The principle: tax isn't calculated on profit, but on distribution
Before running any simulation, it helps to understand the exact mechanics of the Latvian tax rate. Unlike most countries, where corporate tax applies every year to the entire profit earned, Latvia only taxes the share of that profit that leaves the company as dividends. As long as the money stays in the SIA, whether it funds a hire, an investment, or simply builds up cash reserves, it isn't taxed.
In practice, for €100,000 in profits, the final tax bill depends on a single variable: how much do you distribute?
Three worked scenarios on €100,000 in profits
Scenario 1: you reinvest everything
If the full €100,000 in profits stays in the company, corporate tax due is €0. No amount or duration limit applies: you can build up undistributed profits over several financial years without ever triggering tax, as long as the money funds the business (see our article on 0% tax in Latvia for the full mechanism).
Scenario 2: you distribute €40,000 and keep €60,000
Only the distributed share enters the calculation. The taxable base is reconstructed by dividing the net amount distributed by 0.8: €40,000 / 0.8 = €50,000. Tax due is €50,000 × 20% = €10,000. The €60,000 kept remains at 0%.
Scenario 3: you distribute the full €100,000
Same logic applied to the whole amount: reconstructed gross base of €100,000 / 0.8 = €125,000, tax of €125,000 × 20% = €25,000. The effective rate against the net amount distributed is therefore 25%, not 20%, a nuance that's often misunderstood.
| Amount distributed | Amount kept | Corporate tax due | Effective rate |
|---|---|---|---|
| €0 | €100,000 | €0 | 0% |
| €40,000 | €60,000 | €10,000 | 25% (on the distributed share) |
| €100,000 | €0 | €25,000 | 25% (on the distributed share) |
For your specific case
This simulation only accounts for Latvian corporate tax at company level. It doesn't include personal tax on dividends received in your country of residence. For a complete calculation including your personal situation, use our Latvia tax calculator.
The alternative 15% + 6% regime: a special case
Since 2026, SIAs owned exclusively by individuals can opt for an alternative regime: 15% corporate tax at company level (instead of 20%), combined with a 6% withholding at the time of distribution. On €100,000 fully distributed, the total charge generally sits between €21,000 and €27,000, a range that depends on your personal situation and the tax credits available in your country of residence. This regime is worth assessing case by case rather than applying mechanically.
For comparison: the same €100,000 elsewhere
As a benchmark: a French company subject to standard corporate tax would pay 15% up to €42,500 in profit then 25% beyond that, whether or not that profit is distributed. On €100,000 fully kept in the company, French tax would run around €20,000, against €0 in Latvia under the same full-reinvestment scenario. It's this difference in how reinvested profit is treated, not a lower nominal rate, that's the structural advantage of the Latvian model. Many other European countries follow a similar "tax every year regardless of distribution" logic, so the comparison generally holds beyond the French example too.
"On €100,000 in profits, the question is never 'how much tax will I pay in Latvia', but 'what share will I distribute this year'. The company steers its own tax bill, not the other way around."
Frequently asked questions
The essential takeaway: on €100,000 in profits, a Latvian SIA's tax bill ranges from €0 to €25,000 depending on your distribution strategy, where most countries' corporate tax would apply in full from year one. To refine this calculation for your own revenue and personal status, our team is available to discuss your project.