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Article 3 of the Law on Taxes and Duties stipulates that the system of taxes and duties consists of: 1) state taxes with which taxable objects and the rate thereof is determined by the Saeima; 2) state fees, which are imposed in accordance with laws and regulations of the Cabinet of Ministers; 3) local government fees, which are imposed in accordance with this Law, regulations of the Cabinet of Ministers and binding regulations of local governments; 4) taxes specified in directly applicable regulatory enactments of the European Union. There are 15 taxes in Latvia that are imposed in accordance with the specific tax law: 1. Value added tax; 2. Corporate income tax; 3. Customs duty; 4. Personal income tax; 5. Natural resources tax; 6. Mandatory state social insurance contributions; 7. Excise duty; 8. Electricity tax; 9. Tax on subsidized electricity; 10. Lottery and gambling tax; 11. Micro-enterprise tax; 12. Solidarity tax; 13. Vehicle operation tax; 14. Business car tax; 15. Real estate tax. |
The standard VAT rate is 21%.
The reduced tax rates are set out in Article 42 of the VAT Law and could be:
- 12% (for example, for the supply of medicines and accommodation services);
- 5% (for book deliveries, for example);
0% (for the domestic supplies of Covid-19 vaccine and closely related services and for the domestic supplies of Covid-19 in vitro diagnostic medical devices and closely related services).
The 0% VAT rate is applicable to VAT-exempt transactions with the right to deduct input tax, such as the export of goods, supplies of goods within the European Union, services related to the export of goods, etc. transactions.
VAT refund to a foreign taxpayer? VAT payers of other Member States have the right to receive VAT refund for goods purchased and services received in Latvia, including for the import of goods, if they did not carry out economic activities in Latvia during the relevant period. More information on VAT refund procedures for VAT payers of other Member States can be found on the website of the State Revenue Service. VAT payers established in third countries or third territories who do not carry out commercial activities in Latvia are entitled to claim VAT refund in Latvia in accordance with the principle of parity. Refunds are currently being paid to taxpayers established in Switzerland, Norway, Iceland, Monaco and the United Kingdom (for UK taxpayers from 1 January 2021). More information on VAT refund procedures for third country VAT payers can be found on the website of the State Revenue Service. |
The corporate income tax rate is 20% of the taxable base. For non-residents – 3% and 20%.
As of January 1, 2018, the payment of CIT is deferred until the distribution of profits or until the profit is used for costs that are not related to economic activities.
In order to determine the taxable base of CIT, the value of the taxable object must be divided by a factor of 0.8.