Corporate Income Tax Payments
Corporate income tax is paid by:
- domestic companies – residents;
- permanent representative offices of non-residents that perform economic activity.
A company is considered to be a resident ofLatvia, if it is registered inLatviaaccording to Latvian laws and regulations.
Corporate income tax is applied to the profit or loss, which is calculated according to the taxpayer’s financial accounting data and adjusted according to the Corporate Income Tax Law. In general, all types of income are included in the taxable income consisting of:
- income earned inLatviaor abroad (for residents);
- certain types of income earned inLatviaand listed in the Corporate Income Tax Law (for non-residents);
- income earned inLatviafrom performing commercial activities (for permanent representative offices of non-residents).
The corporate income tax rate is 15% of the taxable income.
The rate applied on income earned by non-residents inLatviais 2 to 15%, as stipulated in the Corporate Income Tax Law for certain kinds of income.
Taxation of dividends
Payments of dividends between domestics companies are not subject to corporate income tax. Dividends paid to a legal entity – a resident of a European Union member state or a resident of the European Economic Area – are exempt from taxation.
Dividends paid to a legal entity outside the European Union or the European Economic Area, are subject to a 10% tax payable at the time of their payment.
Taxation of income of non-residents
Corporate income tax inLatviais applied to the following payments to legal entities – non-residents, if they do not have a permanent representative office inLatvia, in accordance with tax rates stipulated in the Corporate Income Tax Law:
- management and consulting services – 10%;
- income from investments in a partnership – 15%;
- interest, if the persons paying and receiving the interest are interconnected – 5 or 10%;
- income from intellectual property – 10% or 15%;
- compensation for the use of property located inLatvia– 5%;
- compensation for expropriation of property located inLatvia– 2%;
- payments to persons located in low-tax or tax-free countries or territories – 15%.
Filing tax declarations
Declarations for a particular taxation year shall be filled out by taxpayers through the EDS system and submitted to the SRS. Tax declarations shall be submitted simultaneously with the company’s annual report.
Tax declarations must be submitted by all taxpayers, including permanent representative offices of non-residents.
Tax payment deadline
Taxpayers shall pay the tax calculated in their tax declarations to the state budget within 15 days of submitting the tax declaration. The amount of tax calculated shall take into account any advance payments made during that year.
Each month during the taxation year, taxpayers shall pay monthly corporate income tax advances. Calculation and payment of advance payments is stipulated in Article 23 of the Corporate Income Tax Law.
Tax incentives and relief
When calculating the amount of corporate income tax, taxpayers shall receive the following incentives and tax relief:
1) Incentives to facilitate investments:
- possibility of accelerated depreciation of fixed assets write-off (depending on the fixed asset category, depreciation is written off by 10 to 70% of the residual value of the assets annually);
- incentives to facilitate production, upon purchasing new technological equipment for production;
- incentives for investments in fixed assets in especially supported territories, upon purchasing of fixed assets used in especially supported territories;
- reduction of taxable income for a conditioned credit interest amount;
- discount on investments in free ports and special economic areas;
- relief for replacement of fixed assets;
- relief for implementation of supported investment projects.
2) Incentives for research and development:
- special cost recognition procedures for research and development costs;
- special write-off procedures for development or purchasing costs of trademarks and patents.
3) Industry incentives:
- navigation industry – a preferential tax regime for marine transportation for domestic companies;
- tax relief to agriculture;
- tax relief to air transport companies;
- tax relief on the income from disposal of shares acquired through capitalisation of bank loans.
4) Discounts for charitable purposes:
- tax discount for donors who donate to charity organisations;
- tax discount of 100% for disabled corporations, medical corporations and other charitable funds corporations;
- tax relief for employing persons with disabilities;
- tax relief for employing civil guards.
5) The possibility of carrying forward losses:
- taxpayers may carry forward their losses of previous years for an unlimited period of time, by reducing their income subject to corporate income tax in future years;
- taxpayers may carry forward their losses to another company within a group, by a group member reducing their income subject to corporate income tax.
6) Relief for having savings for doubtful debts:
- taxable income may be reduced for having savings for doubtful debts, not exceeding 20% of the taxable income.