← Guides / Latvia

Latvia Investment Income Tax Guide 2026

Investment income in Latvia is subject to a flat 20% rate for most categories. Dividends face 20% withholding tax (0% for EU qualifying companies under the Parent-Subsidiary Directive), interest is taxed at 20% (exempt for EU companies), and royalties at 15% WHT. Capital gains on shares held more than 12 months are exempt. Latvia's extensive double tax treaty network provides further rate reductions.

Overview — Investment Income Taxation in Latvia

Investment income in Latvia is subject to separate taxation rather than being included in the progressive IIT scale for most categories. The standard tax rate on investment income is 20% (flat rate). Withholding taxes apply to cross-border dividend, interest, and royalty payments. Latvia's tax treaties (60+ DTTs) provide reduced rates, and EU directives (Parent-Subsidiary, Interest and Royalties) eliminate withholding tax for qualifying EU companies.

Dividend Taxation

  • Domestic dividends (individuals): 20% WHT on dividend distributions to resident individuals. The tax is final — no further IIT is due on dividends.
  • Domestic dividends (companies): 20% WHT on distributions to resident companies, unless the recipient holds ≥10% of the distributing company (exempt under participation exemption).
  • Cross-border outbound dividends: 20% domestic WHT. Reduced to 0% under the EU Parent-Subsidiary Directive (≥10% holding, 12 months) or under applicable DTT (typically 0–15%).
  • Cross-border inbound dividends: Dividends received from foreign companies are subject to IIT at 20% (individuals) or CIT (companies). Foreign tax credit may apply.

Interest Taxation

  • Domestic interest (individuals): 20% WHT on interest payments to resident individuals. Interest from bank deposits, bonds, and other debt instruments.
  • Domestic interest (companies): 0% WHT on interest paid to resident companies. Interest income is included in taxable income for CIT purposes.
  • Cross-border outbound interest: 0% WHT — Latvia does not impose withholding tax on interest paid to non-residents. Under the EU Interest and Royalties Directive, interest paid to associated EU companies is exempt.
  • Exempt interest: Interest on government bonds and certain public debt instruments may be exempt from tax.

Royalty Taxation

  • Domestic royalties (individuals): 20% WHT on royalty payments (flat rate).
  • Domestic royalties (companies): 15% WHT on royalty payments.
  • Cross-border outbound royalties: 15% domestic WHT. Reduced to 0% under the EU Interest and Royalties Directive for associated EU companies. DTTs typically reduce the rate to 5–15%.
  • Royalty definition: Payments for the use of copyrights, patents, trademarks, know-how, and similar intellectual property rights.

Capital Gains on Investments

  • Shares held >12 months: Fully exempt from tax
  • Shares held ≤12 months: 20% CGT on the gain
  • Bonds and debt securities: Same rules as shares — exempt if held >12 months, 20% if ≤12 months
  • Investment funds: Gains from EU/EEA UCITS funds are generally treated the same as direct share investments. Non-UCITS funds may be subject to specific rules.

Tax Treaty Benefits

Latvia has double tax treaties with over 60 countries, which typically provide reduced WHT rates on investment income:

  • Dividends: 0–15% (0% for qualifying holdings under many treaties)
  • Interest: 0–10% (most treaties provide 0% or 5%)
  • Royalties: 5–15% (most treaties provide 5–10%)
  • Capital gains: Generally taxable only in the country of residence (for shares not deriving value from immovable property)

Key treaty partners include all EU member states, US, Canada, China, UAE, CIS countries, and major OECD economies.

Filing Requirements

  • Individuals: Investment income is reported on the annual IIT return (by 1 June). Withholding tax paid is credited against the final tax liability.
  • Companies: Investment income is included in the CIT return. Dividends received may be exempt under participation exemption. Interest and royalty income is subject to CIT at distribution (0% retained, 20/80 effective on distributed).

FAQs

Is dividend income subject to social contributions?

No, dividend income is not subject to social security contributions in Latvia. Only employment and self-employment income triggers social contributions.

Can I offset investment losses against other income?

No, capital losses on investments can only be offset against capital gains in the same year. Unused losses can be carried forward for 5 years. Losses cannot be offset against employment, business, or rental income.

Do non-residents pay Latvia tax on dividends from Latvian companies?

Non-residents are subject to 20% WHT on dividends paid by Latvian companies. The rate may be reduced under an applicable DTT. Most treaties provide for a 0–15% rate depending on the holding level.

Disclaimer

This guide provides general information about Latvia investment income taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Latvian tax advisor (nodokļu konsultants) or VID directly for advice specific to your situation. InvestmentKit does not provide tax advice.