companies or other related persons, and for how long? Plus opening share capital and retained earnings.
5. Does the company deal with related persons abroad, or with anyone in a listed low-tax jurisdiction? Deemed distributions and transfer pricing follow.
6. Does any retained profit date from before 1 January 2018? Dividends from it are outside the base.

Sources

Source	URL	Read on
Corporate Income Tax Law (Uzņēmumu ienākuma nodokļa likums), version in force from 1 January 2026: arts. 1(7), 2, 3, 4, 4.1, 4.2, 6, 6.1, 7, 8, 9, 10, 11, 13, 16(5), 17, 19; transitional provisions 8 to 10, 13, 14, 53	https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums	2026-10-24 (likumi.lv refused the connection; read from the Internet Archive copy of 4 October 2026, https://web.archive.org/web/20261004132502/https://likumi.lv/ta/id/292700-uznemumu-ienakuma-nodokla-likums)
Law on Taxes and Fees (likums "Par nodokļiem un nodevām"): arts. 29, 32, 33.2, 141	https://likumi.lv/ta/id/33946-par-nodokliem-un-nodevam	2026-10-24 (Internet Archive copy of 18 September 2026)
Law On Personal Income Tax (likums "Par iedzīvotāju ienākuma nodokli"): arts. 9(1)(2.1), 9(3.9), 15(5.1), 16.1(8), 17(10)(12), 17(11)(1)	https://likumi.lv/ta/id/56880-par-iedzivotaju-ienakuma-nodokli	2026-10-24 (Internet Archive copy of 1 September 2026)
Administrative Liability Law (Administratīvās atbildības likums): art. 16	https://likumi.lv/ta/id/303007-administrativas-atbildibas-likums	2026-10-24 (Internet Archive copy of 10 August 2026, https://web.archive.org/web/20260810162753/https://likumi.lv/ta/id/303007-administrativas-atbildibas-likums)
State Revenue Service (VID)	https://www.vid.gov.lv	2026-10-24 (refused the connection; not read)
Micro-enterprise Tax Law (Mikrouzņēmumu nodokļa likums), version in force from 1 January 2026: art. 1(3), art. 2(1); transitional provision 36	https://likumi.lv/ta/id/215302-mikrouznemumu-nodokla-likums	2026-10-30 (likumi.lv did not respond; read from the Internet Archive copy of 10 October 2026, https://web.archive.org/web/20261010230816/https://likumi.lv/ta/id/215302-mikrouznemumu-nodokla-likums)
VID, information material "Mikrouzņēmumu nodoklis" (updated 06.05.2026)	https://www.vid.gov.lv/lv/media/32306/download?attachment	2026-10-30

Not yet confirmed: the CIT return form and its annexes (the return regulation was not read); the art. 8(5) fuel limits and the art. 12 donation relief; any CIT Law amendment after the 4 October 2026 archive copy; the Micro-enterprise Tax Law version in force from 15 October 2026 and the one announced for 1 April 2027 (only the 1 January 2026 version was read; it bars SIAs).