Page 34 - CEE Tax Guide 2025

Latvia

SIA Forvis Mazars Latvia
Duntes street 6-213,
Riga, Latvia, LV-1013
Phone: +371 67379031
www.forvismazars.com/lv

Corporate taxes and other direct taxes effective rate. If either of the two thin capitalization
thresholds are exceeded, the result leading
Since 2018, CIT is, in general, payable only on the to highest tax liability would apply.
distribution of profit: dividends (also interim
dividends), payments qualifying as dividends, non- Tax exempt capital gains: from 2018 onwards,
business expenses, loans issued to related parties, distributed profit from the sale of directly owned
interest payments subject to thin capitalization shares (except for shares of low/tax free companies)
rules, bad debts to be written off, transfer pricing is not subject to CIT unless the company has held
adjustments, liquidation quota, etc. The CIT the relevant shares for less than 36 months, or the
rate is 20% of the gross taxable value (expense/ shares belong to a company the majority of whose
distribution value) or 25% of the net value (i.e. assets by value is comprised of real estate located
a 20/80 rate). in Latvia. Exemption does not apply where the main
purpose of setting up the taxpayer or the structure
Since 2018, the following thin capitalization rules
are applicable: (1) the debt/equity ratio exceeds is to benefit from the holding regime (i.e. tax
4 to 1; (2) if the amount of net interest expense optimization or avoidance of taxes has taken place).
exceeds EUR 3 million, the deductible interest Tax exemption is not applicable to profits from the
amount of 30% of EBITDA applies. The appropriate sale of financial instruments (e.g. investment fund
interest excess part will be subject to 25% CIT notes, securities, bonds, etc.) or to royalties and
interest received.
Transfer pricing in Latvia WHT of 20% is applied to management and
consulting service fees paid by Latvian companies
Arm’s length principle Since 2005
to foreign companies; 3% WHT is applied
Documentation liability Since 2013 to remuneration paid to a foreign company for
APA Since 2013 the disposal of real estate located in Latvia, or for
the disposal of shares holding real estate located
Country-by-Country Since 2017
liability in Latvia; 5% WHT is applied to remuneration paid
to a foreign company for renting or leasing of real
Master file-local file Since 2018
(OECD BEPS 13) estate in Latvia; and 20% WHT is applied to all
applicable payments to offshore companies.
Penalty
VAT and other indirect taxes
lack of documentation Penalty of up to 1% of the
controlled transaction, The general VAT rate is 21% for the sale of goods and
but not exceeding services. A reduced rate of 12% is used, for example,
EUR 100K.
for medical goods, periodicals, accommodation
tax shortage 20% tax on gross value services, and thermal energy supplied to private
of underpayment + late
payment interest. individuals. Furthermore, a reduced 5% VAT rate
is applicable for the supply of fruit and vegetables
Related parties > 50% There is specified typically grown in Latvia. As of January 1, 2022,
conditions listed by law.
the VAT rate for books, news websites, etc. has
Safe harbors Low value-added been reduced from 12% to 5%, and on e-books
services: 5% mark-up.
from 21% to 5%. A 0% tax rate is applicable for the
Level of attention paid 9/10 export of goods and supplies in customs territories.
by Tax Authority Exemptions are in place for postal services, medical

Central and Eastern European tax guide 2025 Forvis Mazars 34