In an increasingly demanding European tax environment, Latvia continues to operate under a model that many executives are not aware of: companies do not pay corporate income tax (CIT) while profits are reinvested. This option is stipulated in the normal functioning of its tax system.
How is the exemption carried out?
In practical terms, a business can operate, grow and scale in Latvia without corporate tax impacting its results, as long as profits remain within the company. CIT’s taxation is triggered only when dividends are distributed or when certain payments are treated as equivalent to profit distribution. Moreover, for international groups, this creates a genuine opportunity for cash-flow management and medium-term financial planning within the EU.
However, fiscal attractiveness does not eliminate obligations. Latvia requires accounting discipline, periodic reporting, and clear control of operations. The institutions insist on the supervision of VAT and intra-group transactions. Success lies not in minimising tax, but in getting the structure right from day one.
On the employment side, Latvia offers moderate salary levels and Social Security costs. This phenomenon which explains its growing use for operational teams, tech hubs and shared service functions. Nevertheless, payroll obligations and filing deadlines must be handled with precision and local expertise.
Conclusions
Latvia is not a shortcut jurisdiction. It is a country with clear rules that rewards reinvestment and long-term thinking. Therefore, for companies with a well-defined expansion strategy, it can become a highly effective component of their European footprint.
At Auxadi, we provide tax services in more than 50 countries across the Americas, EMEA, and Asia. If you are interested in expanding your business to Latvia and the Baltic countries, do not hesitate to contact our international tax experts.
At Auxadi, we offer comprehensive services in accounting, tax, payroll, transfer pricing and corporate legal services to multinationals and funds. With experience since 1979 and a presence in over 50 countries, including 26 proprietary subsidiaries, our advanced technological platform and proven methodology enable us to guarantee efficient management in compliance with local regulations.
Author:
Allan Barnett Schulder Covarrubias
Regional Director Cono Sur – CL
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Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance, payroll, transfer pricing, and corporate legal services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 26 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.
All information contained in this publication is up to date on 2026. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.