Sources: OECD Tax Database 2024; VID (State Revenue Service) Latvia; official government sources.
Key Tax Data at a Glance
| Tax Type | Rate | Notes | Source | Year |
|---|---|---|---|---|
| Income Tax — top rate | 31% | Solidarity tax on income over EUR 78,100 (replaces 31% standard rate) | OECD | 2024 |
| Income Tax — middle rate | 23% | EUR 20,005–78,100 annual income | OECD | 2024 |
| Income Tax — lowest rate | 20% | Up to EUR 20,004 annual income | OECD | 2024 |
| Corporate Tax | 0% retained / 20% distributed | Estonian-style system since 2018; applies only upon distribution | OECD | 2024 |
| VAT (standard rate) | 21% | Reduced: 12% (medicines, accommodation); 5% (fresh produce) | OECD | 2024 |
| Capital Gains Tax | 20–31% | Taxed as ordinary income; exception for real estate under specific conditions | OECD | 2024 |
| Social Security (employee) | 10.5% | Employer contribution: 23.59%; EU bilateral agreements apply | OECD | 2024 |
| Digital Nomad Visa | No | EU temporary residence available for self-employed; EU/EEA freedom of movement | Official | 2024 |
Income Tax Brackets
Latvia employs a progressive three-bracket income tax system. Residents are taxed on worldwide income; non-residents pay tax only on Latvian-source income. Personal allowances and dependent credits are available. The solidarity tax of 25% applies above EUR 78,100, replacing the standard 31% bracket but creating an effective top rate of 31%.
| Annual Income (EUR) | Tax Rate | Notes |
|---|---|---|
| Up to EUR 20,004 | 20% | Basic tax-free allowance applies; deductions available |
| EUR 20,005–78,100 | 23% | Middle bracket; covers most professionals and salaried workers |
| Over EUR 78,100 | 31% | 25% solidarity tax replaces standard 31% (effective top rate 31%) |
Corporate Tax
Latvia’s corporate tax model — inherited from Estonia’s system since 2018 — is one of Europe’s most business-friendly. Corporations pay zero tax on profits that remain within the company; tax is deferred until profits are distributed as dividends (20% withholding) or extracted. This system encourages reinvestment and growth. Small enterprises and SMEs qualify for simplified tax regimes. Foreign companies operating in Latvia are taxed on Latvian-source income only; branch profits are not subject to additional withholding if reinvested.
VAT & Consumption Taxes
The standard VAT rate is 21%, applied to most goods and services. Reduced rates of 12% apply to medicines, medical devices, and hotel accommodation. A super-reduced rate of 5% applies to fresh fruit, vegetables, and certain food items. VAT registration is mandatory for businesses exceeding EUR 40,000 in annual turnover. Intra-EU supplies and imports have specific reverse-charge mechanisms.
Capital Gains & Investment Income
Capital gains for individuals are taxed as ordinary income (20–31% depending on total income). Real estate held for over five years may qualify for exemption under certain conditions. Dividends received by individuals from resident companies are subject to 20% withholding tax. Foreign dividends are taxed as income; tax treaties may reduce withholding rates. Crypto and digital asset gains are treated as ordinary income under OECD guidelines.
Social Security
Employees contribute 10.5% of gross salary to social security; employers contribute 23.59%. Together, these funds support pension, health insurance, and unemployment benefits. Latvia is party to EU bilateral social security agreements, allowing portability of credits for expats with prior EU work history. Self-employed individuals contribute at a flat rate (approximately 35.09% combined) on net income above a minimum threshold.
Frequently Asked Questions
How much tax do expats pay in Latvia?
Expats who become tax residents (typically after 183 days in a calendar year) are taxed on worldwide income at rates of 20–31%. Non-residents pay tax only on Latvian-source income (salaries, property rental, business income). Most salaried expats fall into the 20% or 23% bracket unless income exceeds EUR 78,100 annually, triggering the 31% solidarity tax.
Does Latvia tax foreign income?
Yes, Latvia taxes worldwide income for tax residents. However, tax treaties between Latvia and many countries provide foreign tax credits to avoid double taxation. Non-residents are taxed only on Latvian-source income. Self-employed expats should clarify residency status and register with VID (State Revenue Service) to ensure compliance.
Why does Latvia have 0% corporate tax on retained profits?
Latvia adopted Estonia’s innovative corporate tax model in 2018 to encourage business growth and reinvestment. Profits that remain within the company are taxed at 0%; tax is deferred until profits are distributed as dividends (20% withholding) or extracted. This approach has made Latvia attractive to startups and scale-ups, particularly in Riga’s thriving tech sector. The system incentivizes capital retention and reduces compliance burden on growing businesses.
How does Latvia compare to Estonia and Lithuania for taxes?
All three Baltic states share similar income tax structures and corporate tax innovation. Estonia pioneered the 0% corporate tax on retained profits model in 2000; Latvia adopted it in 2018. Lithuania uses a traditional corporate tax system (15% standard rate). For residents, all three offer comparable personal income tax brackets (20–23% baseline rates). Latvia’s corporate system mirrors Estonia’s; choose based on business structure and growth plans. Lithuania offers stability for traditional companies but less incentive for rapid reinvestment.
Is the startup ecosystem in Latvia tax-friendly?
Yes. The 0% corporate tax on retained earnings is highly attractive to early-stage companies, tech startups, and scale-ups. Riga hosts a vibrant startup community with EU funding access, low operational costs, and straightforward business registration. The VID offers digital-first tax administration and R&D tax incentives for innovation. For startups, Latvia’s corporate model combined with EU market access makes it competitive with Estonia and other Nordic startup hubs.
Explore Further
Related Tax Guides
- Tax Rates in Estonia for Expats 2025
- Tax Rates in Lithuania for Expats 2025
- Tax Rates in Finland for Expats 2025
Cost of Living
Sources: OECD Tax Database 2024; VID (State Revenue Service) Latvia; official Latvian government fiscal authorities. Rates verified April 2026. Not financial or legal advice — consult a qualified tax professional or Latvian CPA for individual situations and treaty applications.