Tax
Progressive income tax, tax on distributed profits and 21% VAT
Personal income is taxed on a progressive scale, and since 2018 corporate tax — like Estonia's — falls only on distributed profits. Standard VAT is 21%, administered by the State Revenue Service.
Key rules
- Personal income tax applies on a progressive scale with a differentiated allowance.
- Corporate tax is charged only on distributed and deemed-distributed profits.
- Standard VAT is 21% (12% and 5% reduced rates).
Governing law
- Law on Personal Income Tax
- Corporate Income Tax Law (2018)
Penalties and consequences
- Late-payment interest and penalties; criminal liability for evasion
In practice
Latvia adopted the Estonian-style distributed-profit corporate model in 2018, so retained earnings are untaxed until paid out.