The new dividend tax regime (15% + 6%): who benefits and who doesn't

Following amendments to the Corporate Income Tax Law, an alternative dividend taxation regime has been introduced, which provides for a 15% corporate income tax (CIT) and an additional 6% personal income tax (PIT) on dividends. Previously, only a 20% CIT was applied to dividends.

Comparing the two regimes, the total tax burden does not actually change. In the normal regime, the effective tax rate is 25% (calculated from the amount of the payout), while in the new regime it is approximately 25.16%, i.e. slightly higher. Therefore, for Latvian residents, the new dividend regime is not more tax-advantaged than the previous regime.

The new regime is mainly relevant for non-residents. If the recipient of dividends is a resident of another country, then the tax payable in the country of residence can be reduced by the PIT paid in Latvia.

Regime	Gross dividends	CIT	PIT	Payable	Effective tax rate
20% CIT	1000	200		800	200/800 = 25%
New 15% CIT + 6% PIT	1000	150	51	799	201/799 = 25.16%