You're already paying corporate tax at home and feel your current structure is holding back growth. Why choose Latvia over another European jurisdiction? Because its tax regime taxes distribution, not profit: as long as the money stays in the company to fund growth, it isn't taxed. That mechanism changes the trajectory of a business that reinvests year after year, but it doesn't suit every profile, and we explain exactly why below.
Latvia's tax model: 0% on reinvested profits
Latvia has applied the "Estonian model" since 2018: corporate income tax (CIT) is only triggered at the point of distribution, never on profits kept within the company.
- 0% CIT on profits that are reinvested or simply retained in the company
- 20% on the gross base at the point dividends are distributed, roughly 25% effective after the 0.8 conversion coefficient
- An alternative 2026 regime, 15% CIT + 6% PIT, applies to SIAs held solely by individuals, often more advantageous for non-residents thanks to tax credits under Latvia's treaty network
In practice, a company reinvesting €80,000 in profits on a €200,000 turnover pays zero CIT that year. The same company, if it distributed €100,000 in dividends in a more mature year, would pay roughly €25,000 in CIT on that distribution. For the full mechanics (micro-SIA, alternative regime, VAT), see our dedicated page on Latvia corporate tax.
The principle to remember
Latvian tax is a tax on distribution, not on profit. The higher your margin and turnover, the more significant the saving in absolute terms, it isn't a flat rate that benefits everyone, it's a mechanism that rewards reinvestment.
A stable, transparent EU framework
Latvia has been an EU member since 2004, part of the Schengen area and the Eurozone since 2014. A Latvian SIA invoices, contracts and opens accounts like any other European company, without the stigma attached to non-EU jurisdictions.
Latvia has signed double-tax treaties with more than 60 countries, France among them since 14 April 1997, setting out clear mechanisms to avoid taxing the same dividends twice. Forming a company in Latvia is a legal setup within an EU member state, with the same reporting obligations as anywhere else in Europe.
Lower structure costs than Western Europe
Beyond tax, Latvia remains 25 to 50% cheaper than Western Europe on running costs. In Riga, a city-centre office rents for roughly €500 to €750/month, a level that lets you fund genuine local presence (address, staff, in-person meetings) without blowing the structure budget. We cover this comparison in our article on the cost of living in Riga.
Latvia isn't a fit for every entrepreneur
This is the point we'd rather address head-on than bury in the small print. The Latvian model mechanically benefits companies that already have turnover and margin to reinvest, not those looking for an empty shell to make income disappear.
A good fit
- Established annual turnover, with real margin to reinvest
- Willing to document genuine activity in Riga (office, decisions, possibly staff)
- Growth logic: hiring, stock, R&D, investment
- Looking for a transparent EU framework, not a tax shortcut
A risky fit
- Turnover too low to cover structure costs (accounting, registered address, support)
- Looking for an address with no real activity behind it
- Main goal: never pay any tax again, including on what's paid out personally
- Personal tax residency not clarified upfront
The real risk is economic substance. If your home tax authority decides a SIA is an empty shell, no office, no decisions taken in Riga, it can invoke effective-management rules and treat the company as tax resident at home, with penalties. A company with real turnover, real activity, possibly staff or genuine investment in Latvia, is far more defensible. If you're a French tax resident specifically, this falls under article 209 I of the French tax code (CGI), we cover the precautions to take in our articles on the risks of forming a company in Latvia and on non-resident company formation.
Latvia, France, Estonia: what it actually changes
The table below compares how the same profit is treated depending on whether it's retained in the company or distributed as dividends.
| Criterion | France (SAS/SARL) | Latvia (SIA) | Estonia (OÜ) |
|---|---|---|---|
| CIT on reinvested profits | 15 / 25% | 0% | 0% |
| CIT on distributed profits | 15 / 25% + 30% flat tax | 20% (≈25% effective) | 20% (≈25% effective) / 22% in 2026 |
| Minimum share capital | €1 | €2,800 (€1 for micro-SIA) | €0, paid on distribution |
| Standard VAT rate | 20% | 21% | 22% |
| Tax treaty with France | N/A | Yes (1997) | Yes |
| Francophone/English support | N/A | Yes, physical presence in Riga | No, e-Residency only |
For groups managing several activities, a Latvian holding structure lets you centralise multiple activities or shareholdings under the same reinvestment regime, a relevant option for already multi-entity founders.
Model your own situation before deciding
Every situation depends on your turnover, margin and distribution logic. Rather than applying a generic percentage, our Latvia vs. home-country tax simulator compares, on your own numbers, what you'd keep by reinvesting through a SIA instead of distributing everything at home.
Sounds like a fit? Let's talk about your situation
If your company already generates an established turnover and you reinvest part of your profits each year, Latvia deserves serious consideration, not as a shortcut, but as a European structure built for a growth logic. Check our transparent pricing to see the real cost of full support, incorporation, address, accounting included.
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