Corporate income Tax in Latvia
The main regulatory framework concerning the corporate income tax is the Law 'On Corporate Income Tax'.
The corporate income tax is imposed on the company profits. The corporate income tax is paid by:
- companies, individual enterprises or farms, or fish farms registered in Latvia which prepare annual reports according to the Annual Accounts Law;
- institutions funded from municipal budgets that obtain income from economic activities which is not envisaged in the state or municipal budget;
- foreign companies, natural persons and other persons considered to be non-residents;
- permanent representative offices of non-resident undertakings.
The corporate income tax shall not be paid, for example, by individual enterprises (including farms), which do not prepare annual reports, private pension funds, associations and foundations, religious organisations and trade unions to which the Annual Accounts Law does not apply.
The corporate income tax rates differ according to each taxpayer. For example:
- a tax rate of 15 % is imposed on companies, the taxable object of which is the taxable income obtained in Latvia and abroad;
- The rate of 15 % is also imposed on permanent representative offices of non-resident undertakings, the taxable object of which is the taxable income obtained independently by a representative office in Latvia and abroad, as well as tonnage tax payers the taxable object of which is the income subject to the tonnage tax and taxable income obtained in Latvia and abroad;
- depending on the type of income, a tax rate from 5 % to 15 % is applied to non-residents, whose taxable object is the income obtained in Latvia from economic or related activities.
According to the Law 'On Corporate Income Tax' the estimated tax may be reduced by the sum the taxpayer has paid in the relevant taxes abroad. A mandatory requirement is that the taxpayer must verify the payment of tax abroad. It can be done by presenting documents certified by tax collection institutions of the relevant country, in which the taxable income and sum of the tax paid abroad is specified. Reduction in the tax payable must be lower than the estimated tax in Latvia payable for the income gained abroad. If during the taxation period the income has been obtained in several foreign countries, these provisions must be applied to the income obtained in each foreign country separately.
Corporate income taxpayers must submit to the SRS declarations for each taxation year. The annual declaration for the relevant taxation year must be submitted to the SRS together with the company’s annual report.
During the taxation year companies must pay the tax into the state budget in the form of advance payments till the fifteenth day of each month.
The SRS puts tax overpayments made in each taxation period towards further tax payments made by the taxpayer to cover the tax arrears. A taxpayer may request the SRS to repay these overpayments, which is done within 30 days after the receipt of such request.
If a taxpayer has accumulated arrears of taxes administered by the State Revenue Service or other debt of payments requested by the State, the SRS will direct the amount of overpaid tax to cover this debt.
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