Latvian residents are liable to Latvian income tax on their worldwide income.
Non-residents are liable to income tax on their Latvian-source income.
Personal income tax rates
Latvia has a progressive PIT system. Unless the law provides for a different rate, the progressive rate is based on the level of annual income as follows:
- A rate of 20% applies to income up to EUR 20,004.
- Any portion of income between EUR 20,004 and EUR 78,100 attracts a rate of 23%.
- Any income over EUR 78,100 attracts a rate of 31%.
PIT on dividends is 20%. However, where a company has already charged its profits to CIT, there will be no PIT to pay. This applies to Latvian companies, European Union (EU)/European Economic Area (EEA) companies, and others, except for companies from tax havens and MBT payers. To zero-rate dividends for PIT, evidence of PIT or CIT paid abroad should be presented, except for the EU/EEA companies where no evidence is needed since it is assumed that tax (PIT or CIT) has been applied at source by default. However, in practice, tax authorities tend to ask for the tax application confirmation even for the dividends received from mentioned jurisdictions.
Other income from capital, including interest, also attracts a fixed PIT rate of 20%.
The rate on income from capital gains is 20%.
The Latvian PIT Act defines cryptocurrency as a capital asset subject to the general capital gains tax rules with the requirement to match capital gain with the capital loss from cryptocurrency to assess annual total gain or loss from the trading in cryptocurrency. Other capital assets should not be matched and can be set off against each other.
The taxation regime applicable to royalties, currently in force, was not amended as of 1 July 2021 for a transitional period until the end of 2021 as it was initially planned. The taxation approach was supposed to differ for the individuals who are and are not registered as self-employed individuals; however, this special regime has been prolonged and the mentioned changes have been postponed until the end of 2023.
During 2023, for the individuals who are not registered as self-employed persons and payment is treated as royalties, the payer of royalties must apply 25% or 40% PIT on the gross royalties via withholding, without applying a notional expense rate, as follows:
- 25% PIT on an income up to EUR 25,000.
- 40% PIT on an income exceeding EUR 25,000.
A controlled foreign company (CFC) regime has been operative in Latvia since 1 January 2013. Income from substantial participation in a CFC located in a tax haven attracts a progressive rate of PIT.
Micro-business tax (MBT)
Sole traders may apply for MBT payer status. See the Taxes on corporate income section in the Corporate tax summary for more information on MBT. Please note that the MBT regime has been significantly changed as of 2021.
Local income taxes
There are no local taxes on income, such as municipal taxes.