Latvia

Tax reform

Corporate income tax (CIT)

Latvia is regarded as offering a relatively favourable income tax regime, as due to the CIT reform, the approach to calculating CIT changed fundamentally in 2018. Under the current model, taxation of corporate profits is postponed until those profits are distributed as dividends or deemed to be distributed. Distributed profits are subject to 20% CIT (20/80 on the net amount of the profit distribution), resulting in application of an effective 25% rate.

From 2024, credit institutions and consumer crediting service providers are required to pay a tax surcharge of 20% each year, regardless of the profit distribution, based on the financial results of the previous financial year.

In addition to the surcharge, from 2025, Latvian-registered credit institutions and branches of foreign credit institutions are liable to pay solidarity contributions on a quarterly basis until the end of 2027.

From 1 January 2026, Latvian-registered companies, where shareholders are only individuals, are eligible to apply alternative tax regime to the dividends paid to individuals. Under this regime, distributed profits are subject to 15% CIT (15/85 on the net amount of the profit distribution) and 6% PIT which is withheld from the amount paid to an individual. 

Availability of existing tax relief/tax attributes

Large investment relief (LIR) and reliefs for special economic zone (SEZ) and free port companies may still be claimed by reducing CIT on declared dividends.

Profits accumulated before 1 January 2018 can be utilised by declaring dividends free of CIT indefinitely.

Exit tax and hybrid mismatches

To complete the adoption of the Anti-Tax Avoidance Directive 2016/1164 (ATAD), a set of rules related to exit tax and hybrid mismatches were added to the CIT Act effective as of 12 February 2020. The CIT Act was supplemented with new rules on the tax treatment of assets a taxpayer moves abroad free of charge. There also has been adopted a new section of the CIT Act laying down the tax treatment of transactions that create hybrid mismatches. 

DAC6 Directive

Latvia has implemented Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6). The Taxes and Duties Act was amended, giving rise to the Cabinet of Ministers’ regulation concerning the Automatic Exchange of Information on Reportable Cross-Border Arrangements.

DAC6 applies to cross-border tax arrangements that are entered into by a European Union (EU) taxpayer with other entities in the European Union or non-EU countries. Such arrangements have to be reported to national tax authorities if certain criteria (hallmarks) are met.

DAC7 Directive

Latvia has implemented Council Directive (EU) 2021/514 (DAC7) on administrative cooperation in the field of taxation to extend the EU tax transparency rules and reporting obligations to digital platforms and platform operators. Digital platforms and platform operators are required to provide information on the income of sellers using digital platforms from 2023. These rules impose a reporting obligation on digital platforms operating within and outside the European Union.

The Latvian legislation is effective from 1 January 2023. 

DAC8 Directive

Latvia has implemented Council Directive (EU) 2023/2226 (DAC8) which introduces new tax transparency and reporting obligations for crypto-asset service providers.  

From 1 January 2026, both EU-based and non-EU crypto-asset service providers and platform operators are required to report information to tax authorities about transactions carried out by clients who are EU tax residents.  

Crypto-asset service providers and platform operators must collect and store specific information about their EU clients and transactions, and submit structured annual reports to the tax authorities, The first reports under DAC8 will be due in 2027 for the 2026 tax year. 

Carbon Border Adjustment Mechanism (CBAM)

Latvia has implemented Council Directive (EU) 2023/956 on establishing a Carbon Border Adjustment Mechanism (CBAM). CBAM rules apply only to EU-registered companies importing specified goods (e.g. aluminium, iron and steel, cement and fertilisers) from third countries. The list of goods covered by CBAM will be gradually expanded, so importers are advised to monitor the CBAM rules.

As of 1 January 2026, the CBAM regulation has taken full effect and annual CBAM declarations and certificates become mandatory.

However, following the latest adjustments in the regulation adopted in September 2025, importers whose total yearly imports of CBAM goods do not exceed 50 tonnes are exempt from CBAM reporting, declaration, and certificate-surrender obligations.

Importers expecting to exceed the threshold must apply for authorised CBAM-declarant status by 31 March 2026 to be allowed importing CBAM goods.  

Sales of CBAM certificates will begin in February 2027, covering emissions from 2026 imported goods. The deadline for the annual CBAM declaration and certificate surrender has moved from 31 May to 30 September of the following year.