Latvia

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 25.5% applies to income up to EUR 105,300.
• Any income over EUR 105,300 attracts a rate of 33%.

The PIT rate on dividends is 25,5%. However, when a company has already applied CIT to its profits, no PIT is required on dividends paid to individuals (this exemption is not applicable to the 3% additional PIT rate as per below in case total income exceeds EUR 200,000). 

This provision applies to dividends from Latvian companies, companies within the European Union (EU) or European Economic Area (EEA), and other entities, except for companies from tax havens and micro-business tax (MBT) payers. 

To benefit from a zero PIT rate on dividends, evidence of PIT or CIT paid abroad must generally be presented, except in the case of EU/EEA companies where such evidence is not needed as it is assumed that the tax (PIT or CIT) has been applied at the source by default. Nevertheless, in practical application, tax authorities often request confirmation of tax compliance even for dividends received from these jurisdictions. 

The PIT rate for income from capital (including interest) and capital gains is 25.5%.

Starting in 2025, an additional 3% PIT rate applies to the portion of an individual's total annual income that exceeds EUR 200,000. The tax base includes taxable income, which is employment remuneration, taxable income from capital reported on the annual tax return, royalties, and taxable income from capital gains, and on a specific exempt type of income, which is dividends and dividend equivalents received by the individual. 

The tax base does not include other exempt income, such as employee benefits, gifts and income from real estate if they meet the PIT Act’s exemption criteria.   

The additional rate will be applied at the time of submitting the annual tax return for the previous tax year (e.g. starting from 2026 for 2025 etc.). 

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 2027.

The individuals who are not registered as self-employed persons and payment is treated as royalties, the payer of royalties must apply 25% PIT on the gross royalties via withholding, without applying a notional expense rate.

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. From 2024, micro-enterprise taxpayers, if they obtain income that is object to PIT, are able to apply the differentiated non-taxable minimum and allowance for dependent persons to this income. 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.