Latvia

In Latvia, the standard VAT rate is set at 21%, which applies to most supplies of goods and services, including commodity imports and services provided by non-residents. A reduced rate of 12% is available for certain essential goods and services, such as listed medicaments, medical devices, public transportation, heating for households, and some types of food. Additionally, a 5% reduced VAT rate is applied to printed and electronic books, and certain exemptions are provided for intra-community supplies of goods and export services. These VAT exemptions help Latvia maintain competitive trade and align with European Union regulations.

Latvia levies customs duty on goods imported into the country, with rates ranging from 0% to 20% depending on the type and origin of the goods. The customs duty is based on the value of the imported goods, and certain items may benefit from lower or zero duty rates. Exports, in contrast, are generally exempt from customs duty, which promotes Latvia’s international trade relations. This flexibility in customs duty rates allows Latvia to maintain favorable trade balances and engage in import activities that support domestic industries.

Latvia’s corporate income tax (CIT) rate is 20%, which is payable only when profits are distributed. Companies operating in Latvia must file their CIT returns on a monthly or quarterly basis, depending on their size and the nature of their transactions. The taxable period is one month, and companies are required to file tax returns by the 20th day of the following month. Payments must be made by the 23rd day of the month if a tax base arises. Latvia’s CIT system encourages reinvestment by not taxing retained profits, which stimulates business growth.

Personal income tax (PIT) in Latvia is progressive, with a headline rate of 31%. Individuals are required to file PIT returns by either 1 June or 1 July, depending on their annual income level. Final tax payments are due by 23 June or 23 July. Latvia also mandates estimated PIT payments throughout the year, with payments due on 23 June, 23 July, 23 August, and 23 September. The progressive nature of Latvia’s PIT system ensures that individuals with higher income levels contribute proportionately more to public finances, supporting social services and infrastructure development.

In Latvia, capital gains are subject to corporate income tax (CIT) for companies, which aligns with the standard CIT rate of 20%. For individuals, capital gains are taxed at a separate rate of 20%. This applies to income generated from the sale of assets, such as real estate, securities, or other investments. Latvia’s capital gains tax framework is designed to ensure that individuals and businesses contribute fairly on profits earned through investment activities while maintaining a competitive tax environment.