Why Latvia's 0% reinvested-profit tax beats the EU average
A practical breakdown of Latvia's corporate income tax model and why retaining profits is one of the most efficient growth strategies in Europe.
Latvia's Corporate Income Tax system is intentionally different from most of Europe. Instead of taxing profits the moment they are earned, it only taxes them when they leave the company as dividends.
0% on reinvested profit
Keep profit in the business and pay no corporate income tax at all. You can fund expansion, acquisitions or working capital entirely tax-free and defer any tax indefinitely.
20% only on distribution
When you eventually pay a dividend, a flat 20% CIT applies — no surtax, no cascading layers.
Reinvested and growing beats distributed and taxed, almost every time.
Compare with traditional regimes
Most EU states tax corporate profit at 25–35% the moment it's earned. Latvia defers that burden dramatically and reduces it too.
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